Source: APKinform (Ukraine)
Fertilizer shortage grain prices may rise due to supply disruptions. Specifically, disruptions in nitrogen fertilizer supplies through the Strait of Hormuz could reduce global grain yields. Moreover, these disruptions could alter cropping patterns. Consequently, this could lead to higher grain prices. A Goldman Sachs report released on March 24 states this. Reuters reports on this analysis.
Fertilizer Shortage Grain Prices: Yield Impact
The report notes that fertilizer shortages could lead to lower grain yields. Specifically, this occurs due to delayed or suboptimal nitrogen application. Furthermore, farmers may plant less intensive crops such as soybeans.
“In the US, where farmers import up to 50% of their fertilizer as urea in some years, spring planting could be difficult as fertilizer stocks remain approximately 25% below minimum levels,” the analysts note.
Price Surge and Trade Routes
According to Goldman Sachs, global nitrogen fertilizer prices have risen by 40%. Specifically, this increase occurred since the start of the conflict in the east. Moreover, these prices account for approximately 20% of grain costs. A quarter of the global nitrogen trade transits through the Strait of Hormuz. Additionally, approximately 20% of liquefied natural gas (LNG) supplies pass through this route. LNG is a key factor in nitrogen production. Furthermore, the strait has been effectively blocked since the start of the war in Iran.
Supply disruptions could limit availability. Moreover, they could increase production costs. The bank warned about this. Furthermore, fertilizer shortage grain prices concerns extend to other countries.
“Backup fertilizer production in the Middle East appears limited,” the analysts added. They cited production constraints in Russia. Russia typically accounts for approximately 15% of nitrogen fertilizer exports. This is due to impacts on facilities and export restrictions. Additionally, they mentioned the likelihood of continued Chinese fertilizer export restrictions after August of this year.
US Farmers and Export Predictions
According to the report, US farmers are stocking up on fertilizer through pre-planting purchases. However, the delay in fertilizer deliveries in March could affect availability. Specifically, this could impact the ultimate availability of fertilizer in April. Furthermore, this leads to a lack of strategic reserves in the US. Additionally, rapid scaling up of domestic production is not feasible.
“Disruptions in fertilizer supplies to Europe, Australia, and Southern Hemisphere countries could increase demand for US grain exports and push up prices,” experts predict.