War on Iran threatens Asia’s food supply as fertiliser prices surge

How does a missile strike on a Qatari gas plant end up raising the price of rice in Bangladesh? The answer is fertiliser, an unglamorous commodity that nevertheless sustains much of what the world eats. Qatar burns natural gas to produce ammonia. Ammonia is converted into urea. Urea goes into the ground and out of the ground comes grain. Disrupt the first step, as Iran did when it struck QatarEnergy’s liquefied natural gas (LNG) processing facility on March 1, and the consequences travel along the chain with a slow, compounding logic that no ceasefire can quickly reverse. The price of urea in Southeast Asia has already jumped more than 40 per cent since Qatar’s LNG plant went offline. By Monday, shipments for April and May were trading above US$700 per tonne, the highest since the third quarter of 2022 when Russia’s war in Ukraine upended global supplies. The Gulf currently accounts for about 45 per cent of global urea exports. However, Iranian attacks have made passage through the Strait of Hormuz – the narrow stretch of water connecting the Gulf to the Indian Ocean – too dangerous. Consequently, shipments representing roughly one-third of globally traded fertilisers are no longer moving and Asia is among the most exposed regions. Qatar’s main urea plant took a direct hit last week; the United Arab Emirates’ industrial city of Ruwais, home to its largest fertiliser facility, was struck on Tuesday; and Saudi Arabia’s main gas processing and fertiliser manufacturing hub has been under near-constant attack since the US and Israel launched their war on Iran. Between 3 million and 4 million tonnes of fertiliser per month will not make it to market for as long as Hormuz stays shut, according to estimates from London-based analytics company Signal Ocean. For South Asia, the impact will be especially acute. Pakistan sources virtually all of its LNG from Qatar and the UAE, while Qatar supplies over 40 per cent of India’s LNG imports and around two-thirds of Bangladesh’s. Every one of the 32 ammonia plants in India – among the world’s largest nitrogen fertiliser producers – runs on gas. According to reports in Indian media, one plant has already shut down due to shortages and three others have cut back production. All three South Asian nations will have to “pay a very high price” for fertiliser, “if they can even source the product” on the open market, according to Chris Lawson, vice-president for market intelligence and prices at the CRU Group. “If they can’t, this will ultimately affect yields in the coming crop seasons,” he said. The knock-on implications for the global market could be drastic CRU Group market analysis Time is of the essence. Farmers across northern India and Pakistan typically apply fertiliser to summer-monsoon crops such as rice, sugar cane, corn and cotton between April and July. CRU estimates that if Gulf supplies remain disrupted into early April, South Asian buyers’ incremental requirements could reach 1.5 million tonnes per month. “The knock-on implications for the global market could be drastic, and some regions may subsequently suffer from fertiliser shortages,” the consultancy said in a note to clients. The August lag What makes this looming crisis especially hard to manage is the delay before its worst effects are felt. Fertiliser not bought in March does not translate into empty shelves in April. It translates into lower yields in August, by which point the season is over and nothing can be done. “The inability to buy fertiliser now will affect the yields of the next crops, not those in the system right now,” Lawson said, adding that the downstream impact would be “broader commodity price inflation that passes through to grain prices” with “lingering” effects. In an analysis circulated to clients on March 5, CRU warned that if Gulf disruptions ran past March 20, the “main risk shifts to broader supply interruptions” driven by constrained export routes, limited storage and inadequate domestic absorption. Even if hostilities eased tomorrow, restarting idled capacity would take a further two weeks – implying a “meaningful reduction” in Middle Eastern supply through late March at minimum. “Duration is the key variable,” the consultancy wrote. Disruptions of this scale have triggered chain reactions in the past, according to Signal Ocean. Farmers apply less fertiliser; marginal land, which needs heavier inputs to produce anything, is left fallow; and producers shift towards less nitrogen-hungry crops. Soybeans, for instance, might displace corn – creating a glut in one market and a shortage in another. If enough producers abandon corn, animal feed would become scarce and prices would rise, with the cost of meat and farmed fish to follow. India and China, each of which reportedly relies on the Gulf for around 20 per cent of its fertiliser imports, were identified by Signal Ocean as “most exposed” to the disruption. It said the likely outcome would be “smaller global harvests, higher feed and food prices, and increased volatility in agricultural commodity markets”. Alternative exporters, chiefly the United States and Brazil, might move to fill some of the shortfall, but the “timing and scale of such responses will determine the severity of the impact”, the consultancy added. Impossible choices For individual farmers at the far end of supply chains, the effects of all this could be devastating, said Alexandra Brand, executive vice-president of sustainability and corporate affairs at agricultural technology company Syngenta Group. “They already operate on razor-thin margins, and they could face difficult choices in the coming months if the costs of fertiliser rise sharply and supply tightens,” she said. Smallholders, family operations and large commercial holdings would all feel the strain, Brand said – each having to choose between paying prices they cannot afford, planting less or skipping the fertiliser altogether and accepting a smaller harvest. Sustained disruption to fertiliser supplies risks “threatening both agricultural productivity and the affordability of food for millions of people,” she said. For now, the fields are still being planted. But much of the fertiliser that should be heading to Asia’s farms is either stuck in the Gulf or not being produced at all. This year’s harvest will reflect that fact. And by the time it does, the window to act may have long closed.

War on Iran threatens Asia’s food supply as fertiliser prices surge

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}As Gulf gas plants go offline, missing fertiliser shipments today could mean empty shelves and record food prices by autumn

As Gulf gas plants go offline, missing fertiliser shipments today could mean empty shelves and record food prices by autumn