Iran conflict threatens to push fertilizer prices higher

The disruptions in freight traffic in the Strait of Hormuz in the Middle East could significantly drive up fertilizer prices, warns Rabobank. Currently, ships are avoiding the strait due to threats and attacks on vessels in the region. The region supplies 45% of the world’s urea exports, meaning any blockage could sharply raise prices and tighten supply across global agriculture, said global head RaboResearch Food & Agribusiness Justin van der Sluis on LinkedIn. In general countries like Brazil and India, heavily reliant on imported nutrients, would normally feel the impact fastest — but timing matters — At this time of the year it's actually the US farmers that have higher import demands. The greatest risks concern urea, but phosphate, ammonia, and sulfur also come from the region. According to an earlier RaboResearch report, the strait accounts for up to 25% of global ammonia exports, 20% of DAP exports, 10% of MAP exports, and an estimated 30% of global sulfur exports. Van der Sluis: Ripple effects would reach farmers worldwide through higher prices for urea, phosphates, and ammonia, putting pressure on farmer margins. Geopolitical chokepoints are also food‑system chokepoints. Gas prices have risen by nearly three-quarters In addition to the rising costs of raw materials, higher gas prices are also making fertilizer production more expensive or even unaffordable. RaboResearch: The spread between regional energy prices and local fertilizer prices could render production for some unaffordable. This dynamic played out in Europe, despite soaring nitrogen prices, leading to a 70% curtailment of ammonia production in 2021/22 that only compounded the issue. Gas prices have soared since the attack by Israel and the US on Iran and the subsequent counteractions. At the time of writing, TTF gas futures stand at €55.16 per MWh. Before the weekend, the closing price was €31.96 per MWh. This means that the gas price has risen by 73%. The current level is not comparable with the peak of August 25, 2022. At that time, gas on the TTF was more than €328 per MWh. Between September 13, 2021, and February 8, 2023, gas prices remained above the current level of €55 per MWh. War surcharges on transport For raw materials that will still be transported via the Strait of Hormuz in the near future, transport costs may increase. War surcharges can lead to higher freight and insurance costs, which in turn affects raw material prices.