Fertilizer costs to climb 30% as shipping disruptions strain global farming: Oxford Economics 

RIYADH: Global fertilizer prices are projected to rise more than 30 percent in 2026 from 2025 levels, with urea prices expected to climb even faster as conflict-related shipping disruptions through the Strait of Hormuz tighten global supply.  

According to a report by Oxford Economics, prolonged constraints on traffic through the strategic waterway are worsening fertilizer affordability at a time when grain-to-fertilizer price ratios have fallen to historic lows, increasing pressure on farm margins and crop yields.  

The grain-to-fertilizer price measure suggests that even though fertilizer prices have not yet surpassed previous peaks in nominal terms, their cost relative to crop revenues has become more burdensome than at any point in more than six decades, increasing the risk of reduced application rates and weaker yields. 

“We have revised up our fertilizer price forecasts since the onset of the conflict and now expect fertilizer price increases to exceed 30 percent this year compared to last, with urea prices likely to rise at an even faster pace,” Kiran Ahmed, lead economist at Oxford Economics, said in the report. 

Oxford Economics now expects traffic through the Strait to remain constrained through the second quarter of 2026, with shipping gradually recovering from July. However, port congestion and logistical bottlenecks could continue disrupting fertilizer flows through year-end, particularly if energy cargoes are prioritized. 

The report warned that the impact would vary significantly across crops and regions, with rice, maize, and wheat facing the greatest exposure because of their heavy reliance on urea-based fertilizers. Rice is considered particularly vulnerable due to current planting cycles, while parts of Asia, along with Australia and Brazil, remain highly dependent on Middle Eastern fertilizer imports and inputs. 

A key measure of affordability — the grains-to-urea price ratio — has dropped to its lowest level since records began in 1960, highlighting the growing burden on farmers even though nominal fertilizer prices remain below the peaks reached in 2022. 

“There is reason to believe the hike in fertilizer prices could have a wider impact on global usage than suggested above,” the report said, noting that lower crop prices are making fertilizer purchases harder to justify for farmers already operating on tight margins. 

Recent market data also points to continued volatility in fertilizer markets. Urea traded at $502.50 per tonne on May 22, down 7.37 percent from the previous day and more than 27 percent lower over the past month, according to Trading Economics data. Prices, however, remained nearly 10 percent higher year on year. 

“The current fertilizer disruption highlights the timing mismatch between geopolitical shocks and agricultural cycles,” Marielli Bou Harb, partner at Arthur D. Little Middle East, told Arab News. 

“Fertilizers are time-sensitive inputs: if farmers miss key application windows during planting and crop development stages, part of the yield impact can persist even if supply conditions improve,” he added. 

Harb said the effects on food prices and food security are likely to emerge gradually over future planting and harvest cycles rather than immediately, with the impact expected to vary widely between advanced and developing economies. 

“Advanced agricultural economies typically have greater resilience through subsidies, financing mechanisms, inventory buffers, and forward purchasing,” he said. 

By contrast, import-dependent economies across parts of Asia, Sub-Saharan Africa, and Latin America are more exposed to rising fertilizer costs, particularly for nitrogen-intensive staple crops such as rice and maize. 

Harb added that while alternative sourcing routes remain possible, they come with added costs and logistical challenges, including longer shipping routes, higher freight and insurance costs, and port capacity constraints. 

“Producers are therefore likely to respond through a combination of lower application rates, shifts toward less fertilizer-intensive crops, delayed planting decisions, or a stronger focus on higher-margin export crops,” Harb said. 

He concluded: “The broader risk is that what begins as a temporary supply and pricing disruption gradually translates into tighter agricultural markets, continued pressure on food inflation, and additional strain on vulnerable farming systems in import-dependent economies.” 

Oxford Economics said fertilizer demand is generally considered relatively inelastic, meaning farmers tend to prioritize its use even as prices rise. 

However, farmers in lower-income and least developed countries are more likely to reduce usage due to limited financial capacity and weaker government support, with Food and Agriculture Organization data showing nitrogen fertilizer use in these economies fell 7.9 percent in 2022 — more than double the global decline of 3.4 percent during the price surge. 

“Lower application rates in such countries also suggest an outsized impact on yields compared to more advanced economies where fertilizer may be overapplied,” Ahmed said. 

The report noted that while fertilizer demand is generally considered relatively inelastic, persistently high prices combined with weak crop returns could lead farmers to reduce usage more sharply than historical trends suggest. 

In advanced economies and heavily subsidized markets such as India, fertilizer application could decline by 10 to 15 percent with limited impact on yields. In poorer economies, however, even small reductions in usage risk triggering disproportionately large losses in agricultural output and worsening food security concerns. 

“While urea fertilizer prices have not yet reached the heights they did in 2022, according to the monthly World Bank data, when accounting for crop prices, urea fertilizer is more costly for farmers than it was back then. Indeed, the grains-to-urea price ratio fell to its lowest level in April this year than it ever has since these data series were first collated in 1960.” 

Oxford Economics said risks remain tilted toward a longer disruption in the Strait of Hormuz, warning that any further delays to a full reopening could intensify pressure on global food prices, harvests, and economic growth.