In West Jefferson, North Carolina, workers are grappling with high fertilizer costs as they plant potatoes. The conflict in Iran has exacerbated this issue, compounding challenges like severe weather, tariffs, and elevated costs of fuel and labor.
When the war in Iran began, global economic concerns centered on oil shipment slowdowns. However, fertilizer exports also became a critical issue. Prior to the conflict, about one-third of the world’s fertilizer transported by sea passed through the Strait of Hormuz, according to UN Trade and Development. This vital waterway has now become a shipping bottleneck.
With the strait closed, fertilizer shipments from the Persian Gulf decreased, leading to higher prices worldwide. The war also caused a shortage of natural gas, crucial for nitrogen fertilizer production. This shortage has significantly impacted U.S. farmers, who face both higher prices and limited fertilizer availability as they plan their growing seasons. Despite these costs, experts suggest that retail food prices won’t see a major impact.
“Consumers are going to see higher food prices come September to January,” says Chris Barrett, a professor at Cornell University, “but very little of that is going to be directly attributable to fertilizer.”
Food inflation stems from broader issues like labor shortages and high fuel costs. The Fertilizer Institute states that about a third of U.S. fertilizer is imported, with minimal amounts passing through the Strait of Hormuz. However, the global nature of the market means U.S. farmers are indirectly impacted by these disruptions.
According to a survey by the American Farm Bureau Federation, 70% of farmers reported they couldn’t afford all necessary fertilizer this season. Crops like corn and wheat, which heavily rely on fertilizer, see about a third of their operating costs tied to it. Many farmers planned to reduce fertilizer application this year, partly due to these rising costs.
Some farmers are considering switching to crops requiring less nitrogen fertilizer, like soybeans. USDA data suggests this shift, with a predicted rise in soybean acreage, contrasts with a decrease in corn planting.
If higher fertilizer costs lead to smaller harvests, retail prices may slightly increase. TD Economics estimated a modest production shortfall could marginally grow food inflation. However, the burden primarily falls on farmers. U.S. farms spend about 7% of their budgets on fertilizers, yet they lack bargaining power to secure higher crop prices.
The fertilizer scarcity might have more severe effects in parts of Africa and Asia, where countries rely heavily on Persian Gulf fertilizer. The UN Office for Project Services has warned of significant impacts in less-developed nations.
Recently, some fertilizer prices have decreased as deals to reopen the Strait of Hormuz were reached. Actions like suspending duties on phosphate imports may ease U.S. farmers’ burdens. Despite this, normalcy in the fertilizer sector might take time to resume. As a result, farmers are exploring alternatives like manure and cover crops to counter supply chain vulnerabilities.