The current conflict in the Middle East is worrying fertilizer market participants around the world, as well as sparking fears of higher food prices. Two key categories -nitrogen fertilizers and phosphate fertilizers – are at the center of this disruption.
Nitrogen fertilizers (notably urea and ammonia) are synthesized through energy-intensive processes that rely heavily on natural gas. Because of this, nitrogen production is clustered near low-cost gas hubs, particularly around the Persian Gulf. The current closure of the Straits of Hormuz to shipping is impeding a corridor through which 34% of the global urea trade and 23% of the global ammonia trade passed in 2024, cutting off critical manufacturers like Iran, Qatar, Saudi Arabia, the UAE, and Bahrain.
Beyond interrupting transport, the conflict’s disruption of the natural gas market is impacting nitrogen fertilizer production. Between 27 February and 9 March, LNG prices rose 74%, resulting in an estimated 60% increase in ammonia production costs in just ten days. And in the Gulf, a facility described as the world’s largest single-site urea exporter (representing up to 14% of the world’s supply according to its own literature) has had to halt production after an Iranian attack on the Qatari natural gas facility supplying it.
Meanwhile, phosphate fertilizers rely on sulfuric acid, which is used to manufacture phosphoric acid, an essential input for DAP, MAP, and other phosphate products (including non-fertilizer products found in other parts of the agri-food industry, like feed phosphates, which are nearly universally used in modern animal production systems).
Sulfuric acid comes primarily from oil refining, meaning that nearly 50% of global sulfur flows pass through the Strait of Hormuz, along with around 18% of the global trade in MAP and DAP, two leading phosphate fertilizers. Or at least, they did when the Strait was open.
In the case of both categories, these complications are coming in the context of already tight markets. High nitrogen fertilizer prices had already been a political rallying point for farmers in the EU, for example, causing the bloc’s decision-makers to seek mechanisms to ease the pain, while high sulfur prices had led The Mosaic Company to curtail production of single super phosphate (SSP) in Brazil in December and January.
Reactions from around the world
Several regions with large agricultural footprints have responded to the looming possibility of tighter fertilizer markets:
- China has announced it would release fertilizers from national commercial reserves in order to ensure sufficient supply for spring planting, reports Reuters. It should be noted that the country’s determination to keep affordable fertilizers available for its domestic market has long driven it to intervene, including by imposing curbs on fertilizer exports, something which had already been contributing to the underlying tightness in phosphates.
- India has invoked a law allowing for the allocation of natural gas to certain priority applications, including fertilizer production (in second place), amid production shutdowns at some fertilizer plants. The country is the largest importer of urea, and also has extensive domestic production.
- Brazil’s ministry of agriculture has warned of an “extremely high risk” to the 2026-2027 crop from the fertilizer situation in a document reported on by the country’s financial press. The country, an agricultural export powerhouse, is nonetheless extremely dependent on fertilizer imports, which accounted for 85% of its consumption, according to the Rio Times.
- In the United States, the American Farm Bureau Federation claimed that urea prices had reached $579.75 by March 6, up 25% since the end of February when hostilities in the region began. “These developments come just as fertilizer and fuel demand rises ahead of spring planting,” it observed, noting that about 50% of nitrogen applied to corn, 28% applied to cotton and 42% applied to spring wheat is typically applied in the spring. It has also shared anecdotal reports of farmers seeking to switch from fertilizer-intensive corn to nitrogen-fixing soy.
Image source: Adobe
Written by Shannon Behary
