HANOI: Farmers around the world are feeling the squeeze of the Iran war. Gas prices have shot up and fertiliser supplies are waning due to Tehran's near shutdown of the Strait of Hormuz in retaliation for US and Israeli bombing.
The fertiliser shortage is putting the livelihood of farmers in developing countries already troubled by rising temperatures and erratic weather systems further at risk, and could lead to people everywhere paying more for food.
The poorest farmers in the Northern Hemisphere rely on fertiliser imports from the Gulf, and the shortage comes just as planting season begins, said Carl Skau, deputy executive director of the World Food Programme.
“In the worst case, this means lower yields and crop failures next season. In the best case, higher input costs will be included in food prices next year.”
Iran is seriously limiting shipments through the Strait of Hormuz, a narrow passage that usually handles about a fifth of the world's oil shipments and nearly a third of global fertiliser trade.
Nitrogen and phosphate two major fertiliser nutrients are under immediate threat from the blockade.
Supplies of nitrogen including urea, the most widely traded fertiliser that helps plants grow and boosts yields, are the hardest hit because of shipping delays and the soaring price of liquefied natural gas an essential ingredient.
The conflict has restricted about 30 per cent of global urea trade, said Chris Lawson of CRU Group, a London-based commodities consultancy.
Some countries are already facing critical shortages, according to Raj Patel, a food systems economist at the University of Texas. For example, Ethiopia gets over 90 per cent of its nitrogen fertiliser from the Gulf through Djibouti, a supply route that was strained even before the war began in February.
“The planting season is now,” Patel said. “The fertiliser isn't there.”
Phosphate supplies, which support root development, are also under pressure. Saudi Arabia produces about a fifth of the world's phosphate fertiliser, and the region exports more than 40 per cent of the world's sulfur, a key ingredient and byproduct of oil and gas refining, Lawson said.
Even after the war ends, producers in the Gulf would need clear security guarantees before resuming shipments through the strait, and insurance costs would almost certainly rise, said Owen Gooch, an analyst with London-based Argus Consulting Services.
“The food system is fragile, and it depends on stable fertiliser supply chains to ensure farmers can produce the food the world relies on,” said Hanna Opsahl-Ben Ammar of Yara International, one of the world's largest fertiliser companies.
Fertilisers are generally applied just before or at planting, so crops miss key early growth stages and yields can fall when deliveries are delayed, even if supplies improve later.
The impact is already being felt in the United States and Europe, where the main planting season is underway, and it is expected to hit the first planting season in much of Asia in the coming months.
“Our crops out in the field need nitrogen now — the sooner the better — so they can get off to a good start, helping them establish themselves and build up reserves for the harvest later this summer,” said Dirk Peters, an agricultural engineer who runs a farm outside Berlin.
Fertiliser prices are below the peaks seen after Russia's invasion of Ukraine, but grain prices were higher then, helping farmers absorb the costs, said Joseph Glauber of the International Food Policy Research Institute.
Grain prices are lower now meaning margins are tighter and farmers may have to switch to less fertiliser-intensive crops — such as soybeans in the US — or apply less fertiliser, reducing yields. Lower yields can lead to higher consumer prices.
Other nations likely won't make up the shortfall. China, the world's largest producer of nitrogen and phosphate fertilisers, is prioritising domestic supply, and urea shipments probably won't resume until May, Lawson said. Plants in Russia, another major producer, are already running near full capacity, he said.
The disruptions are already being felt across Africa, where many farmers rely on fertiliser imported from the Middle East and Russia.
Early heavy rains in East Africa have left farmers with about a week of dry weather to prepare fields and apply fertilizer, said Stephen Muchiri, a Kenya maize farmer and CEO of the Eastern African Farmers Federation, which represents 25 million smallholders.
Fertiliser shortages and price hikes hit farmers hard, forcing them to use less and leading to reduced yields. Even short delays can reduce maize yields by about 4 per cent in a season, Patel said, citing research from Zambia.
Governments can intervene by applying subsidies, promoting domestic production and controlling exports.