Farm input costs risk rising as Middle East crisis hits fertiliser markets
Escalating tensions in the Middle East are shaking global fertiliser supply and could push up costs for UK farmers just as many prepare for spring applications.
The widening conflict has pushed the sector into a new phase of volatility, with nitrogen, phosphate and sulphur supplies under pressure, according to analysis from Chris Vlachopoulos, Senior Editor for Phosphates at ICIS, a global commodity market intelligence firm.
Disruption to production and exports from major Arab Gulf producers — alongside the near-closure of the Strait of Hormuz — is raising concern across global fertiliser markets.
The shipping route handles around one-third of global fertiliser trade, meaning any prolonged disruption could quickly tighten supply.
The UK imports a significant proportion of its fertiliser, leaving domestic prices exposed to global supply shocks and rising freight costs.
Freight rates, insurance costs and operational risks are already climbing, with logistics becoming a major concern for traders.
Market participants are increasingly hesitant to sell product while the situation unfolds.
One trader told ICIS: “Let’s wait,” adding that in India’s phosphate market “no one [will] offer this week, as the producers may want to wait more.”
They said producers could stay out of the market for around 10 days, describing the situation as “scary”.
Prices are already responding. Global urea prices have surged by up to 35%, reaching three-year highs as buyers scramble to secure alternative supplies after Middle East shipments were disrupted.
Traders have rushed to cover short positions in North Africa and southeast Asia, while others are building long positions amid expectations the conflict involving the US, Israel and Iran could last at least another month.
Although demand remains relatively subdued, rising fertiliser prices could increase input costs for UK farmers already facing tight margins.
The disruption comes at a sensitive time for agriculture, with many UK farmers preparing for spring nitrogen applications.
Farmers in the United States are also preparing for spring fertiliser use, while India has confirmed more than 500,000 tonnes of Gulf urea for delivery by the end of March ahead of the kharif monsoon season.
Some cargoes originally destined for Brazil are already being redirected to the US where prices are higher.
Supply pressures are also emerging elsewhere, with fertiliser output beginning to fall in some regions due to gas shortages.
Energy disruption in the Gulf is adding to the strain. QatarEnergy halted urea and ammonia production after suspending liquefied natural gas output on 2 March and declaring force majeure.
The Strait of Hormuz is expected to remain largely inaccessible for at least four weeks.
The Arab Gulf typically exports more than 1.5 million tonnes of urea per month, while Iran supplies an additional 350,000–400,000 tonnes.
Even if shipping routes reopen quickly, damage to infrastructure could prolong the disruption, Vlachopoulos warned.
Ammonia supply is also tightening as the Middle East is a major exporter to both eastern and western markets.
Some cargoes have managed to leave the Strait of Hormuz, but others remain stranded in the region.
As a result, buyers are increasingly turning to southeast Asia for supply, with producers in Indonesia and Malaysia offering cargoes at higher prices.
Rising European gas prices have also forced some fertiliser producers to withdraw offers, adding further pressure to supply.
Sulphur trade has meanwhile stalled as traders and producers wait for clarity on how long the conflict will last. Freight costs and insurance premiums are rising, while logistical delays are disrupting sulphur and other downstream fertiliser products.
The conflict erupted just as sulphur prices had begun to fall from record highs, but sentiment has since turned bullish again.
Phosphate trade is also showing signs of caution. In India there has been no fresh trading activity for diammonium phosphate (DAP), with both buyers and sellers stepping back amid the uncertainty.
Participants expect producers to remain out of the market for at least 10 days while they assess shipping and supply risks. Saudi producers are also facing logistical constraints that are limiting exports to key markets.
Potash has so far avoided the worst of the turmoil, with demand for muriate of potash steady and shipments continuing as planned.
However, producers may eventually pass rising freight and insurance costs on to buyers.
For now, fertiliser markets are bracing for further volatility, with UK farmers watching closely as global tensions threaten to push fertiliser prices higher in the weeks ahead.
