The recent U.S. strikes on Iran may have an unintended consequence for conventional farmers—higher fertilizer prices. Almost half of the world’s urea exports come from factories located on the Persian Gulf, and both Egypt and Iran curtailed urea production during and after the strikes. This caused global urea prices to rise 16 percent in the last week of June, though they are still below what they were in late February.
The United States is a relatively small player in the nitrogen fertilizer market, producing only about 9 percent of the total 182 million metric tons of ammonia synthesized worldwide in 2022. Consuming 19 million metric tons of ammonia but producing only 17 in 2020, the U.S. is a net importer of ammonia. The U.S. is an even smaller player in the urea market, producing 11 million metric tons and consuming 15 out of a total global production of 180.
Nobody seems too worried about U.S. farmers being unable to purchase fertilizer, only that prices may continue to rise, especially if the war shuts down the Strait of Hormuz. “So unfortunately, while yes, we think the price is going to come down from the highs, I also don’t believe it’s going to come down to the lows we had previously expected,” said John Linville, the vice president of fertilizer for StoneX.
Urea makes up about 25 percent of all nitrogen fertilizer used by U.S. farmers, according to the USDA’s Economic Research Service. Because fertilizer, like oil, is traded on the global market, prices are always vulnerable to disruptions like the frequent wars in the Middle East. For some conventional farmers, even a slight increase in fertilizer and fuel prices may make the difference between profit and loss for a given season.
Eco-ag farmers who know how to manage nitrogen without relying on synthetic fertilizer inputs have a distinct advantage in this volatile market. Interestingly, none of the conventional ag farm reports on the price surge mention the fact that it won’t affect organic or regenerative farmers who don’t use nitrogen fertilizer. The fertilizer companies must not want farmers to know that foregoing their products would mean greater economic stability.
