In the weeks leading up to the start of the planters, a certain kind of silence descends upon the Midwest. That silence feels different this year. Perhaps anxious. The figures from the fertilizer markets have a tendency to move quickly through grain elevators and rural co-ops, and 34 percent is the figure that everyone keeps bringing up. In about a month, the price of urea, the most widely used nitrogen fertilizer on the planet, has increased to about $601 per ton. Over the past month, urea prices have increased by over 34% to $601 per ton. That same ton was almost 57% less expensive a year ago.
As I watch this develop, I’m struck by how little notice farmers actually received. The conflict in Iran and the closure of the Strait of Hormuz, a waterway that most people couldn’t locate on a map but that transports a disproportionate amount of fertilizer worldwide, served as the catalyst. The Strait of Hormuz is a vital conduit for agricultural supply chains, carrying over one-third of all fertilizer traded worldwide.
The calendar is the cruel part. Since the war began late last month, commercial traffic through the route has essentially stopped, interfering with shipments at a time when farmers throughout the Northern Hemisphere are preparing fields for spring planting. You can’t apply fertilizer whenever it’s convenient. Either yields decline later, or it declines earlier. This timing seems almost designed to do the most harm possible.
Treating this as a singular shock or a freak occurrence is tempting. It isn’t. Brick by brick, anyone who has tracked agricultural inputs over the last five years has seen this pattern emerge. In 2022, the conflict between Russia and Ukraine caused nitrogen prices to soar. The following year, China tightened its export restrictions on urea and phosphate. levies, tariffs, and additional export restrictions. Prices for fertilizer are currently 40–60% higher than they were before the pandemic, and the war is probably going to make them even higher. Thus, this is not the impending crisis. On top of an already shattered foundation, the crisis is intensifying.
The economists are direct about the future of this. If the trade disruption continues, higher fertilizer prices for farmers and retailers may eventually result in higher food costs for consumers. One industry economist pointed out that this type of cost pass-through to consumers is something the market hasn’t really seen before. I was struck by that phrase. Not something we’ve ever seen. Those who monitor these markets feel that the old playbooks are no longer entirely applicable.
The image gets sharper when you walk it down to the field level. Diesel prices have risen 39% to more than $5 per gallon nationwide, while urea prices have increased by up to 30–33%, from about $515 to $683 per ton. That’s not a hassle for a corn farmer who is already facing four consecutive years of negative returns. Whether to plant at all or convert acres to soybeans, which hardly use synthetic nitrogen, is the question. Ten to twenty percent of growers in the north had not yet applied fertilizer before the conflict started, compared to the majority of farmers in the Midwest. The unfortunate farmers in the north are purchasing at post-war prices because they have nowhere to raise the price.
Furthermore, it continues past the farm gate. Since 40% of India’s imports of phosphate and urea come from the Middle East, the effects extend well beyond corn country in the United States. All of this has an odd asymmetry as well. Fertilizer producers’ stock has been rising due to the same disruption that is squeezing growers; CF Industries reached an all-time high and shares have increased by almost 10% in the last week.
Here, it’s difficult not to sense that something structural is changing. It’s genuinely unclear if prices will drop when the Strait reopens or if this will become the new normal. Unquestionably, the supply chain turned out to be more brittle and quick-moving than nearly everyone was willing to acknowledge.
