Middle East Tensions Drive Up Corn and Soybean Prices Amid Fertilizer Supply Chain Disruptions
Global fertilizer market supply chain disruptions caused by geopolitical tensions in the Middle East have pushed up corn and soybean prices. Diammonium phosphate, a key fertilizer for staple agricultural crops, surged 28.4% to $802.5 per metric ton in the first nine months of this year.
The price hike from $625 per ton at the end of last year has increased costs for major agricultural commodities. Corn prices rose by 13.3%, while soybean prices jumped by 22.6%. The disruptions are attributed to the de facto closure of the Strait of Hormuz to maritime shipping, which constrained access to agricultural inputs.
Around one-third of global fertilizer trade passes through this vital waterway under normal circumstances. Conflicts in the Middle East threatening oil supplies and risks at critical chokepoints like the Strait of Hormuz pushed up risk premiums in crude oil prices, driving up the cost of diesel fuel, a basic input for agricultural production.
Kutay Guzgor, investment research director at Participation Bank Kuveyt Turk, stated that these supply shocks have extended beyond urea-based nitrogen fertilizers. Diammonium phosphate fertilizer is affected by logistical bottlenecks due to its dependence on sulfur and ammonia supplies passing through the Strait of Hormuz.
Guzgor warned that a renewed spike in regional energy prices could lead to another surge in natural gas and nitrogen-based fertilizer prices, impacting farmers' production costs and squeezing profit margins. He expects the impact of high fertilizer and energy costs on planting areas and productivity to be decisive next year.