Rising fertilizer prices triggered by the effective closure of the Strait of Hormuz “raise the risk of widespread demand destruction” as farmers reduce application rates, delay purchases, or shift crop choices, warns Rabobank in a new report.
“With 30% of global urea, 27% of ammonia, 24% of phosphates, and 48% of sulfur exports transiting this corridor, the shutdown creates a supply shock that cannot be fully replaced,” says the bank.
“Nitrogen markets are the most exposed, and phosphate markets are similarly pressured.” While potash remains comparatively more balanced given a more diversified supply base, the indirect effect of higher prices for other nutrients used in fertilizer will likely weigh on demand for this as well.
“The outlook for 2026 points to continued pressure on farm economics and increased downside risks for global crop production and food price stability.”
Notably, North African players such as Egypt and Algeria have become critical nitrogen exporters, with “recent urea shipments to Canada show how trade flows are shifting as Middle Eastern availability contracts,” says Rabobank.
“Nigeria is also strengthening its position in Atlantic markets, particularly Brazil and the US, supported by its three urea plants. Morocco continues to anchor the global phosphate market, with limited alternative supply giving its MAP (Monoammonium Phosphate), DAP (Diammonium Phosphate), and TSP (Triple Superphosphate) exports strong price-setting power.”
US and Canada
While many farmers bought fertilizer before the conflict began, risks are shifting to the next planting cycle, especially if exports are redirected abroad and phosphate production—which relies on sulfur—tightens, warns Rabobank.
That said, rising urea prices have added as much as $35/acre to the cost of producing corn in some of the most intensive systems, says the bank. This, combined with higher energy and diesel costs, “suggest this conflict has quite severely impacted the outlook for US growers.”
However, “The true jeopardy may lie ahead,” it warns. “The elevated sulfur price has further eroded the stripping margins of domestic phosphate producers, while export arbitrage opportunities to India and Brazil have likely attracted volumes from the US in an already tight domestic market. Any phosphate volumes leaving the US market may be sorely missed come fall if this conflict persists.”
Brazil
Brazil imports 90% of its fertilizer, although it has been reducing its reliance on the Middle East, says Rabobank. “Historically, roughly 70% of all imported urea arrives in Brazil from May to December, so time favors Brazilian importers, but only in a context of short-lived interruptions.”
Europe
Fertilizer prices have surged in Europe, with urea up about 40%, nitrates up 15-20% and ammonia up by 12%. While Europe sources many of these inputs from North Africa, the region faces risks linked to gas availability and potential production curtailments, notes Rabobank. While suspending most-favored-nation duties on nitrogen fertilizers and inputs may offer some cost relief, it is unlikely to significantly alter supply patterns, claims the bank.
Meanwhile, rising natural gas prices threaten the cost competitiveness of European fertilizer production: “This vulnerability became evident when Duslo in Slovakia reduced ammonia output due to escalating gas costs.”
As a result, farmers are expected to “reduce application rates, switch between nitrogen products based on relative pricing, and shift away from nitrogen-intensive crops such as corn.”
Africa
North Africa is emerging as a critical alternative supplier of nitrogen and phosphate fertilizers as Middle Eastern exports are disrupted. However, Sub-Saharan Africa remains highly exposed to price volatility, says Rabobank: “Urea prices in southeastern Africa have jumped nearly 40% and phosphates between 10% and 15%.”
Australia
Australian farmers are facing acute margin pressure due to heavy reliance on imported fertilizers. As a result, growers are expected to reduce fertilizer use and shift crop rotations toward less input-intensive crops such as barley and canola, predicts Rabobank. “The conflict has highlighted the fragility of Australia’s fertilizer supply chain… ultimately, RaboResearch expects a pronounced decline in total fertilizer consumption.”
China
China has strong domestic production of nitrogen and phosphates but remains vulnerable in sulfur, a key phosphate input, which it imports from the Middle East.
India and South Asia
India, Pakistan, and Bangladesh are among the most exposed regions due to heavy reliance on fertilizer imports and Middle Eastern liquid natural gas for domestic production. Tight global markets and reduced Chinese exports are further constraining supply.
Further reading:
Guest article: Food’s fossil reckoning; energy crises are the new normal, and food is next
Guest article: Technology now exists to decouple fertilizer from oil and gas markets
