The joint U.S. and Israeli attack on Iran has triggered a significant ripple effect across global markets.
While crude oil prices soared on Monday, the global fertilizer market is also rallying. This comes as conflict threatens the stability of the Strait of Hormuz.
This narrow waterway is located between Oman and Iran and links the Persian Gulf with the Gulf of Oman and the Arabian Sea. It serves as a critical maritime chokepoint for global energy and also handles a substantial portion of the world’s fertilizer supply.
Key for Fertilizer Supplies
Josh Linville, vice president of fertilizer for StoneX, notes the Strait accounts for nearly 25% of globally traded nitrogen fertilizer.
“We have got three of the top 10 global urea exporters that sit in the Persian Gulf,” Linville says. “Three of the top 10 anhydrous exporters sit in the Persian Gulf. One of the world’s top five phosphate exporters sits in the Persian Gulf. And with that Strait of Hormuz continuing to stay shut out to safe passage, those tons just don’t matter anymore. They don’t exist until the Strait reopens.”
Conflict Increases Already Historically High Fertilizer Prices
Global fertilizer prices rose immediately following the attack. They moved in tandem with higher energy and natural gas prices, which are the primary feedstocks for nitrogen products.
Fertilizer prices were already at historical highs prior to the conflict. Linville reports urea markets saw the sharpest increases, followed by phosphate.
In New Orleans (NOLA), physical barges for April urea traded at $457 per ton on Friday. By Monday, prices had jumped to approximately $550 per ton.
“We have had prices up about $70 a ton from Friday afternoon trade. It’s been significant,” Linville says.
UAN and anhydrous prices have not reacted as violently, but phosphate values are not far behind.
“Phosphate, we’ve got that price up about $30 a ton from the last trade we had seen. Again, [I’m] a little surprised it’s not up more. That’s, I guess, a thankful thing that’s not up more, but I think more increases are coming. Really, the only major fertilizer that hasn’t been impacted so far is potash. But you can even make a case for that given Israel and Jordan’s importance,” he adds.
Corn-to-Fertilizer Ratio Stretches Further
He says the corn-to-fertilizer price ration was already one of the worst in history, and this has added insult to injury.
“We were already the second or third worst urea-to-corn ratio that we had been for this time of the year, this part of the calendar. This just moves that higher,” Linville explains.
Timing Threats for Spring Planting
Higher prices aren’t the only problem: Supply is in jeopardy. Linville says, from a timing standpoint, it could not be worse for agriculture.
A multi-week conflict could keep some supply from getting to the U.S. in time for spring planting.
“It takes 30 days to get a vessel of urea to load in the Persian Gulf, sail it over here, hit U.S. shores, and then another three to four weeks to move that product into the interior of the nation to a point where the farmer can put their hands on it,” Linville says.
This means a vessel loading today might not be available until May 1. The window for spring application is closing quickly.
While healthy fertilizer import volumes in February provide some cushion, the industry could see a shift in acreage. Some farmers may move from corn to soybeans if nitrogen supplies do not arrive in the Corn Belt in time.