Ambrose Evans-Pritchard
The war in the Gulf has hit the epicentre of global fertiliser production. It has shut off the supply of urea, ammonia and sulphur for 27 critical days in the agricultural calendar.
China, Russia and Turkey have now greatly compounded the shortage by imposing their own curbs on fertiliser exports in recent days. Close to 45 per cent of globally traded nitrogen is cut off, disrupted or at risk.
The crunch is happening just as the big farming belts of the northern hemisphere near the spring planting season and just as Australia approaches winter planting. It is the blackest of black swans.
Abdolreza Abbassian, the former head of commodities at the United Nations’ Food and Agriculture Organisation, said the markets did not yet seem to grasp the full gravity of what was already in the pipeline.
“It will be bad enough even if the Strait of Hormuz is reopened tomorrow but if the war goes on for another month or more, it is going to be a really horrifying crisis unlike anything any of us have ever seen before,” he said.
A second crisis is building up in parallel. The two risk colliding in 2027. Atmospheric scientists expect an El Niño pattern in the South Pacific this year and next, leading to hotter weather, longer droughts and lower crop yields.
A team at Columbia University has warned the world could hit 1.7 degrees above pre-modern levels in 2027, a “regime shift” that smashes through the heat thresholds of wheat and corn, and increases the risk of multiple breadbasket failures. Could it go non-linear? We will find out.
Jean-Marie Paugam, from the World Trade Organisation, said the fertiliser shock is a greater immediate threat than the oil and gas shock.
“It is the number one alert today. All the main cereals are vulnerable but so is animal feed and the effect is going to keep accumulating through next year. There are countries where people will die of hunger if they don’t get their imports,” he said.
It is costly to store fertilisers and most states work on a just-in-time basis. Global stocks are thin. Half the total inventory is in China, the one country prepared for famines.
There is no equivalent to the International Energy Agency. No global body is able to co-ordinate the release of deep reserves in an emergency. It is sauve qui peut in the world of fertilisers.
A third of global urea exports and half of sulphur exports come from Qatar and the Gulf. Some supplies are getting through from Iran but most remain locked up.
“We have 24 vessels loaded with fertilisers floating in the Gulf right now that cannot get out to the farmer-customers,” said Corey Rosenbusch, the head of the Fertiliser Institute in Washington.
China is the world’s biggest producer of fertilisers by far, accounting for 15 per cent of global urea exports and 30 per cent of phosphate fertilisers. It tightened export curbs on most of its output last week, hitting the market at the worst possible moment.
Russia is the second largest. It followed suit this week, imposing a one-month ban (for now) on shipments of ammonium nitrate in order to meet “the needs of the domestic market during the spring field work period”.
‘It will be bad enough even if the Strait of Hormuz is reopened tomorrow but if the war goes on for another month or more, it is going to be a really horrifying crisis unlike anything any of us have ever seen before.’
Abdolreza Abbassian, the former head of commodities at the United Nations’ Food and Agriculture Organisation
Turkey has joined the stampede, even blocking the transport of urea.
Russia normally accounts for 40 per cent of the world’s ammonium nitrate exports. It will continue to supply selected countries in Africa and the “Global South” as a form of soft power diplomacy, a tool it perfected in 2022.
These export curbs are perhaps understandable. Fertiliser prices have gone mad. The three countries fear food inflation just like the rest of us. But hoarding on this scale, at this moment, has a geopolitical sting in the tail.
Global urea prices have risen 60 per cent to $US680 ($989) a tonne on the quoted world market since mid-February but that is only if you can get it.
Energy experts Argus report that Australian farmers have been paying as much as $US900, four times the pre-pandemic level.
Aussies face a double shock because the country has shut down most of its refineries and is now acutely short of diesel, sending tractor fuel costs through the roof.
America is scarcely in better shape. It imports a fifth of its applied nitrogen. The Fertiliser Institute says the US does produce its own phosphates, but it needs sulphur from the Gulf to make it possible.
American farmers were in a structural depression before this crisis because of spiralling input costs. They now face a 70 per cent jump in diesel prices. The fuel tracks the global market regardless of Donald Trump’s “energy supremacy”.
A quarter of US farmers did not pre-buy their fertilisers. None will escape the long-tail consequences later this year.
“The concern is how are we even going to get those last one million tonnes into the US that we need to plant a crop,” said Rosenbusch.
“We are a ‘just in time’ supply chain and we need that last 20 per cent to come in April and May for spring planting, and most of that – as a matter of fact all – will come from overseas.”
Poorer countries in Asia are being hit on every front. Most of their fertiliser imports come from the Gulf.
Their internal production has collapsed because natural gas shortages have doubled the cost of feedstock. The combined effect is depriving Pakistan, India and Bangladesh of two million tonnes of urea each week.
The Kharif monsoon planting season kicks off in June, but that means the supply chains must be repaired by mid-April.
“I don’t want to sound the alarm too much yet but this could be catastrophic if it lasts long,” said David Delaney, the head of the US fertiliser group Itafos, speaking to Bloomberg.
Alexandra Prokopenko, from the Carnegie Russia Eurasia Centre, warns us to brace for three consecutive shocks in slow succession over the next year or so. The fertiliser shock is already under way. The plunge in crop yields will come in the autumn. Food inflation will follow in 2027.
“The lag is measured in seasons rather than days,” she said.
Britons may muddle through with nothing worse than 4 per cent or 5 per cent inflation and a lot of grumbling and demands for bailouts, the reflex of decadent societies.
The deeper conclusion is that Britain should no longer assume it is possible to outbid poor countries when food is scarce just because Britain is richer – and it is not that rich any more.
The survival imperative in our Hobbesian new world is to grow your own food, make your own energy and manufacture your own fertilisers.
“Our self-sufficiency has been dropping like a stone over the last decade,” said Professor Tim Lang in his wake-up report on food for the UK’s National Preparedness Commission.
“We should not be buying so much food on world markets, we should be growing it ourselves.”
If you have a garden, start planting now.
