Americans worried about food prices may soon feel the effects of the Iran war causing unexpected problems on American farms. Rising fertilizer prices are creating a potential ripple effect that could reach grocery stores.
why? The American Farm Bureau Federation cites the effective closure of the Strait of Hormuz as the main reason why fertilizer prices are rising. According to the United Nations, about a third of the world’s seaborne fertilizer trade passes through the strait.
At least 70% of farmers say they can’t afford all the fertilizer they need because of rising costs associated with the Iran war. The problem can reduce crop yields and, if widespread enough, could drive up food prices.
The federation’s survey, released on April 14, found that nearly three-quarters of farmers said fertilizer prices were becoming too expensive. Approximately 6 in 10 farmers reported an overall worsening of their finances.
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What is the relationship between the Strait of Hormuz and fertilizers?
The American Farm Bureau Federation says many farmers are reconsidering their fertilizer purchases and when to apply them. Farmers in the South and Northeast are suffering the most, but farms across the country are also being affected.
Persian Gulf countries are important producers of chemical fertilizers, and the Strait of Hormuz is an important trade route. Huge quantities of urea, ammonia, phosphate fertilizers, sulfur, and oil from Gulf countries are transported through the strait each year.
Countries affected by the Iran war account for nearly 49% of global urea exports and about 30% of ammonia exports, according to the federation. Major exporting countries include Iran, Qatar, Saudi Arabia, and Egypt. Why these chemicals are important:
- Urea contains approximately 46% nitrogen and is the most widely used solid nitrogen fertilizer in the world.
- Anhydrous ammonia is a nitrogen fertilizer applied to soil.
- Nitrogen is essential for plant growth.
Lack of ‘advance booking’ for fertilizer hits farmers
Many farmers “reserve” or purchase fertilizer in advance for the next harvest season. Those unable to book in advance may face higher prices, negatively impacting their budgets and forcing them to readjust production volumes and crop types.
Advance reservation practices vary across the United States because crop production systems, planting schedules, and fertilizer needs vary by region.
Advance reservations are more common in the Midwest, where corn and soybeans are typically grown. About 67% of Midwestern farmers have pre-booked for this season, and about a third are unable to secure all the fertilizer they need.
The lowest percentage was in the south, where about 19% were able to make advance reservations.
Rising diesel prices also impact farmers
The closure of the strait has caused U.S. diesel prices to skyrocket, impacting farmers as well. Agricultural diesel prices have risen 46% since the end of February, the federation said. This increased the cost of the next seed planting and growing season.
- field work
- transporting fertilizer
- irrigation
What happens next?
According to Bloomberg and BrownfieldGnews.com, the USDA said it would investigate “whether fertilizer producers colluded to drive up fertilizer prices” and is asking farmers for help.
The USDA is preparing an online service that allows farmers to confidentially report problems with their produce suppliers. The Department will coordinate with the Federal Trade Commission and the Department of Justice as necessary.
Source USA TODAY reporting and investigation. American Farm Bureau Federation; Reuters; United Nations Conference on Trade and Development
