Fertilizer Panic: The War With Iran Hits Global Agriculture

As conflict around the Strait of Hormuz disrupts global trade, the world’s fertilizer supply chain is facing unprecedented pressure. Andrew Wilkinson speaks with AgResource analyst Ben Buckner about soaring fertilizer prices, the threat to corn and wheat production, and why the Iran crisis could trigger the next global food shock.

Summary – IBKR Podcasts Ep. 387

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Andrew Wilkinson

Welcome to this episode as the war with Iran drags on. Here with me to discuss a non-oil consequence of the closure of the Straits of Hormuz is Ben Buckner, Grains and Dairy Analyst from AgResource in Chicago, Illinois. 

Welcome to the show, Ben. 

Ben Buckner

Andrew, it is a pleasure to be here. Thanks for having me. 

Andrew Wilkinson

Thank you very much for being a guest. Now, under the microscope in today’s podcast, we’ll be talking about urea, ammonia, phosphates, sulfur used to create fertilizer, and also liquefied natural gas, or LNG, required to create electricity for converting atmospheric nitrogen into plant food. When we focus, Ben, on the trade disruption resulting from the war with Iran and the lack of vessels leaving the Straits of Hormuz, it’s instinctive to think of the logjam for crude oils. But it’s not just oil and gas that’s produced in the Middle East, is it? The region is a huge producer of fertilizer, isn’t it? 

Ben Buckner

Yeah. And I think a lot of the world is just learning that in the last two months. It’s really come out that, you know, markets, whether they’ve got perfect information or not, the price is the price, and suddenly we’ve seen a skyrocketing of all of those fertilizers that you listed: ammonia, phosphate, sulfur. And so it’s gonna be an increasing focus, I think, in the ag markets and food markets as a whole, depending on the duration that the Strait is closed. But I think, you know, to start off with, until the Strait of Hormuz is opened nearly fully, this is gonna stay in the headlines, and this is gonna be something that we as ag market analysts, and the ag markets themselves, are gonna be hyper-focused on. 

What does 2027 bring, I think, is where we are at the moment. 

Andrew Wilkinson

Could you describe the impact this is having on farming? 

Ben Buckner

Yeah. And so we wanna think about this, you know, the details of fertilizer trade flows can be kind of opaque or, you know, data’s out very much in arrears. But we wanna think about this, I think, through the lens of cost of production. And even as we see generally everything has doubled when we think about fertilizer. And even taking a step back, you know, one of the problems that we’ve got for a lot of the major exporting countries, when we think about wheat, corn, vegetable oil, soybeans, this kind of predates what’s happening in the Strait of Hormuz, is this may be kind of the final nail in the coffin when we think about fertilizer pricing moving forward. But where these products come from, you know, nitrogen, phosphorus-based fertilizers, you know, it’s always been China, North Africa, the Middle East, and Russia. And so if you go back to really 2016, you know, kind of worsening trade relationships between the US and China, you know, that kind of threw a wrench into this. 

You know, China’s an incredibly large exporter of phosphate-based fertilizers. It wasn’t really much of an issue, but then we’ve got, you know, Russia’s invasion of Ukraine, and then we lost, you know, the fifth largest exporter of total fertilizers would be Russia. And so then that threw another wrench. Now we’ve lost the remaining third, or the remaining third of the world’s exportable fertilizer supplies have been, you know, kind of shuttered for now. And the duration, again, that we don’t have access to at least reasonably priced fertilizers is anyone’s guess. So that’s the issue for now. Whether we get supplies or not, you know, the US farmer, the Australian farmer, the Western European farmer, I think the market will be able to sort this out. But again, we want to look at this through the lens of cost of production. 

Corn prices, wheat prices, soybean prices are moving up, but not to the degree that fertilizer has. So when you start to do balance sheets for late 2026, 2027, you know, the next Southern Hemisphere growing season, you’re really starting to stress Brazilian and Argentine producer balance sheets, you know, to the point where now fertilizer as a percent of total cost to the Brazilian corn farmer is going to be double. 

They have got to double yields to see the same on-farm balance sheet that they saw really currently. So if they can’t double yields because of maybe a lack of access to fertilizer supplies, then I think the world farmer increasingly is gonna start thinking about planting something that’s not as reliant on nitrogen specifically. So you’re planting more oil seeds, less corn, less wheat. I think another maybe more direct impact of the nitrogen-based issue specifically is, you know, nitrogen essentially correlates to protein levels of wheat in Western Europe. And do they have supplies to apply that final coat of nitrogen-based fertilizer to the wheat crop in a country like France or Ireland or the UK? 

