The ongoing American-Israeli conflict regarding Iran and its repercussions on regional countries are severely disrupting global trade and supply chains, particularly due to navigation issues in the Strait of Hormuz. The world is grappling with one of the worst energy crises in modern history, reminiscent of the oil crisis of the 1970s. This crisis is not only characterized by a persistent shortage of energy supplies over the past three months, but it also extends to agricultural fertilizer shortages, as the strait is a vital trade route linking the Arabian Gulf to the world.
The disruptions in supply chains do not merely affect the energy market; they also impact various other economic sectors. This is particularly true for agricultural fertilizers, where the decline in supply has left farmers worldwide without the necessary inputs for their crops. Such a scenario could lead to intertwined crises, with food shortages posing a significant threat to global food security due to the anticipated decrease in agricultural production. Modern agriculture heavily relies on fertilizers and the stability of their supply chains.
While recent focus has been on the shortage of oil and gas supplies due to navigation disruptions in the Strait of Hormuz, the decline in agricultural fertilizer supplies is creating a significant yet quieter shock. This situation has a profound effect on food products and their global supply chains. Moreover, the agricultural fertilizer sector is one of the key contributors to rising inflation rates, a topic that is often sidestepped or downplayed at present.
When inflation occurs, its effects are not limited to the agricultural sector alone; they ripple through various economic sectors. Historical market trends show that inflationary pressures often emerge in areas that do not receive adequate attention from most economists. The inflation waves of the 1970s illustrated how a gradual decline in the supply of essential goods, coupled with an increasing inability to meet demand, can lead to rising prices and soaring inflation rates.
The shortage of agricultural fertilizers comes at a critical time for the Northern Hemisphere, as it represents the main planting season. This situation is likely to diminish productivity on cultivated lands and inflate agricultural product prices. In this context, Carl Skau, Deputy Executive Director of the World Food Program, indicated that this could, at worst, mean reduced crop yields and failure in the upcoming growing season. At best, the high input costs will be passed on to food prices next year.
Nitrogen and phosphate are among the key components of fertilizers facing supply shortages due to the blockade imposed on the Strait of Hormuz. Gulf countries previously exported about half of the world’s urea supplies, accounting for 46% to 49% of the global market. These two materials are essential in agricultural fertilizer production, enhancing soil fertility, accelerating crop growth, and increasing yields, especially for staple food crops like wheat, corn, and rice.
While some countries possess reserves of fertilizers and their inputs, others face acute shortages and rely heavily on the Gulf region for their supplies. This scarcity may negatively affect trade outside the Gulf in the coming months, as countries focus on meeting their domestic needs. In India, for instance, the government is prioritizing the domestic market and utilizing its urea reserves for fertilizer production.
Svein Tore Holsether, CEO of Yara, one of the largest fertilizer producers globally, warned in early May that global trade disruptions due to the war on Iran could lead to a loss of up to 10 billion meals weekly worldwide, with the most severe impacts felt in the poorest countries.
Holsether stated that there is currently a nitrogen fertilizer production shortfall estimated at around half a million tons due to the ongoing situation. Additionally, declining crop yields due to limited fertilizer use could trigger a price war on food products. He urged European countries to carefully consider the potential impacts of this price war on vulnerable populations in other nations.
Holsether emphasized that the reduction in nitrogen fertilizer usage could decrease crop yields by up to 50% in the first season. Although the fertilizer market is global, major destinations for fertilizer shipments include Asia, Southeast Asia, Africa, and Latin America—regions expected to feel the swiftest and most direct impacts. This situation could exacerbate issues in areas already struggling with low fertilizer usage, such as the Sahara region in Southern Africa.
The production of staple grains in many countries, particularly in Brazil and Argentina in Latin America, is closely linked to the availability of fertilizers. Together, these two countries account for approximately 10% of global wheat exports, 39% of corn, and 66% of soybean exports, according to estimates from the U.S. Department of Agriculture. Both countries are heavily reliant on fertilizer imports, most of which come from the Arabian Gulf, making any price increase directly translate into higher production costs and subsequently higher prices.
With uncertainty surrounding when and how navigation through the Strait of Hormuz will return to normal, several countries are seeking to develop alternative supply chains. However, if the disruption of fuel and fertilizer trade continues for an extended period, food prices are expected to rise, along with growing threats to food security in many regions worldwide over the next year. This is particularly concerning as the production of these fertilizers requires essential materials such as natural gas (for nitrogen) and sulfur (for phosphate), with the Arabian Gulf being a primary source.
In Lebanon, which is facing escalating economic and social challenges, the shortage of agricultural fertilizers and their rising prices are exacerbating the agricultural sector crisis. This is particularly true given the extensive losses caused by the ongoing Israeli conflict, which has severely damaged agricultural lands and production infrastructure, with affected areas totaling over 52,000 hectares, equivalent to about 22.5% of Lebanon’s total agricultural land.
This dire reality worsens amid the relentless Israeli aggression against Lebanon, threatening to wipe out nearly a quarter of national agricultural production, thereby posing a direct threat to food security and undermining farmers’ ability to sustain and continue production.
