Analysts believe the world’s farmers face soaring fertilizer and fuel prices as the war in the Middle East escalates, leaving some scrambling for supplies as the spring planting season approaches.
According to a report in Reuters- “Prices in the United States, which imports much of its fertilizer needs despite a large domestic industry, rose at the war’s outbreak. Prices for fertilizer jumped from $516 per metric ton early last week to up to $683 at the import hub of New Orleans last Thursday. Prices could jump higher if the Persian Gulf closure persists and shipments can’t make it in time for spring planting.
“Seth Meyer, former U.S. Department of Agriculture chief economist and now at the Food and Agricultural Policy Research Institute at the University of Missouri, said farmers might alter crop choices and fertilizer applications due to the price spike. Meyer is quoted by Reuters “Farmers need fertilizers for virtually all their crops if they want a good yield, but each crop and the soil they are grown in have different demands. Farmers could cut back on corn, which requires high rates of nitrogen fertilizer, or else sharply reduce fertilizer application rates.”
Fertilizer prices have increased more than 30 percent in New Orleans since the conflict began more than 10 days ago, according to StoneX Group. The Iran conflict is challenging the production and transport of fertilizers like urea, phosphate, anhydrous and sulfur, with ships not wanting to enter the war zone, causing uncertainty as to whether product can leave. “Literally, this could not happen at a worse time of the year,’ said StoneX analyst Josh Linville.”
Some farmers are reporting that they had locked in fertilizer prices ahead of the outbreak of the war with Iran- but many are at the mercy of the market that has jumped higher very quickly. As the head of FAPRI suggests- we could see a significant shift from corn to soybean acres since soybeans require fewer pounds of nitrogen fertilizer to produce a crop.
Projected Impact on Acreage
- Before the Escalation: Estimates projected about 94.5 million acres of corn.
- Post-Escalation Estimates: Projections have been adjusted down to roughly 93 to 93.5 million acres of corn.
- Alternative Crops: While corn acreage is expected to shrink, soybean acreage is expected to increase to 86.5 or 87 million acres in response.
