When Iran closed the Strait of Hormuz following the outbreak of hostilities between the US and Israel, everyone began talking about the potential rise in oil prices. But it’s already clear that the crisis caused by the closure of this vital transport route for the Persian Gulf countries will affect more than just energy.
One of the most significant consequences was the rise in prices for fertilizers and food products – approximately 30% of the world’s fertilizer supply passed through the Strait of Hormuz, and countries in the region are dependent on imports of many food products. The publication “Govorit NeMoskva” spoke with Andrey Sizov, one of the leading agricultural market analysts and head of the SovEcon analytical center, about the impact this will have on the global agricultural market and what it means for Russia.
In connection with Iran’s closure of the Strait of Hormuz, the talk is mostly about oil, less about LNG. But Maximo Torero, chief economist at the UN Food and Agriculture Organization, stated that if the Strait of Hormuz is closed for more than three months, there will be a systemic shock to global food supplies, the likes of which have not been seen even during the COVID-19 pandemic. Can you explain the basis for this apocalyptic forecast?
— I can say that SovEcon wrote that the situation around Iran would maintain high prices on global food markets in recent months, even before the actual military action began. Because grain and oilseed prices have increased by 10-15% since the beginning of the year, even before the war began. In other words, the market had already priced this event in. So, those talking about potential problems now are very late in the game. As for the timing of the Strait of Hormuz closure, it does influence how dire the situation may become. But it’s not necessarily three months. It’s already safe to say that even if the strait were to suddenly open in the next week, high food prices are still largely predetermined.
So, this can’t be changed?
— It can’t be changed. The only question is how strong this growth will be and whether we can talk about a shock or some less dramatic increase. But there will be growth—at least for agricultural commodities. It’s important to note here that this isn’t the same as food prices. Because there are food prices—what we see in stores, retail prices. And then there are agricultural prices—commodities—that is, grain at the port, meat frozen in a refrigerated truck. And the prices of one don’t necessarily move in sync with the prices of the other. To be clear, since this is a chain, it might not be very clear to the average reader, who might think that if their grain prices have risen by 20%, then food inflation will also be 20%. This isn’t true, because the prices of agricultural commodities account for tenths of retail prices. For example, in the US—the most researched and transparent market—the average share of farm gate prices in retail prices is only 10-12%.
But fuel prices are also rising, so it will contribute to food prices.
— Absolutely right. Fuel and, consequently, logistics are a significant factor in rising retail prices for everything, including food. An additional driver is rising agricultural prices. If we return to the FAO Food Index, which everyone uses and cites, we must understand that it’s not a retail price index—it’s a price index for agricultural raw materials. The dynamics in stores can vary greatly. The share of raw materials varies around the world. In the US, as I already said, it’s 10-12%. In Russia, it’s a maximum of 20%. In a poor country, the share of raw materials will be much higher because there’s less added value. Someone in a poor country bought a whole chicken and is already happy. In some developed countries, chicken is purchased as a prepared dish—for example, pre-cooked chicken fillet. In the first case, the price of chicken as an agricultural product would be, say, 50% of the retail price; in the second case, it might be only 5%, although in both cases it is a chicken meal.
Fertilizer prices also impact agricultural produce prices. Fertilizer prices are also rising due to the closure of the Strait of Hormuz. Russia is currently receiving windfall profits not only from oil but also from fertilizer exports. As I understand it, Russian fertilizers can be shipped without passing through the Strait of Hormuz, and Iran has allowed Russian ships to transit through it. Meanwhile, the Russian agricultural sector is also suffering from rising fertilizer costs—and, incidentally, it also has significant export potential. The Ministry of Agriculture has suspended ammonium nitrate exports until April 21, but a farmers’ association has appealed to Minister Oksana Lut asking her to reinstate the export duties lifted on January 1, introduce fertilizer export quotas during the planting season, and ensure pricing transparency. Is there a way to ensure both farmers are safe—being able to buy enough fertilizer—and exporters are well-fed—meaning they profit from the higher fertilizer prices?
