A recent CoBank report noted that fertilizer prices have come down from historic highs following the start of the Iran war. However, it stated that the ripple effect of the Middle East conflict compounded with tight supplies will create higher prices and sourcing issues in 2027 and beyond.
REASONS FOR INCREASES
Unlike the 2022 fertilizer shock, today’s disruption is rooted less in rerouted trade flows and more in damaged production capacity, raw material constraints and uncertain recovery timelines. The fertilizer price run-up in 2022 stemming from the Ukraine war forced a reshuffling of the flow of fertilizer products. The current conflict in the Middle East has resulted in shutdowns and damage that will require significant time and resources to restart, long after the war has concluded.
An estimated 31 ammonia plants in the Middle East have been directly impacted by the conflict or have shut down production completely. Also, 49 plants in India, Pakistan and Bangladesh are either curtailed or shut down due to constrained feedstock. At least 20 plants in Russia have been damaged from Ukrainian drone attacks.
The Middle East plays a critical role in the international fertilizer market. Fifty percent of globally traded sulfur and more than 30% of global urea exports originate from this region.
FARMER RESPONSE
Most farmers have already adjusted fertilizer management in response to elevated prices over the past several years. Rather than dramatically reducing application rates, they have relied heavily on soil analysis, variable-rate technologies and better nutrient management to optimize returns.
Under-fertilization can be more costly than higher fertilizer prices as it directly reduces crop productivity, in turn increasing the cost of production per unit of output — which is why many U.S. farmers have not pulled back on nitrogen applications. However, farmers have reduced phosphate and potassium application levels by as much as 10% to 15% in recent years. Historically, when fertilizer prices are high, farmers prioritize nitrogen application over phosphate and potassium, a pattern evident in 2008, repeated in 2022 and now emerging again.
Cash is tight at the farm gate, limiting some growers from locking in any product for the next crop year until additional financing or working capital becomes available.
PROJECTED PRICE
North Dakota State University projected fertilizer prices to continue to rise and then see a prolonged plateau that remains above pre-Iran war levels until 2028.
As a whole, fertilizer markets are unlikely to return quickly to pre-Iran war conditions. For farmers, elevated prices will keep nutrient decisions under pressure and could extend the recent pullback in phosphate and potassium applications. Even if prices stay below the extreme levels feared after the Strait of Hormuz closure, the industry should prepare for fertilizer costs to remain structurally higher — and more difficult to manage — through the next several crop years.
See the full CoBank report here.
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