Strait of Hormuz Disruption Exposes Fertilisers Supply Vulnerability, Raises Food Security Concerns

The ongoing disruption in the Strait of Hormuz and escalating tensions in West Asia have highlighted the vulnerability of the global fertiliser supply, potentially jeopardising food security worldwide. 

A new analysis by Zero Carbon Analytics found how supply shocks linked to the conflict are pushing up fertiliser prices, tightening availability, and raising concerns over food inflations, especially in import-dependent countries. 

The Strait of Hormuz, a critical maritime checkpoint access to which has been almost completely cut off following attacks on Iran in late February, handles around 30% of global nitrogen fertiliser exports and 20% of liquefied natural gas (LNG). The analysis said as the Middle East supplies four times as much global urea as Russia, instability in the region could trigger even larger fertiliser shocks. 

This comes at a time when fertiliser prices are already up and when demand is the highest due to planting seasons. The disruption has caused market shocks, with urea prices rising to levels not seen since the 2022 invasion of Ukraine.

Early Signs of Disruptions are Already Visible

The analysis said the early signs of the disruptions are already visible with the price of urea in the US rising to the highest levels since October 2022 following the attacks. Within 48 hours of the attack, urea prices surged by 20% in North Africa. Prices in Southeast Asia have risen by more than 40% following outages at a major Qatari LNG facility, struck by Iran, that supplies feedstock for fertiliser production citing the data by Bloomberg Green Markets

According to the analysis, fertiliser manufacturers in India and Pakistan are reportedly cutting production as a result of suspended LNG supplies, while Europe's largest fertiliser producer has reduced ammonia output to 85% of full capacity as gas feedstock prices have soared more than 50% in Europe since the conflict started.

The analysis revealed that fertiliser supply shocks swiftly lead to higher food prices. This is because agricultural and food producers pass on rising input costs to consumers. For example, in the second week of March this year, prices for palm oil, soybean oil, soy, corn and wheat surged.  This was partly due to disruptions in crude oil supplies which increased interest in crop-based biofuels. Additionally, panic around wartime food security may have prompted some countries to stockpile staples like wheat. 

Larger Cost will Fall on Farmers 

The analysis drew parallels with the supply disruptions in 2021-22 and pointed out that many low-income countries relied heavily on imports but lacked the fiscal capacity or bargaining power to cushion farmers from rising costs. Spikes in fertiliser prices created significant fiscal pressures in these markets and required governments to fund subsidies for farmers. 

In the face of today’s challenges, farmers are looking again for alternative solutions, and are landing on changes that could affect food security. They will be facing other challenges such as higher energy and transport costs, including oil freight rates and insurance premiums, as a direct consequence of the war. 

Reducing Dependence on Fertiliser for More Resilient Agricultural Systems 

According to the analysis, the current crisis underscored the risks of heavy reliance on synthetic fertilisers. Reducing dependence on these inputs would make agricultural systems more resilient while also delivering environmental and economic benefits. 

The analysis suggested that while reduced application of synthetic fertilisers can lower yields by 40-50% in conventional farming systems, agroecological systems, which use less or no synthetic inputs, are less affected and have proved to be economically resilient during the recent global food crisis.  

Shamika Mane, an Indian farmer and President of the Inter-Continental Network of Organic Farmer Organisations said, “With fertiliser prices rising - and the planting season soon to begin - Asia’s farmers are once again being forced to choose between rising costs and falling yields. Consumers, who are already struggling to put food on the table, are facing further price hikes. We need to get Asian agriculture off this rollercoaster by shifting subsidies away from intensive mono-crop farming and towards approaches such as agroecology and organic that are less reliant on chemical inputs and less vulnerable to shocks from conflict and climate change.”

The analysis found that agroecological approaches that focus on strengthening natural nutrient cycling and improving soil health, such as legume crop rotations, organic amendments such as crop residue and biochar, reduced tillage, and buffer zones such as vegetated strips, as well as precision agriculture approaches that aim to increase the efficiency of fertiliser use through improved targeting and timing of applications, such as optimising fertiliser rates, and improving fertiliser placement and timing.