Nitrogen fertilizer prices, almost double what they were before the Iran war, may climb further as vital supplies remain locked up in the Persian Gulf, according to one of the world’s biggest exporters of the crop nutrient.
“Prices are already quite ‘toppy,’ but if the situation continues, they could move higher,” Ahmed El-Hoshy, chief executive officer of Abu Dhabi’s Fertiglobe Plc, said in an interview. “It’s a very challenging situation for the farmers’ economics, and it could eventually translate into higher grain and food prices.”
The war has effectively shut the Strait of Hormuz, cutting off about a third of the seaborne fertilizer trade and fueling fears of a food crisis. Nations have raced to source alternative supplies for farmers, but some top producers have capped exports and many buyers are having to pay premiums to compete for limited volumes.
Iran said Friday that ships could again pass through the strait, before abruptly stopping traffic less than 24 hours later as tensions escalated. As the conflict entered its eighth week, the US and Iran offered disparate views on the next stage, stoking uncertainty over whether the two sides will meet for peace talks.
The hit to fertilizer supply is particularly acute for nitrogen products such as urea and ammonia, which must be applied annually to maintain crop yields. Phosphate- and potash-based nutrients can remain in the soil, allowing farmers to skip applications for a year or two.
Urea exports from the Gulf slumped to about 300,000 tons in March from typical monthly volumes of 1.7 million tons, El-Hoshy said, citing Fertiglobe research. Those shipments largely came from Oman, he said.
Crop prices have yet to catch up with soaring costs for nutrients and fuels, meaning farmers can’t offset the spike in expenses. That’s in contrast to 2022 after Russia sent troops into Ukraine and crop prices jumped, reflecting both countries’ status as major grain producers.
Slower Buying
Grain prices did initially rise at the start of the Iran war, but they’ve since dropped back, increasing the risk that struggling farmers may stop applying fertilizer or shift away from crops such as corn, rice and wheat in favor of others that are less nitrogen-intensive, El-Hoshy said.
Fertiglobe is already seeing slower buying in regions such as Sub-Saharan Africa and Australia. Brazil, a key market that’s entering its application season, is also vulnerable to the tightness in supply.
In the US, farmers need to get their fertilizer by mid-May to meet planting deadlines. Although some in the US and elsewhere purchased significant volumes before the war began, there’s uncertainty over how much demand remains — particularly in poorer countries more sensitive to rising prices — according to the executive.
Even when Hormuz opens again, it will take time for volumes to move and for shortages to ease.
“There are a lot of ships currently in the Strait of Hormuz just sitting there” as floating storage, El-Hoshy said. “It’s likely several hundred thousand tons.”
Fertiglobe has been exploring alternative routes to transport its UAE output, including overland options, though volumes would likely be lower than those typically shipped by sea. The company is better positioned than many Gulf producers as its Abu Dhabi sites are close to Oman’s east coast and the UAE’s Fujairah port.
Fertiglobe also has operations in Egypt and Algeria, which are still able to serve customers.
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