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The head of one of the world’s largest fertilizer companies warn that growing tensions in the Middle East can cause fresh food price shocks by straining the global supply chain with crop nutrients and energy.
Svein, chief executive of Norwegian Group Yara, said the fertilizer group and its customers are “examined” the risks around the Strait of Hormuz.
The fertilizer market has been “very unstable over the past two weeks, indicating how connected everything is,” he told the Financial Times.
Holcether pointed to the recent closure of Israeli gas fields that disrupt Egypt’s fertilizer production.
Tensions between Iran and Israel pushed Brent crude oil up over $80 per barrel this month, before returning to $60 high after a ceasefire brokered earlier this week.
Industry analysts warn that more than five-fifths of global urea production have been suspended due to conflicts and supply disruptions. “Iran has closed all ammonia plants for security reasons, but Egypt remains offline as Israeli gas flows have stopped,” said Sylvia Traganida, senior ammonia editor at Consultancy ICIS.
The consulting firm warned of Israel’s strike against Iran and retaliatory attacks that “provided large-scale disruptions to the nitrogen market” within days of the event, raising “continued threats to the supply of phosphate, potassium and sulfur from the region.”
According to CRU data, almost a third of urea exports, 44% of sulfur exports and almost five fifths of ammonia exports are migrated or produced in countries western Hormuz Strait.
“Food systems are fragile,” Holcether said. “If (energy price) remains high over time, it will ripple into the food system (in Ukraine) just like the outbreak of war.”
The last major turmoil in the fertilizer market took place in 2022, when Russia’s full-scale invasion of Ukraine caused a high natural gas price, causing a sharp rise in fertilizer costs, and contributed to the global food price crisis.
Since then, crop nutritional prices have been eased as the natural gas market fell, but the European fertilizer industry has remained under pressure as Russian imports gained a larger share of the market.
Sanctions have curbed the export of Russia’s natural gas, but key inputs of nitrogen fertilizer remain exempt, allowing Moscow to redirect gas through fertilizer production.
Holesther welcomed the EU’s recent move to impose tariffs on Russian fertilizers, but called it postponed. He said Europe needs to avoid “repeated mistakes” made with energy imports with food.
Yara’s chief accused Moscow of weaponizing weapons and fertilizers by expanding fertilizers and fertilizers to increase global dependence on supply and targeting Ukrainian civil agriculture in a campaign to destroy the country’s role as one of the world’s agricultural powers.
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“There are military battles, but there are also battles where food is used as weapons,” Holsether added that over 20% of Ukraine’s farmland is currently unavailable, occupied or used.
Before the war, Ukraine’s food exports, including up to 50 million tonnes of grain, were fed to approximately 400 million people per year.
According to Holsether, the country’s grain and oilseed production fell from 78 million tonnes in 2023 to 72.9 million tonnes this year.