Prices for Russian fertilizers have been rising for years and will likely continue to rise. However, by global standards, they are still relatively cheap. Unfortunately, the Russian crop production industry lacks a serious lobby. If it did, its main goal would be to combat export duties on grain and oilseeds, which take tens of percent of the sector’s revenue. If agricultural prices in Russia were close to global levels, there would be no fertilizer price problem. Formally, Russia already has fertilizer export quotas and even a price-fixing agreement, but in reality, prices for agricultural producers have been rising for years. We shouldn’t fight fertilizer prices; we should fight low incomes in crop production.
So let’s talk about the situation. Which crops and which regions are most sensitive to fertilizer prices? Who might be worst off?
— Russia has truly benefited greatly from this whole situation. Oil and gas prices have risen. Gas means nitrogen fertilizers: 70-80% of the cost of nitrogen fertilizers comes from gas. The third area where Russia has been lucky is fertilizers, where it is among the top exporters. In fact, this applies to all three types of fertilizers: nitrogen, phosphate, and potash. So Russia has no problems with any type of fertilizer—it has all of them, and it has everything needed for their production, unlike other countries that have one but lack the other. Admittedly, compared to oil and gas exports, fertilizer exports represent a rather modest amount. But we mustn’t forget that Russia is also the world’s number one wheat exporter—and we’re already seeing rising global grain prices. So, overall, Russia is also benefiting from this.
What exactly is happening to agricultural producers in Russia? In fact, nothing tragic is happening with the 2026 harvest in Russia or the Northern Hemisphere as a whole. In Europe, as I already mentioned, the situation is worse; among the major exporters, Ukraine will face the most difficult situation. But it’s worth noting that farmers aren’t buying fertilizer now. Firstly, some fertilizer was already applied in the fall, for winter crops. Secondly, farmers are purchasing fertilizer in advance, and 70-90% has already been purchased for the 2026 harvest. On average, if we look at the Northern Hemisphere, across the main exporters, the fertilizer supply coverage at this point is, I think, somewhere around 80% and higher. For example, in the US, it’s probably higher – everything is generally fine there with fertilizers. Well, not as good as in Russia, but generally fine. In Russia, I think the fertilizer supply is somewhere closer to 90%. Regarding the regional aspect, fertilizer supply coverage is probably higher in the European part of Russia. These fertilizers were purchased at a relatively low price, and now farmers are left wondering if they need to buy anything for this year and maybe even for next year, 2027. Because winter crops will be planted in the fall, and the first fertilizer application will be in the fall. Farmers usually buy well in advance. Yes, if they have to buy more now, it will be more expensive. Overall, there are big differences across different regions of the world: Russia is doing well, the US is worse, and so is Canada. China is doing very well—they stopped exporting fertilizer long ago. The EU isn’t doing so well—they don’t have the resources to produce a full cycle of fertilizers, and imported gas is expensive. The situation in Ukraine is also difficult.
What are the current harvest prospects in Russia? Which regions are doing better, and which are worse?
— The harvest outlook is still very good, as last winter was generally favorable for plants. Yes, there were periods of very cold weather in January and February, but these periods weren’t particularly severe or prolonged, and winter crops didn’t freeze. Moreover, they were accompanied by heavy snowfalls—this not only protects the crops from freezing but also helps create sufficient moisture reserves for the spring, when plant growth begins. As for the regions, the Russian south is finally looking good after two disastrous years. It had bad weather in 2025, and even worse luck in 2024. This year, the Russian south is looking average, and in some places, even good. Given this, overall, the outlook for the new harvest in Russia is still good. However, there are two “buts.” One, in the case of wheat, is the reduction in planted area. We believe we will see this trend again. Grain production in Russia remains low-profit, and in many cases unprofitable, due to export duties introduced in 2021. Secondly, weather risks remain. April-May is the most risky period, for example, for winter crops, and most Russian wheat is winter. In the past two years, we had recurrent frosts in May, which severely damaged winter crops.
With the mass slaughter of livestock, will the same demand for feed and, consequently, for feed grain be maintained?
— Feed wheat accounts for approximately a third of total production. The scale of the slaughter is still unclear. I’m not sure that the scale of this event, despite the much publicized attention surrounding it, will fundamentally impact grain balances in Russia.
