What could be the impact of a global fertiliser shortage impact? Summary
- Strait of Hormuz closure disrupts nearly one third of global fertiliser trade
- Supply constraints stall millions of tonnes monthly and sharply raise global prices
- Rising energy costs intensify nitrogen fertiliser shortages and heighten production risks
- Lower fertiliser access threatens crop yields and food security across key regions
- Commodity markets face escalating volatility as shortages trigger cross‑commodity pressures
Responding to a wave of attacks from the US and Israel three weeks ago, Iran has threatened trade moving through the Strait of Hormuz, a major chokepoint for global trade.
As well as being the route through which around 20% of the world’s crude oil passes, the Strait is also a key route for the global fertiliser trade. Around 30% of internationally traded fertilisers go through the Strait, according to the UN’s Food and Agriculture Organisation (FAO).
In particular, a significant portion of the world’s nitrogen fertiliser is produced in the Middle East. Around 30-35% of urea exports and 20-30% of ammonia exports stem from the region. It is also a key exporter of sulphur, which is heavily used in fertiliser.
Impact of Strait of Hormuz closure on fertiliser
The closure of the Strait of Hormuz has severely impacted fertiliser trade. Production cuts and shipping constraints have stalled an estimated 3–4 million tonnes of fertiliser trade per month, according to the FAO.
Unlike oil, there are no strategic reserves for fertiliser, putting the sector at a comparative disadvantage. Furthermore, alternative sourcing locations are already limited due to export restrictions and high energy costs. On top of this, nitrogen fertiliser relies on natural gas as a feedstock, so the rising energy prices caused by the conflict in Iran have also impacted fertilisers.
There are currently no alternative routes for fertiliser to travel through that are not prohibitively expensive, explains Joseph Glauber, research fellow emeritus at the International Food Policy Research Institute (IFPRI).
As soon as the Strait was closed, global fertiliser prices skyrocketed. All in all, prices could average at 15-20% higher if the crisis persists, according to the FAO.
The crisis has worsened an already strained market. The Persian Gulf was used by those trying to offset losses from disrupted imports in the Black Sea, following Russia’s 2022 invasion of Ukraine and Chinese export restrictions on phosphate fertilisers in 2021, according to the IFPRI.
What could a global fertiliser shortage look like? How could it affect food and beverage?
Increased costs for farmers could mean lower crop yields
Fertiliser is an essential input for farmers globally. Rising fertiliser prices will push up input costs.
This could in turn lead to lower yields for key crops, if farmers cannot afford enough fertiliser to feed them. In particular, this could impact rice, wheat and maize yields.
The immediate impact of fertiliser prices on yields may be relatively small, IFPRI’s Glauber predicts, due to the fact that most farmers will have already made purchases. However, a prolonged crisis could put pressure on them.
Fertiliser shortages could impact food security in some regions, predicts the FAO, especially those which are particularly reliant on fertiliser from the Gulf.
Countries that will be exposed to fertiliser shortages include Brazil, India, Thailand, Bangladesh, Turkey, Australia and the US. Some countries, such as Sudan and Bangladesh, source more than half of their fertiliser from the Gulf and have severe exposure to the crisis.
In the case of major exporters like Brazil, impact on yields could ripple throughout the world, as the country is a major agricultural exporter. Reduced yields here could drive up the price of groceries and commodities worldwide.
Could commodity prices be affected?
Commodity prices are already being impacted by fertiliser shortages, according to the FAO.
This could get worse. Pressure on some commodities could push others up, leading to a “cross-commodity price contagion”. Prices could rise further if harvest shrink due to input costs.
However, if high prices are passed on to consumers, IFPRI’s Glauber predicts, this will largely be due to the higher energy costs experienced by food companies post-farmgate for activities such as processing, transportation or refrigeration, rather than fertiliser shortages.
It is not known how severe the impact will be if fertiliser supplies continue to be choked off. But what is for sure is that the repercussions will be felt around the world.
