The ongoing war in Iran isn’t just driving up oil prices. Essential crop fertilizers are also in the crossfire, and U.S. food prices could be next.
About a third of the world’s fertilizer ingredients, a critical input that farmers rely on to grow crops for daily food, pass through the Strait of Hormuz, a key shipping chokepoint on Iran’s southern coast.
Approximately one-fifth of the world’s oil supply also moves through this narrow waterway. The strait has been effectively closed since the US and Israeli attacks on Iran began on February 28th.
At least three cargo ships have come under direct attack by Iranian forces, raising concerns that Iran may have planted mines in the strait.
Faced with the immediate danger, shipping companies and oil tanker owners are choosing not to go through the strait, and maritime tracking systems show hundreds of tankers stuck stranded just outside the waterway.
In response, oil prices soared, and on Friday night, US crude oil exceeded $99 per barrel, an increase of about 50% since the start of the war. The longer the conflict drags on, the greater the risk that disruption will spread beyond energy markets.
“A lesser-known risk is the threat that conflict poses to global food supply chains that depend on exports passing through the region,” Joe Brusuelas, chief economist at RSM, wrote in a recent client note.
The Middle East plays a major role in fertilizer production, primarily because its natural gas reserves are the main input used in the production of ammonia, a key component of nitrogenous fertilizers such as urea.
Countries facing regional turmoil due to war, such as Egypt, Iran, Qatar, Saudi Arabia and the United Arab Emirates, account for about 49% of global urea exports and 30% of ammonia exports, according to the American Farm Bureau Federation.
“The fertilizer market is globally integrated, so supply disruptions in one region can affect prices and availability in other regions,” said Faith Palm, an economist with the Agriculture Department.
In other words, rising costs and tightening supplies overseas could quickly spill over into the global agricultural supply chain, pushing up food prices.
For American farmers, the uncertainty is already being felt keenly.
John Boyd Jr., a fourth-generation farmer who grows soybeans, corn and wheat in Virginia, said he was recently warned by a fertilizer supplier that his shipment might not arrive on time.
“Dealers are saying they can’t get fertilizer,” Boyd said in an interview with NBC News this week. “Because of the war and the bombing of the area, the fertilizer is not moving.”
Fertilizers are essential to food production and must be applied before planting crops, he said.
“If you don’t fertilize, you don’t have the yield to grow crops,” Boyd explained.
He expects prices to rise as supply becomes tighter.
As of March 10, ammonia prices in the Middle East were up 92% year-on-year, and urea prices were up 70% over the same period, Brusuelas noted in a note.
In the US, ammonia prices are currently up 41% compared to last March, and urea prices are up 21%.
Simply put, “increasing fertilizer costs will contribute to higher prices in U.S. supermarkets,” he wrote.
Food prices are already rising. The latest consumer inflation data released earlier this week showed food prices rose 0.4% from January to February and are now up 2.4% year-on-year. Eating out expenses increased by 0.3% during the same period, and by 3.9% from the previous year.
With the planting season now underway, any disruption to fertilizer supplies could put further pressure on food prices in the coming months.
Timing is critical for U.S. agriculture. This is when farmers buy fertilizer, prepare fields, and give them the nutrients they need to grow crops like corn and wheat.
“As spring planting begins across the United States, it is important to secure transportation and the necessary risk coverage insurance for vessels transporting fertilizer through the Strait of Hormuz,” Palm wrote.
“If farmers do not receive remaining supplies in time, we could see reduced acreage, displacement, and lower yields, which will impact our nation’s food security and affordability of essential goods.”
On Friday, Agriculture Secretary Brooke Rollins said the Trump administration is “very close to announcing some solutions” aimed at lowering fertilizer costs for farmers. However, she did not reveal any further details.
Mr. Rollins acknowledged that while most farmers have already purchased fertilizer for the planting season, about 25% have not yet and are far more affected by the higher prices.
“It’s clear that events around the world are impacting our nation’s farmers,” she said at a White House event.
But it’s not just fertilizer. The price of diesel, which powers tractors, irrigation systems and fertilizer spreaders, has also increased.
In addition to fertilizer concerns, rising fuel costs are already starting to put pressure on the company, Boyd said.
“I have a tractor that requires 100 gallons of diesel fuel to fill up, and just one tank of diesel costs $469,” he said. “That won’t last long.”
