By: Gustian Farrow, Head of StoneX TV • Content Channels
StoneX VP of Fertilizer Josh Linville analyzes the fertilizer market’s sharp reaction to Middle East conflict and the ongoing volatility facing global supply chains.
The fertilizer market faced significant disruption after the U.S. joined Israel in striking Iran. “Israel struck Iran. Iran, of course, retaliates. The US gets into the middle of it. And this thing spiraled out of control very, very quickly”. These events led to widespread concerns about the closure of the Strait of Hormuz, a key route for fertilizer exports.
Following the strikes, both Iran and Egypt halted production. Linville notes, “We have seen Iranian production shut off. They shut down their gas fields as a precautionary measure. That means their nitrogen production goes offline. Israel did the same to their gas field. So they're not a nitrogen manufacturer, but Egypt relies a lot on them. They're the fourth largest exporter in the world. They had to shut down their production. So we lost numbers three and four for global exporters and very quickly because of these strikes” . Global urea prices rose between 20 and 40 percent in days.
The surge in fertilizer prices has hit farmers especially hard. “The thing everybody's yelling about is nitrogen prices are going sky high. My grain prices are actually going down. And for today going on, we are comparing our nitrogen prices against the December 26th corn price. You look at that value, which closed yesterday at 462. That created a ratio of 98 for this time of year. We've seen higher ratios, but it's been in other parts of the year for this time of year. We have never seen it that high”.
News of a ceasefire eased prices, but fundamental supply issues remain. “I do think that we will see values come off from these highs that we've said here in the last couple of days… However, we also have to understand the fact that we've lost production. We have lost several weeks of production in Iran. We have lost several weeks of production in Egypt. This is on top of a lack of exports from places like China. Production issues in Europe. So unfortunately, while yes, we think the price is going to come down from the highs, I also don't believe it's going to come down to the lows we had previously expected”. Linville suggests that the global fertilizer market will remain tight, with price volatility likely to continue.
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---- Written by Gus Farrow
--- Expert: Josh Linville, StoneX VP - Fertilizer
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