And that’s something that our contacts have said maybe it’s gonna be a struggle. And so if you don’t get that last application of nitrogen on, you know, May, June, probably looking at, on the margin, some kind of loss of nitrogen protein in the wheat plant. So you’re gonna have less high-quality wheat. Yields will be a different issue. But I think that’s how it’s impacting things from a very high level, is costs of production are going up, producer balance sheets are getting very tight to turning negative, and do they make the decision not to plant or to plant something other than corn or wheat? 

Andrew Wilkinson

Well, I was gonna ask you about the impact on this year’s crop yields. You’ve explained a lot of it for next year, but is it the case that farmers are being a little bit more sparing with fertilizers at this point for this year? 

Ben Buckner

So far, we have found, you know, through our client data, I think a lot of what the media has found. And, you know, different farms will have different coverages of fertilizers and applications. But for the most part, I don’t think it’s going to be a major issue for the United States, maybe even the Northern Hemisphere 2026 growing season. I think a lot of this was pre-bought. A lot of fertilizer in the U.S. is applied during the fall. Of course, a lot of it is in the spring as well. But I don’t think it’s going to materially impact ideas of productivity, given that if our main concern is United States corn yield, you know, once we get into September and October and our first kind of metric for productivity would be test plot data. You know, certain portions of field grown to be measured. We’ve got several decades of history. You know, when we get to that point, I don’t think we’re going to be able to separate what that field yielded. Was it fertilizer applications? Was it weather? Was it early emergence planting date? So I don’t think that we’ll be able to know. 

And we’re not terribly concerned about productivity in the Northern Hemisphere. But I think the issue is in calendar year 2026, we’ve got to do this all over again in the Southern Hemisphere, you know, as early as late August. And what does the market look like then? 

Andrew Wilkinson

Ben, is it the case that all crops are equal? Which crop is the most vulnerable from a squeeze on supplies of fertilizer? 

Ben Buckner

It’s going to be corn first and then the quality of wheat second. Though, again, if we include phosphate supply issues to the already very well-known and clear nitrogen issues, you know, soybeans, oilseeds will be impacted. But I think top priority for us is what does the producer do with corn production? Kind of Southern Hemisphere, September onward. If you can’t apply adequate amounts of nitrogen-based fertilizer, I mean, you probably are looking at a pretty significant ding in corn yields. And it’s also impacting corn cost of production and corn balance sheets most significantly. 

You know, when you think about the United States farmer, the Indian farmer, the Brazilian farmer growing corn, and they’ve got to double yields to meet or to match the balance sheet they saw in 2025, it’s not quite as dire when you look at something like oilseeds. So to us, it is primarily a corn issue. 

Andrew Wilkinson

Is there a tipping point along the timeline, in terms of the standoff between US and Iran? How long can farmers operate before this becomes significantly worse? 

Ben Buckner

I think it’s more about seasonal demand for fertilizer. So one of the interesting things is, you know, let’s isolate the United States, maybe Europe as well. Peak demand for spring fertilizer applications has come and gone. And so you really enter this lull period that everyone had to pay more or less double what they paid for fertilizer this year. 

India suddenly bought, in one tranche, you know, two and a half million tons of fertilizer to meet 2026 needs. So we can kind of go the next maybe 90 days without really impacting fertilizer balance sheet supply and demand, maybe even new price discovery to that extent. Again, we redo all of this starting September, October in both hemispheres. 

So I think that would be the sort of pinch point here, knowing too that it’s, you know, 40 days to get from the Middle East to a country like Brazil or Argentina or the United States. So if we haven’t solved this probably by July 1st, I think the market’s gonna have to price something different or reset itself when we think about future grain productivity, food markets as a whole. 

Andrew Wilkinson

The final question off the cuff here. I don’t think there are any futures markets. You just mentioned price discovery, but are there any futures markets that would address this issue going forward? 

Ben Buckner

The CME has recently launched, kind of in addition to its existing urea contracts, short-dated and smaller-size urea contracts. And so volume, I think they’re trying to pick that up, but they do exist and they are settled one way or another. But I’ve got to look at the CME. They’re trying to, you know, coincidentally become more active in the fertilizer space during the winter months. And now it has been pretty timely, and we’ll see if that contract picks up. 

Andrew Wilkinson

Ben Buckner, Grains and Dairy Analyst of AgriSource in Chicago, thank you very much for joining me today. 

Ben Buckner

My pleasure, sir. 

Andrew Wilkinson

And to the audience, thank you for listening. And remember to like and subscribe wherever you download your podcasts from. Bye for now.