According to Oxford Economics, an independent economic advisory firm, in late March the price of the two main fertilizer ingredients, ammonia and urea, spiked 20% and 50% respectively in response to disruptions in the Persian Gulf.
Now that Iran has established a blockade and tolling system in the Strait of Hormuz in response to the United States and Israel attacking the country, large amounts of urea, ammonia, phosphates, and sulfur, critical components for fertilizer, are locked out of agricultural supply chains.
While the blockade is not an issue for Russia, the world’s largest exporter of urea, it is a significant issue for Qatar, Oman, and Saudi Arabia, Persian Gulf states currently prevented from exporting urea to market. India, Brazil, and the US are dependent on urea from the Gulf, while China, India, and the US depend on sulfur and ammonia exports from the region.
“The timing of the disruption makes the situation especially acute,” explains the Kiel Institute, a European research institute for global economic affairs. “March and April are peak months for fertilizer application in the Northern Hemisphere planting season. Although some market adjustment may occur over time, structural damage to supply chains and agricultural production is likely to persist.”
On March 9, the American Farm Bureau Federation sent a letter calling on President Trump to ensure safe passage of fertilizer shipments to the United States to stabilize costs and delivery ahead of spring planting season for farmers, the Detroit Free Press reported.
A survey conducted by the federation in early April “shows 70% of respondents say fertilizer is so expensive that they will not be able to buy all the fertilizer they need.” More than 5,700 farmers, both Farm Bureau members and non-members, from every state and Puerto Rico took part in the survey.
The analysis reveals that almost 8 in 10 farmers in the southern U.S. say they can’t afford all needed supplies this year, followed by the Northeast and West at 69% and 66%, respectively, compared to 48% of the farmers in the Midwest.
While the Hormuz Strait blockade contributing to reduced production of fertilizer will produce food shortages and higher prices in the United States, the situation is for more dire elsewhere in the world. In Sudan, Yemen, and Syria, nearly 50 million people face serious food insecurity, while in Gaza, 94% of the population facing food shortages. The situation ongoing in the Strait of Hormuz will deepen the crisis.
If the war and blockade persist into summer, according to the United Nations World Food Program, the “total number of people around the world facing acute levels of hunger [an additional 45 million] could reach record numbers.”
The virtual shipping standstill in the Strait of Hormuz and mounting risks to Red Sea maritime traffic are already increasing energy, fuel, and fertilizer costs, deepening hunger beyond the Middle East. The conflict reverberates far and wide—and the world’s most vulnerable people are the ones who will be most exposed to its ripple effects.
Australian economist Steve Keen, known for predicting the 2008 financial crisis, warns that famine could begin within two months, with India likely among the first hit due to fertilizer shortages. “If we lost 20 per cent of the world’s fertilizer, we’d lose roughly 20 per cent of the world’s food, and it would cause a global famine,” he said. “Food production on the planet could fall 10-25 percent and there simply won’t be enough food for everyone on the planet.”
In addition to enlarging an already serious food insecurity crisis and increasing the possibility of famine, the maritime disruption will intensify economic pressure. “The combination of supply shortages, currency depreciation, and inflation could trigger broader economic instability,” notes the Al Habtoor Group, a United Arab Emirates conglomerate.
