Annirudha Ghosal and Allan Olingo
Hanoi, Vietnam: Farmers around the world are feeling the squeeze from the war in Iran. Fuel 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 Program.
“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.”
Baldev Singh, a 55-year-old rice farmer in Punjab, India, says smallholders – the bulk of the country’s farmers – may not survive if the government cannot subsidise fertilisers when demand peaks in June.
“Right now, we are waiting and hoping,” he said.
War halts supplies of key nutrients
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.
On Friday, Iran’s ambassador to the United Nations in Geneva, Ali Bahreini, said Tehran had accepted a request from the UN to let humanitarian aid and agricultural shipments move through the critical waterway, even as it endured strikes on its nuclear facilities.
The aid plan would be the first breakthrough at the shipping choke point after a month of war. While markets and governments have largely focused on blocked supplies of oil and natural gas, the restriction of fertiliser threatens farming and food security worldwide.
‘The planting season is now. The fertiliser isn’t there.’
Raj Patel,food systems economist
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 the 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 more than 90 per cent of its nitrogen fertiliser from the Persian 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 sulphur, 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.
In India, the government has prioritised urea supplies for domestic use and provides fertiliser manufacturers with about 70 per cent of their natural gas needs. Some plants are still operating below capacity, resulting in lower output.
“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.
Shortages hit at a critical time
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.
Factories in Russia, another major producer, are already running near full capacity, he said.
Developing nations are vulnerable
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 fertiliser, said Stephen Muchiri, a Kenyan maize farmer and chief executive 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.
India already subsidises fertiliser to ease the financial strain on farmers, but those subsidies leave less money for long-term farming investments. It has budgeted $US12.7 billion ($18.4 billion) this year for urea subsidies alone, according to the US-based Institute for Energy Economics and Financial Analysis.
Efforts to produce domestic urea have increased India’s dependence on imported gas, and excessive urea use has harmed local soil, said Purva Jain of IEEFA, which supports the use of organic fertilisers.
Less reliance on imported fertilisers could protect farmers and consumers from energy price swings and climate shocks, said Oliver Oliveros, executive coordinator of the Agroecology Coalition.
“This could be a turning point,” he said.
AP
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