Spring planting season is starting across the northern hemisphere. But before seeds go into the ground, nutrients go into the soil. Typically nitrogen fertilizer.
“Right now, we’re kind of … we’ll be in the thick of it,” farmer Matt Ubel said from the cab of his huge green fertilizer spreader near Wheaton, Kansas. “Lot of nitrogen gets put on in the spring.”
The high cost of fertilizer and other farming necessities pushed many row crop farmers into the red last year. Ubel says some were holding out for lower prices this spring, only to see the price of the most common nitrogen fertilizer, urea, spike close to 30% when Iran shut down shipping in the Strait of Hormuz, halting close to half the world’s fertilizer trade.
“This probably threw some guys for a loop,” said Ubel.
The Persian Gulf, nitrogen fertilizer hub of the world
Farmers in rural Kansas, and across the world, are feeling the unexpected consequences of the war in the Persian Gulf because closing the Strait of Hormuz has bottled up almost 50% of the world’s urea exports.
Every plant needs nitrogen to grow. The best source of nitrogen is natural gas, and the Gulf states are sitting on the world’s largest gas reserve.
“If you had sat us down before and said, ‘Hey, I want you to think of the nightmare scenario for fertilizer. What would it be?’ It would be this exact event during this exact time of year,” said Josh Linville, who oversees the global fertilizer department at the brokerage firm StoneX.
Linville says urea that had been expected to arrive in the United States next month, in the peak of planting season, won’t come.
The Fertilizer Institute predicts that U.S. farmers will be short some 2,000,000 tons of urea this spring.
The United States is currently the world’s top natural gas producer, which supports a robust domestic fertilizer industry. Still, U.S. companies import about 18% of the nitrogen fertilizer sold in this country, drawing heavily on imports to cover the spring planting surge.
Other countries are much more dependent on petrochemical imports. Liquefied Natural Gas imports from the Persian Gulf fuel urea production in some of the top-producing countries. Or it did.
“Countries like India, the second biggest urea producer in the world, their production rates are starting to fall. Pakistan, China, all of these major producing countries are struggling to get these gas supplies,” says Linville. “And all of a sudden, they’re having to say, well, we’ve only got so much. We need to lower our fertilizer production to put into some of these other industries.”
And natural gas isn’t the only problem. About half the world’s sulfur exports were shipped out of the Strait of Hormuz.
For instance, sulfur is an important plant nutrient on its own, but it’s also a critical ingredient in phosphate fertilizer.
“We do produce a lot of phosphate fertilizers here in the U.S., but if we can’t get sulfur, we can’t produce phosphate fertilizers,” said Veronica Nigh, chief economist at the Fertilizer Institute. “And so, it’s kind of a twofer there.”
No easy answers
Federal lawmakers are trying to help.. Bipartisan Senate legislation aims to lower fertilizer costs by requiring more transparent pricing.
The Trump Administration is lifting barriers to fertilizer imports from Venezuela and Morocco.
“They’re trying to pull a number of levers,” said Nigh. “I think that it’s the acknowledgement that there aren’t a lot of easy answers to this problem.”
There’s very little slack in the fertilizer supply chain. The product doesn’t store well, some of it is prone to blowing up, some if it gets clumpy and hard to use with the slightest moisture. According to Nigh, fertilizer plants tend to operate at capacity and take years to construct. Iran was a top urea producer and exporter before the war. It’s unclear when or if that capacity will come back online.
The gas fields in Iran and Qatar are the world’s largest natural gas reserves. They supplied fertilizer production in India, normally the world’s second-largest nitrogen fertilizer producer. But, those fields have been severely damaged in the war.
Even after the Strait of Hormuz reopens, it will likely take months to straighten out the fertilizer supply chain.
“How long does it take until we get back to normal? It could be a while,” Nigh said.
Meantime, American farmers may have to make hard choices at planting time. Corn, for instance, needs a lot of nitrogen to thrive. Soybeans need less, so U.S. farmers may grow less corn and more soybeans. Farmers who can’t source fertilizer may even skip a year.
“Think watermelons and cantaloupe and things along those lines in Texas, those don’t get planted,” said Nigh, “Or pumpkins in Indiana.”
On the one hand, less fertilizer use could be good for the environment. Fertilizer runoff pollutes water sources and fuels toxic algae blooms.
But the fertilizer shock triggered by the attack on Iran will invariably mean that people around the world have less to eat. And that could be an acute problem in vulnerable countries, especially those dependent on Persian Gulf oil for fertilizer.
“What our product is used for, is food, is the production of food,” Nigh said. “So the consequences aren’t going to be immediate, but they could be substantial.
