As bombs continue to fall across the Middle East, much of the global fertilizer supply remains stranded. The ongoing closure of the Strait of Hormuz highlights just how much the global agriculture economy depends on one narrow shipping lane.
In the latest episode of the Ag Policy Podcast, global fertilizer analyst Deepika Thapliyal from the Independent Commodity Intelligence Services said that around one-third of the world’s fertilizer trade come from the Middle East. The region supplies about 34% of world’s urea and more than 20% of its ammonia.
Countries in the region exporting significant amounts of fertilizers include Qatar, Saudi Arabia, Bahrain, Oman and the UAE. Each nation depends on the Strait to deliver product to countries across the globe. The Iran conflict further constricts supply. Even if hostilities end there, it remains unclear how much of that nation’s production capacity is destroyed.
Some Middle Eastern nations may be working to find alternative routes for shipping fertilizers, Thapliyal said. Still, they won’t be able to supply nearly enough fertilizer to meet global agriculture needs this crop season.
“I did hear about Saudi Arabia maybe trying to do something internally and then trying to ship, but it can’t be a big volume,” Thapliyal said. Oman, she said, is perhaps in the best position because it lies just outside the Strait. But, she said, “No ship wants to go to Oman because it’s still a very risky thing to do.”
It’s not just the risk of attack that is crippling fertilizer shipments. Skyrocketing insurance costs for shippers make it economically unfeasible for cargo ships to even attempt a voyage. Thapliyal notes the Trump administration announced a $20 billion maritime reinsurance program intended to help oil tankers and cargo ship traverse the Strait. That may help in the short term. Thus far, however, that program has done little to resume normal shipping through the region.
“This couldn’t have come at a worse time because several countries now will go into the spring application season and they all need to have fertilizer in place,” Thapliyal said.
Nitrogen and urea supplies in the U.S. are already thin. Prices spiked at the start of the Iran conflict and will likely continue to climb as the weather gets warmer. According to Thapliyal, imports from Russia have somewhat blunted the impact on U.S. farmers. In the long run, Russian imports won’t be enough to offset the loss of Middle East supply.
Farmers in India will likely face urea shortages in June when they typically begin applying fertilizers. Australian farmers also rely heavily on Middle Eastern fertilizer. Those farmers are now looking to southeast Asia for supply to get them through the growing season.
While farmers in those three countries may see the most immediate impact, Thapliyal believes farmers in nearly every country will be impacted at some point.
“Even if the Strait of Hormuz opens soon, this is going to take a few months before it all gets back to normal,” she said.