Fertilizer plays a critical role in modern agriculture, so critical that U.S. farmers are expected to spend $260 more per planted acre on fertilizer than on seeds.
As American farmers prep their fields for the spring growing season, their minds are not on the soil in front of them, but 7,200 miles away on the Strait of Hormuz, located off the Persian Gulf. Roughly a third of the world’s nitrogen fertilizer travels through the waterway. But since Israel and the U.S. attacked Iran on February 28, the vessels normally hauling fertilizer and other goods have remained anchored indefinitely.
U.S. farmers stand to suffer financially as the war damages an already weakened global fertilizer supply chain. Even if the Strait opens tomorrow, the conflict has already disrupted global trade and nitrogen fertilizer production enough to affect U.S. farmers. U.S. import prices for nitrogen-containing urea have risen by over 32% since the war began.
The war could not be happening at a worse time for American farmers who have begun planting fertilizer ahead of the spring planting season. U.S. import prices for nitrogen-containing urea have risen by over 32% since the initial missile strikes. Depending on how long the conflict lasts, the price may not go down by the time farmers buy fertilizer for 2027.
“We just got to try to run our businesses through this,” said Wes Beck, a fourth-generation farmer in Southern Minnesota who also serves as president of the Minnesota Corn Growers Association.
Unlike traditional businesses, farmers like Beck do not set the price at which they sell their crops. The rates are set by investors on commodity exchanges, such as the Chicago Futures Commodity Exchange, without input from farmers. This leaves farmers unable to easily adjust for rising expenses, forcing them to absorb much of the costs themselves.
U.S. import prices for urea have increased dramatically since the war began on February 28.
Nitrogen fertilizer — most commonly sold as urea — is produced synthetically by burning large amounts of natural gas. Prices first spiked in 2021 as countries lifted COVID-19-related restrictions. Costs began to stabilize by the start of 2022, but then soared when Russia — then the world’s third largest urea exporter — invaded Ukraine. EU-imposed sanctions on Russian natural gas restricted its flow into Europe, shutting down roughly 70% of Europe’s ammonia production capacity at one point.
Besides halting shipping lanes for fertilizer, the Israeli-U.S. war with Iran has severely disrupted nitrogen fertilizer production in the Gulf. Qatar’s state-owned fertilizer company, QAFCO, shut down production indefinitely after being hit by Iranian missiles. QAFCO is the world’s largest single-site urea exporter, accounting for 14% of global supply. Egypt’s urea output is also at risk, since it depends heavily on natural gas imported from Israel.
The United States is largely self-sufficient in nitrogen fertilizer, producing all but 15% of its needs. The remaining 5.5 million tons are imported, with Qatar, Oman, and Saudi Arabia accounting for 29% of the U.S.’s imported urea. Nevertheless, a weakened global supply of urea still affects domestic prices in the United States because the higher prices will lead American producers to sell abroad, said Josh Linvville, vice president of fertilizer at financial services company StoneX.
“We are still part of the world economy, a world marketplace,” said Linville. “When global values start to go higher, our values have to go up with them to match, or we run the risk of exporting even more.”
The war also raised shipping costs for urea. Brent crude oil prices have surged past $100 per barrel since the onset of the war. That has sent the global price of bunker fuel used by ships upwards 85% to $1,068 per metric ton. Insurance brokers also raised premiums on vessels traveling through the Strait and their cargo, which financial experts expect to remain elevated. Jiyeon Kim, an economist with the Agricultural Risk Policy Center at North Dakota State University, says she expects these costs to decline much more slowly.
“Already the energy price and other prices are going up really high,” she said. “So I think that the recovery to the usual situation takes time.”
Farmers won’t necessarily feel those higher prices right away. Many of them lock in fertilizer prices ahead of time, a strategy known as “forward purchasing.” One survey found that more than 80% of Illinois farmers typically buy their fertilizer ahead of season. Beck himself purchased almost 80% of the fertilizer he’ll use this year in November, when urea prices were below $400.
But many farmers struggled last year after the Trump administration’s policies raised many agricultural expenses. The poor farm economy left many unable to pre-buy fertilizer ahead of this season, according to the American Farm Bureau Federation. Harry Ott, a cotton, corn, and soybean farmer who serves as president of the South Carolina Farm Bureau, says the fertilizer costs will most affect farmers without years of harvests under their belt.
“Some of my younger farmers in South Carolina are facing some real decisions on whether or not they will be able to continue to farm in this economy,” said Ott.
The price of corn typically correlates with the price of fertilizer, but Beck says the changes aren’t always “tit-for-tat” and may not cover the total increase in expenses.
“We have a posted price that’s kind of good for today or until it changes in the corn business, and that’s what we’re gonna get paid,” said Beck. “And then from there we’ve got to manage our business and try to make the numbers come out right.”
Crop commodity prices alone have little impact on U.S. consumer food prices. That’s because spending tends to skew towards more processed foods and the complexity of the nation’s food supply chain. However, the same energy crisis that’s helping drive fertilizer prices upwards may also increase grocery costs at home.
Beck says he hopes fertilizer prices will go back down before the fall, when it’ll be time to pre-buy fertilizer for 2027. While that becomes more unlikely the longer the war continues, he remains optimistic.
“Right now in Minnesota, the sun is shining,” Beck said. “Spring is right around the corner, and ‘Minnesota farmers are getting ready to plant their best crop ever’ is the optimistic belief that we have as farmers.”