Closure of Strait of Hormuz: A Looming Threat to Already High Fertilizer Costs

Tue, 08 Jul 2025 21:52:34 GMT

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.”

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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.”

5 Trends To Watch In The Input Market

Thu, 29 Feb 2024 14:16:22 GMT

As fertilizer prices go through a seasonal spring elevation, experts are watching global dynamics to understand the market’s longer-term outlook in the U.S.

Among their top concerns are geopolitics, weather and low supply.

Possibility of Pipelines in Russia
Before Russia began invading Ukraine, they were the top global exporter of anhydrous. But due to their pipeline’s proximity to Ukraine, production plummeted.

Sam Taylor, farm inputs analyst at Rabobank, says the high prices that resulted from the loss of this pipeline aren’t expected to make another appearance.

“We saw the worst of the market really come and go,” Taylor says. “When we look to affordability, farmers should be able to reasonably feel comfortable in investing in a lot of these fertilizers.”

Josh Linville, vice president of fertilizer at StoneX, adds prices have the potential to significantly drop as Russia works on two new pipelines, one of which could come online as early as this year. However, the new route is also within reach of Ukraine and could be a potential target.

“You have a situation where the world’s largest exporter could pop up and start exporting again. Or, maybe they don’t,” Linville says.

The Israel/Hamas Conflict Continues
Another conflict with potential to impact the market is the situation between Israel and Hamas –even though Israel isn’t necessarily an area heavy in fertilizer production.

“This is one misstep away from the entire Middle East region jumping into the mix,” Linville says. “Sometimes the indirect impacts can have a foothold in the marketplace.”

Linville says the Middle East accounts for 51% of global urea exports and even a small reduction in supply could cause a scare and make prices jump.

China’s Unpredictability
Higher prices could also result from China–a major exporter of nitrogen–who has placed new restrictions, Those new restrictions could mean 40% less exports from the country.

“Right now, we’re going ahead with the idea that the Chinese are going to restrict exports,” Linville says. “They’re going to lower that number and that’s going to help keep prices a little bit more elevated.”

Taylor shares while tight supply may be in the near term, the longer outlook may be more positive.

“We anticipate the bulk of the exports from the Chinese market are likely to come in the second half of this year, which ultimately means a semblance of tightness in the North American market and also the global markets for the first half,” Taylor says. “There is room for optimism in the second half of this year as we look forward into 2025 to potentially see some downward pricing dynamics.”

With this in mind, Linville says it’s nearly impossible to predict what China will do, and there’s a chance the restrictions could be lifted at any time.

“The government continues to step in, play a bigger role and have a heavier hand on what happens and what doesn’t happen,” he says. “We’re watching very closely. Are they going to further restrict exports? Are they going to loosen up a little bit? We don’t know.”

The Weather Forecast
Domestically, water levels continue to be top of mind.

“The Mississippi River is an artery for our transit. When it suffers, we suffer,” Linville explains. “This is the most liquid point of fertilizer trade in the North American marketplace.

Linville says that while the Mississippi is in good shape for now, the Northern Plains have the potential to slow down the water flow due to the below-average level of snowfall they’ve received this year.

High Levels of Fall Fertilizer Applications
U.S. fertilizer applications from fall 2023 are also expected have a lasting effect on spring supply, and according to Linville, the short turnaround time between fall and spring fertilizer applications makes it difficult to restock an adequate amount of inventory.

“When we look at anhydrous, it was the third best application we’ve seen since 2000. Inventories have been drawn down very low,” he says. “You get about 90 days for the system to rebuild. There is not enough pipeline capacity, rail capacity, truck capacity or barge capacity to get the system rebuilt.”

Until inventory is rebuilt, elevated spring prices for anhydrous, phosphate and potash can be expected.

“High prices are the manufacturer’s way of saying ‘I can’t meet demand, and I am trying to shock you and scare you into using urea, UAN or something else because I can’t balance yesterday,’” Linville says.

Taylor adds while tightness in the input market isn’t quick to correct itself, next year could bring better availability.

“The current market environment still incentivizes imports into the North American market,” he says. “There should be room for inventory to build up into 2025.”