Iran war drives global fertilizer prices up, raising food cost fears

Munich - The war in Iran has resulted in a 30-40% spike in the cost of mineral fertilizer since the start of the year, threatening international food prices, according to German experts.
'World market prices for nitrogen fertilizer are increasingly approaching the peak levels we saw at the start of Russia's war against Ukraine [in February 2022],' said Philipp Spinne, managing director of the German Raiffeisen Association (DRV).
In Europe, however, consumers have not yet directly felt the effects because many farmers had already purchased their spring fertilizer before the Iran war began, the Bavarian Farmers' Association told dpa.
But should the war drag on, production costs in Germany and other countries are likely to rise, and with them, producer prices, it warned.
Four years ago, the threat to global food security feared by some experts did not materialize.
This was partly because Russia - a leading fertilizer producer -benefited from the invasion of its neighbour and actually increased its fertilizer exports.
The European Union has since gradually introduced tariff increases on Russian nitrogen fertilizers.
High energy prices are primarily driving the pricing spike, with gas prices accounting for up to 90% of the costs of ammonia and nitrogen production, said Germany's Agrar industry association.
Therefore, if gas becomes more expensive, fertilizer prices automatically rise. But if farmers use less fertilizer, crop yields suffer as a result.
Europe is focusing on domestic production
Although around a third of the world's traded urea and around 20% ofammonia pass through the Strait of Hormuz, the direct impact on Europe is so far regarded as minimal.
'Europe has imported hardly any fertilizer from the conflict region for years,' said a spokesman for the German Agricultural Industry Association (IVA).
In the case of Germany, around 75% of nitrogen fertilizer requirements can still be met by domestic production, and slightly more in the case of potash fertilizers.
However, the indirect effects of higher gas and liquefied natural gas prices, which are impacting the European chemical and fertilizer industries, are very much being felt.
The sharp rise in gas prices in Western Europe amid the war in Ukraine has already weakened the local chemical industry.
In response, the IVA is calling for a strengthening of domestic production. The association is also advocating higher tariffs on Russian potash.