Middle East Conflict Strains Global Fertilizer Supply, Threatening Food Production

Escalating tensions in the Middle East are disrupting global fertilizer supply chains, driving up prices and raising concerns about food security worldwide. The conflict is impacting the production and export of key fertilizer components like nitrogen, phosphates, and sulfur, with Europe, India, China, and Brazil particularly vulnerable.

Supply Chain Disruptions and Price Surges

The conflict has led to sudden disruptions in production and exports from key producers in the Arab Gulf. Logistical constraints, including rising freight and insurance costs, are exacerbating the situation. Urea prices have surged by as much as 50% – from $482.50 per ton (FOB Egypt) on February 27th to $720 per ton on March 17th – as buyers scramble for alternative supplies [FertilizerField]. Ammonia prices have also increased, rising 24% from $495 per ton (FOB Middle East) to $600 per ton [FertilizerField].

Interruptions to the flow of ammonia, urea, and sulfur from the Middle East, a key supplier for all three products, are tightening markets already strained by earlier gas disruptions, winter curtailments, and geopolitical issues affecting Russia and China [World Fertilizer].

Regional Impacts

• Qatar: Operations at one of the world’s largest urea plants have been suspended following attacks on liquefied natural gas infrastructure.
• India: At least three fertilizer plants have reduced production due to decreased liquefied natural gas supplies from the Persian Gulf. Gas supply to fertilizer plants has been reduced to 70-75%, potentially dropping urea production by 800,000 tonnes per month. India relies on imports for over 50% of its natural gas and 80% of its ammonia.
• Bangladesh: Four of the country’s five fertilizer plants have been closed.
• Egypt: Egypt, which supplies 8% of the world’s traded urea, could face difficulties in nitrogen fertilizer production after Israel declared force majeure for gas exports.
• Brazil: Almost entirely dependent on urea imports, with nearly half passing through the Strait of Hormuz.
• United States: Reports indicate a 25% shortage of necessary fertilizer supplies.
• Poland: Prices of complex fertilizers have increased by approximately 7%, and urea prices have risen up to 14%, with further increases expected.

Latvia’s Vulnerability and the CBAM Regulation

Latvia is particularly vulnerable to rising fertilizer prices due to its complete dependence on imports. Zinta Jansone, Commercial Director of Farmers’ Cooperative “VAKS,” emphasizes this risk. The EU’s Carbon Border Adjustment Mechanism (CBAM), designed to apply a carbon price to imported products, adds further complexity. While currently suspended, the potential for CBAM to add €70-140 per ton of imported fertilizer is a significant concern for Latvian farmers [TFI].

Farmers are becoming more cautious with purchases and reducing fertilizer use in anticipation of further price fluctuations, potentially leading to lower yields. Latvia has proactively purchased around 80% of its necessary mineral fertilizers for the spring sowing season through the “VAKS” cooperative.

Looking Ahead

The situation remains volatile, with risks building and participants bracing for several weeks of disruption. The potential closure of the Strait of Hormuz for an extended period would be “catastrophic” for plant nutrition and global food production [World Fertilizer]. The future of food prices in Europe and Latvia will depend heavily on the resolution of the conflict and the evolution of trade policies, including the CBAM regulation.