THE FERTILIZER CRUNCH IFPRI BLOG HOW FERTILIZER POLICIES COULD EXACERBATE HORMUZ PRICE SHOCKS
By Shawn Arita, Ming Wang and Joseph Glauber 1
T he closure of the Strait of Hormuz amid the outbreak of the Iran war on February 28, 2026, put roughly one- third of global seaborne fertilizer trade at risk. Suddenly, production across the broader Persian Gulf region had no clear ocean exit. Focusing on two major types of fertilizer, urea and diammonium phosphate (DAP), the closure effectively blocked around 21 million metric tons (MMT) of annual urea export capacity across the Gulf region, including that of Iran, Qatar, and Saudi Arabia, along with another 4 MMT or so of DAP export capacity. The supply disruption drove global fertilizer prices up: through April, world urea prices approximately doubled and DAP prices rose about 35 percent. Yet how high prices go, and for how long, depends on more than the strait closure alone. The evolving export policies of the major non-Gulf fertilizer suppliers (mainly export restrictions) and the import policies of large fertilizer importing countries (mainly producer subsidies) are also affecting global supplies and prices. A handful of administrative decisions, often opaque and made with little or no advance notice or explanation, can move world prices by hundreds of US dollars per ton. As we saw in the grain and vegetable oil markets following Russia’s invasion of Ukraine in 2022 or with the rice market in 2023, countries often resort to export restrictions to
ensure sufficient supplies for domestic consumers, and further shorting global markets. Meanwhile, India and Pakistan, the world’s largest fertilizer importers, along with many other countries, run subsidy schemes that insulate their farmers from shifts in world prices, limiting changes in global demand that can lower prices. Amid the current spike, such decisions could drive fertilizer prices higher still, or help lower them. In other words, whether urea peaks at US$700 or US$900 per MT – and exactly how the shock will affect agricultural production and food security – may very well depend on the policy choices these countries make in the next several months. An earlier blog post by Arita and Glauber described the Hormuz disruption as a fertilizer supply shock that would likely have limited impacts on grain markets and food prices more broadly. This is a different kind of shock than the last one, triggered by the Russia-Ukraine war in 2022, which disrupted fertilizer supplies while food prices were considerably higher than today. This post further explores the nature of the current shock, employing an economic model to quantify and compare impacts of various supply- and demand-side policies across key fertilizer exporting countries beyond the Persian Gulf and major importing countries – finding that these can have significant impacts of fertilizer prices.
Key takeaways • Policy decisions by fertilizer exporters outside the Persian Gulf region could have significant impacts on global fertilizer markets already reeling from the closure of the Strait of Hormuz, a modeling analysis shows. • Export restrictions insulate domestic users from high global prices, but amplify global supply shocks by removing physical volume from the marketplace. • Subsidies shield domestic farmers from high global prices, sustaining consumption but contributing to price increases.
1 Shawn Arita is Associate Director of the Agricultural Risk Policy Center at North Dakota State University; Ming Wang is a Junior Research Economist with the NDSU Agricultural Risk Policy Center; Joseph Glauber is a Research Fellow Emeritus with IFPRI’s Director General’s Office. Opinions are the authors’.
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