There’s another aspect here. Kazakhstan has now banned the import of all types of grain from Russia. What is the reason for this? Which regions might this affect?
Kazakhstan has banned feed grain shipments due to what they consider to be increased epizootic risks. Export volumes to Kazakhstan are small—a few hundred tons per month, compared to millions of tons per month.
Which regions export to Kazakhstan?
— Mainly Siberia, primarily; relatively small quantities come from other regions.
If panic about the epidemic continues, will this threaten overall Russian grain exports?
— The disease that everyone has already assumed is foot-and-mouth disease is actually unknown. Could this impact Russian exports? I doubt it at this point. Foot-and-mouth disease is an unpleasant disease, but even if it is confirmed, it usually doesn’t affect grain exports. There have been outbreaks of foot-and-mouth disease in recent years, for example, in Germany and Hungary—they didn’t have any export problems. Because importers are generally relaxed about the issue. It’s a problem for livestock farming, but that’s a separate issue. It’s unlikely to impact grain exports specifically. I doubt large grain buyers from Russia will follow Kazakhstan.
If we’re talking about overall grain exports, does it mean that grain producers are actually benefiting from the situation with Iran?
“Winning” is probably too strong a word. Farmers’ expenses are rising sharply, as are the prices of their produce, but at a much slower pace. Given current prices for key nitrogen fertilizers, diesel, and grain, grain production is deeply unprofitable almost everywhere. So either resource prices must fall (which currently seems unlikely), or agricultural prices must rise—only in this scenario can we say farmers will benefit.
As for Russian export destinations, the impact will likely be limited. Iran, incidentally, the number three buyer of Russian grain this season, purchases it through Caspian ports and terminals in the Persian Gulf—ships carrying its cargo easily transit the Hormuz Strait.
The situation with other Gulf countries is somewhat more complex. Saudi Arabia is the main buyer there. But if you look at the map, you’ll see that it also has ports on the Red Sea with grain terminals. So, Saudi Arabia has been buying Russian grain through these ports and continues to do so. Moreover, after the war began, Riyadh announced it was launching a program to support its neighbors, those without their own access to Red Sea ports. Saudi Arabia is ready to help them purchase grain and transport it by land. This means there will be no demand issues in this region. I should add that the Persian Gulf countries are wealthy, so there will definitely be no drop in demand on their part, and they will resolve logistical issues, including with Saudi Arabia’s assistance.
Is the “grain truce” between Russia and Ukraine in the Black Sea continuing? Are grain ships moving smoothly?
— There has never been, and still is, any official “grain truce” in the Black Sea. There was a so-called “grain deal,” which ended several years ago, and no one remembers it except Turkish President Erdogan, who is willing to facilitate its renewal, although no one else—neither Russia nor Ukraine—has shown any interest in it. Grain ships are generally moving smoothly from both Russia and Ukraine. Ukraine had serious problems at the end of last year and the beginning of this year, when there were numerous attacks on Odessa. The fact is that there are three large grain terminals in the so-called Greater Odessa area, and when there were attacks on the Odessa energy infrastructure, debris was landing on both the terminals and some ships. It’s clear that the risks are far from zero. Perhaps there will be some serious problem that will shake up the market, but so far it hasn’t happened, and given the events in Iran, everyone has completely forgotten about it.
So, to summarize our conversation, I can say this: food prices have certainly already started to rise and will continue to do so, but you don’t foresee a catastrophe yet. Just as you don’t see any problems for Russian exporters—both fertilizer and grain producers?
— In my opinion, there are more than enough problems. Food prices are already rising, and agricultural production is quickly becoming deeply unprofitable. For this to cease, agricultural prices would have to rise sharply, which is the most likely scenario. This, in turn, would give new impetus to rising global food prices.
Meanwhile, the consequences of the Hormuz closure are only just beginning to reach many regions of the world due to the existing reserves—for example, tankers carrying oil and petroleum products afloat. As a result, we’ll see both more expensive oil products and more expensive fertilizers. This will likely be bad for everyone. First and foremost, it will be hard for the poorest countries, and it will be difficult for countries that import energy and/or fertilizers. Russia appears to be a relatively safe haven, but this storm could also affect it—for example, through a significant increase in the cost of imported food.