Odd Lots

War in Iran Is Creating a Fertilizer Crisis Like Never Before

March 11, 2026

Key Takeaways Copied to clipboard!

  • The current geopolitical situation involving Iran is exacerbating a fertilizer crisis by disrupting the Strait of Hormuz, a critical artery for global urea trade, precisely when spring planting demands are highest. 
  • Urea fertilizer production is highly dependent on natural gas feedstock, leading to production facilities being co-located near cheap gas sources, and its granular form makes it a globally tradable commodity, unlike natural gas itself. 
  • The current fertilizer price pressure is driven by supply-side shocks (China's export ban, Russia sanctions, and the Iran conflict) resulting in a record-high urea-to-corn price ratio, signaling severe economic pain for farmers even if absolute urea prices are below 2022 peaks. 

Segments

Historical Context of Warfare
Copied to clipboard!
(00:02:18)
  • Key Takeaway: Historically, warfare avoided spring sowing and fall harvest seasons to protect the food supply and utilize farmer-soldiers.
  • Summary: For much of human history, going to war was avoided during the spring sowing season and the fall harvest. This was due to soldiers often being part-time farmers whose day jobs were essential for food production. Avoiding these times prevented the complete disruption of the food supply.
Fertilizer Crisis Timing and Urea Prices
Copied to clipboard!
(00:03:27)
  • Key Takeaway: The current U.S.-Iran conflict coincides with the Northern Hemisphere’s spring planting, causing urea prices to spike by 25% in one week.
  • Summary: The current agricultural conflict timing is considered the worst possible time for a supply-side shock to fertilizer prices. Urea, a popular fertilizer, saw prices jump by about 25% in the past week alone. This timing directly impacts spring planting when fertilizer is most needed.
Urea Production and NPK Basics
Copied to clipboard!
(00:05:32)
  • Key Takeaway: Urea is the most common nitrogen fertilizer, derived from natural gas cracked into ammonia, then chemically converted into a granular product.
  • Summary: Urea is the most commonly used form of nitrogen, one of the three essential NPK fertilizers (Nitrogen, Phosphate, Potash) crops demand. The production process starts with cracking natural gas into ammonia, followed by a chemical conversion to create granular urea, which is about 46% nitrogen.
Haber-Bosch Paradox and Gas Co-location
Copied to clipboard!
(00:06:57)
  • Key Takeaway: Conventional fertilizers, stemming from the Haber-Bosch process, are responsible for sustaining billions of lives but also generate products used as weapons.
  • Summary: The invention enabling modern fertilizer is credited with supporting about half of the current global population, as the Earth could only support around 4 billion people without it. Nitrogen fertilizer plants are often co-located with natural gas sources because shipping chilled natural gas is expensive, whereas granular urea is cheaper to transport globally.
Urea Seasonality and Storage Issues
Copied to clipboard!
(00:09:42)
  • Key Takeaway: Due to short, intense seasonal demand, urea production favors a ‘make and ship’ model over long-term storage, limiting strategic reserves during supply disruptions.
  • Summary: Manufacturers prefer to ship urea immediately to capture economies of scale, as farmers only demand the product during a short two-month window annually. Storing urea for long periods involves taking on price risk and inefficiently using warehouse space. This lack of significant strategic reserves compounds the current crisis.
Global Supply Chain Choke Points
Copied to clipboard!
(00:11:34)
  • Key Takeaway: The Middle East supplies about 45% of the world’s tradable urea, and current geopolitical issues leave few viable alternatives due to Russian sanctions and Chinese export bans.
  • Summary: Countries along the Persian Gulf account for roughly 45% of the world’s tradable urea supply. Finding replacements is difficult because the West has sanctioned Russian fertilizer products, and China maintains an export ban to protect its domestic farmers. This leaves limited alternatives like Egypt or the United States.
Moroccan Phosphate Importance
Copied to clipboard!
(00:13:25)
  • Key Takeaway: Morocco is a major, low-cost global producer of phosphate, a critical NPK nutrient, comparable in economic importance to Saudi Arabia’s oil reserves.
  • Summary: Morocco is one of the world’s largest producers of phosphate, which is a necessary NPK nutrient. The country is actively expanding its phosphate production due to its low cost and favorable shipping location in Africa. Phosphate is viewed as central to the Moroccan economy.
2022 Price Spike Drivers
Copied to clipboard!
(00:17:36)
  • Key Takeaway: The 2022 fertilizer price surge resulted from two simultaneous shocks: China’s 2021 export ban and the uncertainty following Russia’s invasion of Ukraine.
  • Summary: The 2022 price spike was caused by China, the marginal producer, banning urea and phosphate exports in late 2021, forcing the world to bid in higher-cost supply, primarily from Europe. The subsequent Russian invasion further spiked prices due to uncertainty over sourcing from Russia, a high-volume, low-cost exporter of all fertilizer types.
Farmer Decision-Making Under High Costs
Copied to clipboard!
(00:05:15)
  • Key Takeaway: Farmers facing high fertilizer costs can reduce application rates, switch crops (e.g., to soybeans), change nitrogen products, or, as a last resort, not plant at all.
  • Summary: U.S. farmers are relatively better positioned to handle the current storm compared to European or Indian farmers. Key decisions include reducing nitrogen application rates or shifting planting to crops like soybeans, which require significantly less nitrogen. The economic pain is real, evidenced by rising Chapter 12 bankruptcies for farms in early 2025.
Relative Cost vs. Absolute Price
Copied to clipboard!
(00:21:39)
  • Key Takeaway: The true measure of fertilizer affordability for farmers is the urea-to-crop price ratio, which is currently near a record high, indicating fertilizer is more expensive relative to corn than ever before.
  • Summary: While the absolute price of urea is below the 2022 peak, the current crisis is arguably worse when measured by the urea-to-corn price ratio. This ratio determines the economic viability of applying the last incremental ton of nitrogen for yield bumps. The ratio is expected to set a new record high, destroying urea demand.
Infrastructure Damage and Recovery Time
Copied to clipboard!
(00:26:38)
  • Key Takeaway: Fertilizer infrastructure has shifted into a higher price regime since 2020/2021, and even if the Strait of Hormuz reopens, it would take at least two to three weeks to see fertilizer shipments resume.
  • Summary: The commodity market has already shifted into a higher price regime for fertilizer even before the current Iran conflict. If the Strait of Hormuz reopened immediately, manufacturing sites that preemptively shut down would require two to three days to restart urea production. Loading and shipping vessels would then add at least two more weeks before product flows again, with oil likely getting priority.
Impact on Future Food Prices
Copied to clipboard!
(00:31:13)
  • Key Takeaway: Reduced nitrogen application rates this spring are expected to lower U.S. corn yields (potentially from 186 to 182 bushels per acre), with resulting food price impacts flowing through the system over the next year or two.
  • Summary: Lower yields are anticipated due to expected reductions in nitrogen application rates during the current planting season. This lower yield will move through the food production system over a time span of about a year or two before significantly impacting consumer prices. High fertilizer costs will either reduce yields or force farmers to pass on higher input costs.