The war in the Middle East has created major disruptions to global supplies of nitrogen-based crop nutrients. Now a potentially bigger threat is emerging in another important part of the fertilizer market.
The focus since the conflict began has been on urea, a key nitrogen fertilizer used on corn. Prices for the nutrient have surged as the war blocks shipments through the Strait of Hormuz, sending farmers scrambling to procure supplies. What’s been largely overlooked in the chaos is the risk to phosphate fertilizers — key for crops like soybeans, a cornerstone of food production.
The Middle East accounts for only about a fifth of global trade for three key phosphate products, according to The Fertilizer Institute. But almost half of the world’s supply of sulfur — which is turned into sulfuric acid for the processing of phosphate fertilizer — comes from countries in the Middle East vulnerable to disruptions in the Strait of Hormuz.
The effects along the supply chain could start to be "exponential” if the conflict continues for much longer, once producers work through existing sulfur and sulfuric acid reserves, said Andy Hemphill, who covers sulfuric acid markets for commodity pricing platform ICIS.
That’s bad news for the global food supply, which counts on phosphate to support the growth of everything from soybeans to potatoes. The conflict is already raising concerns over inflation and food security. It’s also the latest threat to US farmers, who were already weathering years of high production costs. Nearly 80% of the US’s phosphorus is applied to its soy and corn fields, which in turn are processed both into livestock feed and fuel.
Even before the conflict, supplies of both phosphate and sulfur were already tight. Sulfur prices had surged to record highs, driven in part by demand from the mining industry, which uses sulfuric acid to extract metals such as copper and nickel. Russian exports have been constrained by the war in Ukraine and an export ban, while China has curbed phosphate shipments to prioritize domestic use.
US policy has added further strain. Duties imposed in 2023 on Moroccan phosphate — still in place — and broader tariffs implemented last year by President Donald Trump have limited imports.
"Phosphate had plenty of problems of its own before the war started. This war has just made the bad situation worse,” said Josh Linville, vice president for fertilizers at brokerage StoneX Group. "I would dare say it’s almost in worse shape than what urea, nitrogen is in today.”
Efforts were made to rebuild inventories, particularly of phosphates, after fertilizer was exempted from some tariffs late last year, said Veronica Nigh, chief economist at The Fertilizer Institute. But she said the real challenge is on sulfur supplies. The conflict in Israel had already raised sulfur prices so much that some phosphate production had shut down.
"Sulfur is used for a lot of things, and if we are in a situation where we are in a constrained supply situation, fertilizer may not be the first use case of that sulfur,” Nigh said. "It could be a more prolonged problem.”
Sulfur contracts in Tampa — a key US benchmark that is settled quarterly — reached a record price in late January, according to Bloomberg Green Markets data going back to 2012. New Orleans prices for diammonium phosphate, the world’s most common phosphate fertilizer, are at a nearly four-month high.
Fertilizer producers will be squeezed as competing buyers, particularly mining companies, will be able to pay more, said Faraz Ahmed, a director at Montage Commodities, a trading house based in the United Arab Emirates. The impact to phosphate fertilizer prices could come as soon as April, when India typically steps up purchases for its domestic production — a move that could push the market in "panic mode,” he said.
The situation is intensifying calls in the US for more stability in the markets. Farmers depend on three main families of fertilizer products: nitrogen, phosphate and potash. Only the latter, which is largely sourced from Canada and is applied alongside phosphate to soy crops, is largely insulated from the current global supply shock.
Farm groups are urging the government to suspend duties on fertilizer from Morocco, which holds the world’s largest phosphate rock reserves, arguing that high prices and geopolitical risks have already reduced the need for protectionist measures.
Those duties — put in place in 2021 after Florida-based Mosaic Co asked the Commerce Department for an investigation — are currently under review. The American Farm Bureau Federation asked Trump to temporarily suspend such fees, while a coalition of the US’s biggest farm groups last week asked fertilizer manufacturers Mosaic and JR Simplot Co to withdraw their support of the duties. The companies on March 17 sent letters to the Commerce Department saying they intended to participate in the agency’s review.
Meanwhile, affordability is already curbing demand. David Delaney, chief executive officer of phosphate producer Itafos Inc, said he expected US phosphate use to fall about 20% in the 12 months ending in June. Supply constraints could push that decline further — especially if farmers plant more soybeans instead of corn to avoid high nitrogen costs.
"It’s going to be tight through spring, through summer and through the fall,” said Delaney. "Will there be enough to get through spring with a 20% cutback? Probably, but we end the season completely empty.”