Current fertilizer and corn price ratios are at historic levels, but could they get worse? According to new research and modeling from Rabobank, there’s one specific action that would have ripple effects globally: the closure of the Strait of Hormuz.
This narrow but critical shipping channel has come into focus with the looming possibility of making a bad situation even more economically painful since Israel first struck Iran in June. The strait’s border to the north is Iran, and to the south it’s Oman and the United Arab Emirates. It’s the world’s busiest oil shipping channel, the only traversable waterway from the Persian Gulf to the open ocean, but it’s also critical for the global trade of fertilizers.
Sam Taylor, senior farm inputs analyst at Rabobank says: “It’s really some kind of nutrient highway that is a very small slither of seaway through which a huge proportion of global nutrients, particularly urea, but also phosphates and sulfur go through.”
Disruption on the strait could be a closure or placement of mines, but any issues could bring severe consequences. Up to 45% of global urea exports are from the Middle East, with top exporters reliant on the strait: Qatar, Iran, UAE, Bahrain and the eastern ports for Saudi Arabia. The Strait of Hormuz also brings 25% of ammonia, 20% of DAP, 10% of MAP and 30% of sulfur global exports.
Taylor says an important factor would be the timing. Two countries most directly dependent on the reliability of these supply tons are Brazil and India.
“It’s their seasonal import time. India has just thrown out a rather sizable tender. This is the start of the import season for Brazil, who are almost entirely reliant on imports to meet their macronutrient supply,” Taylor says. “So if there was a full closure, the prices could be quite parabolic–upwards of 70% to 80%.”
He notes Brazil imports 90% of its urea demand and 95% of its macronutrient demand.
What U.S. Can Farmers Expect?
While the U.S. isn’t as reliant on imports to the same magnitude, and it’s not our heaviest import season (which is September/October and March), an immediate complete stop of traffic on the strait would bring globally higher prices as well as some notable product price changes.
“It is a risk, and it’s particularly pernicious for urea, but it’s also quite a pernicious risk to pricing for phosphates for U.S. growers too,” he says.
Elevated prices rose higher with first Israel strikes, which were also followed by production reductions.
“We saw curtailment of Egyptian production; we’ve lost several 100,000 tons globally on the urea balance sheet,” he says.
Managing Expectations Is the Name of the Game
With or without a closure of the shipping channel, fertilizer prices do not appear to be coming down.
“The expectations which I would set farmers with is that pricing is less likely to come down to a pre-conflict level for urea globally than we had,” he says. “So the expectation heading into 2026 is for a potentially higher price than would have otherwise been. Manage expectations that we are in a higher price floor than pre-conflict even without any closure.”
Farmer demand continues to show strength despite the high input prices and lower commodity prices.
“The resilience of some of the demand has been quite impressive,” Taylor says. “A huge amount of the pre-conflict run up in U.S. nitrogen prices and urea prices were on a steam even before the conflict. It has been a reflection of that strong demand and the resilience and the affordability has not necessarily been very good on urea and UAN in particular, but also phosphate.”
As for ag retailers, Taylor advises for them to watch global demand dynamics and who is filling requests for tenders.
“Keep a very keen eye on the demand dynamics that are coming out of the Brazilian market and the Indian market,” he says. “Have a particularly close look on the tenders in the Indian market, and who’s going to be a supplier to that, and the scale of supply, whether they’re overcommitted/undercommitted to give a good indication about the actual global balance sheet. That’s the easiest proxy to understand about whether you should be stepping in or stepping out of the market, or you anticipate some semblance of a correction in that particular market. There is likely to be volatility above and beyond just that increased price floor that we would expect as well.”
