Americans worried about grocery prices may soon feel the consequences of an unexpected problem on U.S. farms caused by the war in Iran – rising fertilizer prices are creating a potential ripple effect that could reach grocery stores.
Why? The American Farm Bureau Federation cited the virtual closing of the Strait of Hormuz as the main reason fertilizer prices are increasing . Roughly one-third of global seaborne fertilizer trade passes through the strait, according to the United Nations.
At least 70% of farmers say they can't afford all the fertilizer they need because of higher costs tied to the Iran war − a challenge that could lower crop yields, which, if widespread enough, could push food prices upward.
A federation survey released April 14 revealed nearly three-fourths of farmers said fertilizer has become too expensive. About 6 in 10 farmers reported worsening finances overall.
How are the Strait of Hormuz and fertilizer connected?
Many farmers are rethinking purchases of fertilizer and when to apply it, the American Farm Bureau Federation says. Though farmers in the South and Northeast are having the greatest difficulty, farms across the United States are affected.
Persian Gulf nations are significant producers of fertilizer chemicals, and the Strait of Hormuz is a key trade route. Large volumes of urea, ammonia, phosphate fertilizers, sulfur and petroleum from gulf countries are shipped through the strait each year.
The federation says countries affected by the Iran war account for nearly 49% of global urea exports and about 30% of global ammonia exports. Major exporters include Iran, Qatar, Saudi Arabia and Egypt. Why these chemicals matter:
Urea, which contains about 46% nitrogen, 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 'prebooking' fertilizer hurts farmers
Many farmers "prebook" or buy fertilizer in advance for the next crop season. Those who can't prebook face higher prices, which hurts their budgets, and may force readjustments in production and types of crops.
The prebook practice varies across the United States because crop production systems, planting timelines and fertilizer needs are different depending on the region.
Prebooking is more common in the Midwest, where corn and soybeans are usually grown. About 67% of Midwestern farmers prebooked this season, leaving about a third who haven't secured all of their fertilizer needs.
The lowest percentage is in the South, where about 19% were able to prebook.
Rising diesel prices also affect farmers
The strait closure has created a surge in U.S. diesel prices, which also affects farmers. Farm diesel prices have increased 46% since the end of February, the federation said. That has raised planting and growing season costs for:
Fieldwork
Transportation of fertilizer
Irrigation
What will happen next?
The Department of Agriculture says it will investigate "whether fertilizer producers colluded to raise fertilizer prices" and is asking farmers for their help, according to Bloomberg and brownfieldagnews.com.
The USDA is preparing an online service to let farmers confidentially report challenges with agricultural suppliers. The department will work with the Federal Trade Commission and the Justice Department if needed.
SOURCE USA TODAY reporting and research; American Farm Bureau Federation; Reuters; United Nations Conference on Trade and Development
