Global consumers are understandably concerned about how the ongoing U.S.-Israeli war against Iran and the associated spike in commodity prices affects the gasoline they put in their tanks. But without a resolution soon, the conflict will also impact the food they put on their tables. |
As many readers now know, 20 percent of global oil supply flows through the Strait of Hormuz, the maritime chokepoint that connects the Persian Gulf to the Arabian Sea, and which Iran has closed off to virtually all shipping traffic in response to the U.S.-Israeli attacks. |
Less well-known is the fact that fully one-third of the world’s fertilizer supply also passes through the strait. That has caused the prices of urea and other nitrogen fertilizers—without which global crop yields at current levels would be impossible—to skyrocket. |
Why is global fertilizer production so concentrated in the Persian Gulf region? Mostly because it is home to some of the world’s most plentiful and easily accessible deposits of natural gas, a crucial ingredient for making nitrogen fertilizers. Qatar alone accounts for 20 percent of the global trade in liquefied natural gas. |
Gas is expensive to ship as it requires sophisticated terminals that cool it to ultralow temperatures in order to convert it to liquid form, but urea pellets can be easily packed into dry shipping containers. Countries like Qatar, Saudi Arabia and the United Arab Emirates thus took advantage of their natural gas endowments and built huge fertilizer industries to meet the growing global demand. |
Now, with the Strait of Hormuz blocked, neither fertilizer nor gas can be shipped through it. To make matters worse, Qatar has suspended LNG production after Iranian drones strikes hit its facilities at Ras Laffan and Mesaieed, adding to the spike in gas prices. |
With urea trading at the highest rate since October 2022, countries with large agriculture sectors are scrambling to line up alternative supplies. The timing couldn’t be worse, as farmers in the Northern Hemisphere are preparing for the spring planting season. |
Urea producers in India and Bangladesh have reportedly had to curb output as they rely on imported LNG from the Gulf. New Delhi is negotiating with Iran to allow some tankers through the Strait of Hormuz, and has even asked neighboring China, its longtime rival, to loosen its restrictions on urea exports. Beijing has historically tightly guarded its fertilizer supply through an export quota system. |
In Brazil, which is heavily dependent on imported fertilizers for its soybean and corn production, the Agriculture Ministry assesses there is “a very high risk of supply shortages and rising domestic prices.” |
And as Nima Shokri and Salome Shokri-Kuehni of the United Nations University recently wrote, farmers across much of sub-Saharan Africa are already have a hard time affording adequate fertilizer for their crops. The war-induced supply crunch will likely cause them to further reduce fertilizer usage further, exacerbating food insecurity. |
The situation is also dire in the U.S., where farmers have already been dealing with higher input costs and the adverse impacts of President Donald Trump’s trade wars. The American Farm Bureau Federation, the nation’s main agricultural lobbying group, warned in a letter to Trump earlier this week that “the U.S. risks a shortfall in crops” due to the shock to fertilizer supply chains. |
“Not only is this a threat to our food security—and by extension our national security—such a production shock could contribute to inflationary pressures across the U.S. economy,” Zippy Duvall, the bureau’s president, wrote. |
For now, most countries have enough reserves of staple products to avoid a major immediate impact on food prices. But if the fertilizer shortage lasts through the planting season, the impact will surely be felt later this year. And those hit hardest will be farmers and consumers across the Global South who are less able to bear a price shock—and who had nothing to do with starting this war. |