Fertilizer Supply Crisis Signals Bearish 40% Yield Risk

The fertilizer supply crisis triggered by the conflict between the United States and Iran has moved from an energy story into the core of the global food system. With commercial traffic through the Strait of Hormuz severely constrained since late February, the raw materials that underpin modern crop nutrition are no longer reaching the factories and farms that depend on them.

The disruption is unusual in both its scale and its reach. It does not merely raise the cost of a single input. It removes the feedstock that links phosphate production, planting decisions, and grain availability across continents.

Strait of Hormuz Sits at the Center of the Shortage

The Strait of Hormuz functions as a chokepoint for far more than crude oil. Under normal conditions, roughly 45 percent of the world's sulfur passes through the waterway, according to industry assessments of seaborne flows.

Sulfur is the starting point for sulfuric acid, which in turn processes phosphate rock into finished phosphate fertilizer. When that single corridor seizes up, the effect cascades through the entire phosphate value chain.

The North Dakota State University Agricultural Trade Monitor estimates that the Persian Gulf normally accounts for about 44 percent of seaborne sulfur and roughly 40 percent of globally traded urea exports. The Food and Agriculture Organization has described the situation as a disruption at the heart of the global agrifood system rather than a contained geopolitical event.

Phosphate Fertilizer Plants Are Going Offline

Phosphate fertilizer manufacturing has been among the first casualties. Dozens of facilities worldwide have idled production as they run short of sulfur and other raw inputs, and the pressure has been compounded by Russia's suspension of sulfur exports.

The result has been a sharp repricing of finished product. Through April, world urea prices roughly doubled and diammonium phosphate climbed about 35 percent, according to the International Food Policy Research Institute.

Phosphate fertilizer feedstock constraints reach well beyond direct Gulf shipments. Major producers in China, Morocco, and Indonesia rely on imported sulfur, which means the shortage degrades output even in countries far from the conflict zone.

Grain Prices Face Upward Pressure as Yields Fall

Grain prices are now the central concern for the season ahead. Lower nutrient application reduces crop yields, and tighter harvests feed directly into commodity markets.

The FAO has warned that reduced availability of ammonia, urea, phosphate, and sulfur-based fertilizers could lower production of staple crops such as wheat, maize, and rice within six to nine months. Brazil illustrates the stakes, with industry estimates suggesting up to 40 percent of its acreage may receive no phosphate this season.

Even if the Strait reopens, supply lines will not recover quickly. A backlog of vessels, elevated war-risk insurance, and possible damage to loading infrastructure mean grain prices could stay supported well into the 2027 planting cycle. Whether higher grain prices fully offset the additional input costs that farmers now face remains uncertain.

Food Security Policies May Deepen the Strain

Food security has become the organizing principle for government responses, and several of those responses risk amplifying the original shock. To protect domestic supply, China has extended urea export restrictions and Russia has suspended export licenses for ammonium nitrate.

Food security pressures are also reshaping fuel policy. Argentina has lifted permitted bioethanol content, Indonesia has expanded biodiesel mandates, and the United States has moved to raise renewable fuel volume requirements.

These mandates lock in rigid demand for corn, sugarcane, and palm at the exact moment supply is tightening. Analysts at Transport and Environment describe a vicious circle in which high energy prices drive more biofuel blending, which deepens demand for nitrogen and pulls feedstock away from food.

A New Boom and Bust Cycle for Agriculture

The combination of falling output, export curbs, and rising biofuel demand points toward a structural supply deficit. If global stockpiles draw down, the deficit could trigger a pronounced surge in grain and oilseed prices and open a new boom phase for agricultural markets, though one carrying far greater volatility for producers.

For growers, the strategic logic is already changing. The traditional focus on timing the market for the best price is giving way to securing physical availability, pushing farmers to lock in phosphate and sulfur commitments far earlier in the year than usual.

That shift marks the practical legacy of the crisis. Supply certainty, rather than price alone, is becoming the decisive variable in agricultural planning for the seasons ahead.