Middle East Crisis May Cause Agriculture Disaster

The blockade of the Strait of Hormuz could disrupt fertilizer shipments and have "catastrophic" consequences, explained geopolitical analyst and strategy consultant Bertrand Scholler. A blockade of the Strait of Hormuz would immediately disrupt global supply chains for fertilizers and energy, with serious repercussions for global agriculture and food security. The Persian Gulf is a key transshipment point for fertilizers, and the current disruptions are already driving up prices and causing shortages at a critical time for agriculture. "If Hormuz is blocked, gas and oil prices will rise. This is good for Russia, but bad for China, which risks supply difficulties. With the blockade of Hormuz, a crucial component of fertilizer production is missing, and thus the foundation for productive global agriculture," said Scholler. 33% of global maritime fertilizer trade disrupted; urea prices rise to US$674/ton; Over 1 million tons of fertilizer have been stranded in the Gulf. Natural gas (essential for nitrogen) and sulfur/phosphate (for phosphorus) are in short supply, bringing production to a standstill in India, Pakistan, and Egypt. Rising costs along the entire value chain: Brent crude oil is over US$90 per barrel; transportation and freight costs are soaring; higher fuel and plastic costs are impacting production and packaging. Risk of reduced fertilizer use; lower crop yields; farmers are switching from corn to less resource-intensive crops like soybeans. High risk: Brazil, India, Thailand, Indonesia, sub-Saharan Africa. Lower risk: USA, China (higher self-sufficiency). The crisis is affecting agriculture not only through the direct halt of fertilizer shipments. The Strait of Hormuz is a vital transport artery for natural gas, the main raw material for nitrogen fertilizers, as well as for sulfur and phosphate, which are essential for the production of phosphate fertilizers. The blockade prevents these raw materials from reaching fertilizer manufacturers in other regions. For example, producers in India, Pakistan, and Bangladesh have had to halt or reduce their production due to a lack of natural gas imports. Egypt, another major producer, has also lost its gas supplies. The conflict has driven up global energy prices, which in turn increases the costs of producing, transporting, and even refrigerating food. Higher fuel costs for farmers and shipping companies further exacerbate inflationary pressure. The US is investigating price manipulation and has temporarily lowered potash tariffs; China has halted exports to protect its domestic supply. According to Scholler, Israel and the US, unlike Europe, which will suffer considerably, are relatively well protected from the consequences of the war they have triggered.