The ongoing war in Iran is raising more than just the cost of oil. With essential crop fertilizers also caught in the crossfire, American food prices could be next.
About a third of the world’s fertilizer ingredients – key inputs that farmers depend on to grow the crops that become everyday foods – transit the Strait of Hormuz, a critical point for shipping along Iran’s southern coast.
About a fifth of the world’s oil supply also passes through this narrow waterway. Since the US and Israeli attacks on Iran began on February 28, the strait has been effectively closed.
At least three cargo ships have been directly attacked by Iranian military forces and there are growing fears that Iran has placed sea mines in the strait.
Faced with imminent danger, shipping companies and tanker owners have opted not to transit the strait, and maritime tracking systems show hundreds of tankers idling just outside the waterway, with seemingly nowhere to go.
As a result, oil prices have skyrocketed, with US crude surpassing $99 a barrel on Friday afternoon, up about 50% since the start of the war. The longer the conflict continues, the greater the risk that the disruption will spread beyond energy markets.
“A less recognized risk is the threat the conflict poses to the global food supply chain, which depends on exports coming through the region,” Joe Brusuelas, chief economist at RSM, wrote in a recent client note.
The Middle East plays a huge role in fertilizer production, largely because its natural gas reserves are the main input used to produce ammonia, a key element for nitrogen fertilizers such as urea.
Countries exposed to disruptions in the region due to war (including Egypt, Iran, Qatar, Saudi Arabia and the United Arab Emirates) account for about 49% of global urea exports and about 30% of ammonia exports, according to the American Farm Bureau Federation.
“Fertilizer markets are globally integrated, so supply disruptions in one region can influence prices and availability elsewhere,” wrote Farm Bureau economist Faith Parum.
That means any increase in costs or restrictions on overseas supplies can quickly disrupt the global agricultural supply chain and raise the cost of food.
For American farmers, the uncertainty is already affecting their homes.
John Boyd Jr., a fourth-generation farmer in Virginia who grows soybeans, corn and wheat, said his fertilizer supplier recently warned him that shipments might not arrive as expected.
“Dealers tell me we can’t get the fertilizer,” Boyd told NBC News in an interview this week. “Due to the war and bombing in that area, the fertilizer is not moving.”
Fertilizer is essential for food production, he said, and should be applied before crops are planted.
“If I don’t apply fertilizer, that means I won’t have the yields I need to produce my crop,” Boyd explained.
Looking ahead, expect prices to rise as supply shrinks further.
As of March 10, ammonia prices in the Middle East were up 92% compared to a year earlier, while urea prices were up 70% over the same period, Brusuelas said in his note.
In the US, ammonia prices are currently 41% higher than last March, while urea prices have increased 21%.
Bottom line: “Higher fertilizer costs will contribute to higher prices in American supermarkets,” he wrote.
Food prices have already been rising. According to the latest consumer inflation data released earlier this week, grocery prices rose 0.4% from January to February and are now up 2.4% compared to a year ago. The cost of dining out increased 0.3% over the same period and 3.9% more than a year earlier.
Now, with the planting season underway, any disruption to fertilizer supplies could put additional pressure on food prices in the coming months.
The timing is critical for American agriculture. This is when farmers purchase fertilizers, prepare fields, and apply the nutrients needed to grow crops like corn and wheat.
“With the start of spring planting in the United States, it is essential to ensure transit, along with the necessary risk coverage insurance, for vessels transporting fertilizers through the Strait of Hormuz,” Parum wrote.
“If farmers are unable to obtain remaining supplies in time, we could see reductions or changes in planted acreage and lower yields, impacting our nation’s food security and the affordability of essential goods.”
On Friday, Agriculture Secretary Brooke Rollins said the Trump administration is “very close to announcing some solutions” aimed at keeping fertilizer costs down for farmers. But she did not provide additional details.
Rollins said most farmers have already purchased fertilizer for the planting season, but admitted that about 25% have not, leaving them much more exposed to rising prices.
“Obviously, events around the world are impacting our farmers,” he said at an event at the White House.
But it’s not just about fertilizers. Prices are also rising for diesel, which powers tractors, irrigation systems and fertilizer spreaders.
Boyd said those higher fuel costs are already starting to affect his operation, in addition to fears about fertilizers.
“I have a tractor that requires 100 gallons of diesel fuel to fill and it costs me $469 just for a tank of diesel fuel,” he said. “That doesn’t last long.”
