Higher fertilizer and energy costs could weigh on agricultural production and food supplies into 2027.
Global agriculture has suffered a severe crisis during the six months of the U.S.-Israeli war on Iran due to higher fertilizer and energy costs, but its consequences for global food supplies could worsen in 2027.
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The disruption of fertilizer trade, rising fuel prices, logistical imbalances and the resulting increases in production costs are among the effects of the conflict.
This crisis comes on top of tensions stemming from the Ukrainian war and a year of extreme heat that is damaging farmland. As a result, in countries such as Spain, cereal producers say they have experienced the most expensive growing season in their history this year.
The Persian Gulf region accounts for up to 35% of global urea exports and up to 30% of ammonia exports, while 30% of global fertilizer trade passes through the Strait of Hormuz, where it has been brought to a standstill.
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A Prolonged Impact
The Organization for Economic Cooperation and Development (OECD) and the United Nations Food and Agriculture Organization (FAO) have warned that the U.S. war on Iran will lead to higher prices and lower agricultural production in 2026 and 2027.
Raymond Torres, director of economic outlook at Spain’s Foundation of Savings Banks (Funcas), said the full impact of the war is “yet to materialize.” So far the impact has been smaller in the Northern Hemisphere because farmers had purchased some of the fertilizer needed for planting at the beginning of the year and because increased production in China has acted as a counterweight.
However, Andres Gongora, secretary of the agricultural organization COAG, said the crisis has intensified in the European Union (EU) because domestic fertilizer production has been dismantled, while fertilizer manufacturing has recovered in countries such as the United States, Egypt, and Argentina.
Torres said the risk, if the conflict continues, is “asymmetric,” depending on countries’ reliance on flows of agricultural products and inputs passing through the Strait of Hormuz.
The Gulf countries would be the most affected, according to the World Trade Organization (WTO). In Asia, rice harvests could be lower because of the region’s high dependence on fertilizers from Hormuz.
In Africa, which imports food and fertilizers, there is a risk of “disproportionate declines” in harvests and increased food insecurity. In Latin America, despite being net agricultural exporters, there could also be declines.
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Overlapping Conflicts Worsen the Outlook
Another risk is the overlap between the fertilizer shock and the escalation in the Black Sea, as well as restrictions on the supply of Ukrainian or Russian grain.
The convergence of these geopolitical conflicts is being reflected in markets this week, particularly European markets, according to Agritel, an agency specializing in agricultural analysis.
There is also another trade risk, as since the closure of Hormuz, barriers to fertilizer trade have increased to affect 15% of global exports, according to WTO data.
Gongora argued that food sovereignty “also has to do with fertilizer production” and therefore welcomed the fact that the crisis has prompted the European Union to advance plans to promote domestic production.
teleSUR/ JF
Source: EFE
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