A new risk is forming in the global food chain as conflict in Iran begins to disrupt fertilizer supply from the Middle East. The issue centers on the Strait of Hormuz, a key sea route used by ships carrying fertilizer to farms around the world.
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The Middle East is one of the largest fertilizer regions. At the same time, the strait is a vital shipping route. About 35% of global urea exports pass through this route, according to CRU data. Urea is the most widely used nitrogen fertilizer and supports nearly half of global food output.
Production Stops, and Prices Move Higher
First signs of stress in the market have already appeared. QatarEnergy halted output of sulphur, ammonia, and urea at its Ras Laffan complex after a drone strike hit the site. Qatar normally exports about 5.4 million tons of urea each year, close to 10% of global seaborne supply.
At the same time, Iran has taken all ammonia output offline as the conflict continues. Other producers in the region are now weighing output cuts as ships struggle to pass through the Strait of Hormuz.
The price reaction has been quick. Granular urea prices in the Middle East have risen from about $130 to roughly $575 to $650 per ton in just days. Egyptian export prices have climbed from about $125 to around $610 to $625 per ton.
Ammonia futures have also surged. A European cargo for April recently traded at about $725 per ton, roughly $130 above its last trade in mid February.
Additionally, energy costs are adding more pressure. Natural gas is the key input used to make nitrogen fertilizer. Svein Tore Holsether, chief executive of Yara International, said gas used by the firm in Europe rose from $10.6 per mmbtu to more than $20 within a few days.
Holsether said the focus on oil markets may be hiding the scale of the fertilizer risk. “We shouldn’t underestimate what this potentially could mean for global food production,” he said.
He also warned about the impact on yields if supply remains tight. “If you’re not getting fertilizer into the field of the farmers, yields could go down by up to 50% in the first harvest.”
Food Stocks Could Feel the Impact
Unlike oil shocks, fertilizer supply issues tend to show up in food prices with a delay. Farmers apply fertilizer months before crops reach stores.
Raj Patel, a food system expert at the Lyndon B. Johnson School of Public Affairs, said bread prices could rise within six to ten weeks if supply remains tight. Egg prices may move higher within a few months, while pork and chicken prices could rise within six months.
This type of cost pressure can ripple across large food producers such as Tyson Foods (TSN), Hormel Foods (HRL), General Mills (GIS), and The Kraft Heinz Company (KHC).
Meanwhile, fertilizer producers like Nutrien Ltd. (NTR), The Mosaic Company (MOS), and CF Industries Holdings (CF) could see support from higher fertilizer prices if supply remains constrained.
Analysts say the disruption could prove more complex than the fertilizer shock that followed Russia’s invasion of Ukraine in 2022. Chris Lawson, head of fertilizers at CRU, said the key difference now is the shipping route itself. “When prices spiked in 2022, it was extraordinary, but the market was able to adjust because Russian exports continued,” he said.
If the Strait of Hormuz becomes harder to cross, fertilizer supply could face a more direct physical limit. In that case, the ripple effect across global food markets may only be starting.
We used TipRanks’ Comparison Tool to align all the stocks appearing in the piece. It’s a great tool to gain an in-depth view of each stock and the broader food industry.
