Key facts
- Fertilizer prices have fallen significantly since late April.
- The decline is attributed to slow demand, increased Chinese exports, and the conflict in the Middle East.
- Shipping disruptions in the Strait of Hormuz have previously caused sharp price increases.
- The Persian Gulf is a critical region for global fertilizer and natural gas exports.
- Continued conflict could threaten global food security by reducing fertilizer use and crop yields.
Fertilizer prices have experienced a notable decrease since the end of April, offering some relief to farmers who had faced significant price spikes following the outbreak of the Iran War. This recent decline is attributed to a combination of factors, including slowing demand, increased fertilizer exports from China, and the ongoing geopolitical tensions in the Middle East.
However, industry experts are cautioning that the fertilizer market may continue to experience volatility in the coming months. The conflict in the Middle East has introduced new challenges to global supply chains, which were already vulnerable from the COVID-19 pandemic and the Russia-Ukraine war. Shipping restrictions in the Strait of Hormuz, a critical maritime corridor, have already led to sharp increases in both fertilizer and energy prices. Up to 30% of global fertilizer trade, 20% of liquefied natural gas (LNG)—a key fertilizer feedstock—and 27% of globally traded oil typically pass through this strait.
The Persian Gulf region is a significant producer and exporter of nitrogenous fertilizers, such as urea and ammonia, as well as phosphate fertilizers like diammonium phosphate (DAP) and monoammonium phosphate (MAP). Natural gas, essential for producing ammonia, is also heavily exported from the Gulf, with Qatar being a major global supplier. Any sustained disruption to these exports, particularly LNG shipments, could severely impact nitrogen fertilizer production worldwide, especially in countries like India, Pakistan, Bangladesh, and Türkiye, which rely heavily on Gulf gas for their fertilizer manufacturing.
If these supply disruptions persist, higher fertilizer prices could lead to reduced fertilizer use by farmers, consequently lowering crop yields. This scenario poses a significant risk to global food security, with countries heavily dependent on Persian Gulf fertilizers and natural gas being the most vulnerable. The fertilizer sector remains susceptible to future supply and trade shocks, underscoring the need for increased resilience in the value chain.