Iran War Sends Fertilizer Prices Sky-High

As the U.S. and Israel’s war against Iran enters its second month, Iran has found a new way to hold leverage over the world economy: closing and opening the Strait of Hormuz at will. Iran’s ability to shut off one of the world’s major shipping routes, which transports one-fifth of the world’s oil and gas, allows it to dictate the cost of energy in the U.S. and everywhere else.

Reporting suggests that Iran’s control over the strait won’t clear up whenever the war ends. On March 19, Iran’s former first vice president Mohammad Mokhber said that the new plans for the strait would “upgrade Iran’s position from a country under sanctions to a powerful position in the region and the world.” And on Monday, the Iranian parliament passed a bill that would impose tolls on any ship passing through the strait, while banning U.S. and Israeli vessels from entering.

More from Emma Janssen

Iran already appears to be enforcing this new toll regime. At least one tanker ship has reportedly paid $2 million to get through the waterway safely. The Financial Times analyzed shipping data and found that at least eight vessels have taken an unusual route through the strait in the last week, suggesting that they may have received escorts through the dangerous waterway.

If Iran’s toll collection continues for the indefinite future—and even Secretary of State Marco Rubio has acknowledged that it will—that adds nontrivial shipping costs to any goods passing through the strait, which is sure to jack up prices in any country that imports materials from the region (or even countries that do not, since oil is a global market and shortages affect the whole world regardless of the import structure).

The biggest impact of these developments is on fossil fuels like oil and natural gas, which are abundant in the Gulf region. Global energy prices are already rising as a result. But many goods that are derived from fossil fuels have also been impacted. Fertilizer is one such product.

FERTILIZER IS MADE FROM THREE MAIN COMPONENTS: nitrogen, phosphorus, and potassium. Nitrogen-based fertilizers are made from synthetic nitrogen components like urea and ammonia, which are synthesized from natural gas. About one-third of the world’s urea supply comes from the Middle East; Iran itself has the third-largest natural gas supply in the world after only Russia and China, and Qatar is another major producer. According to the Fertilizer Institute, almost half of global urea exports come from the countries to the west of the Strait of Hormuz, and they transit through the waterway on their way to countries like the U.S.

This strain on fertilizer prices is threatening farmers across the world, including here. For farmers growing corn or wheat, fertilizer makes up between one-third and one-half of their operating costs. Just a month into the conflict, prices are already increasing significantly, and the timing couldn’t be worse.

It’s currently spring planting season, precisely the moment when farmers need fertilizer the most. Depending on the crop, farmers apply up to half of their nitrogen fertilizer in the spring. That includes about 50 percent of the nitrogen-based fertilizer applied to corn, 28 percent applied to cotton, and 42 percent applied to spring wheat, according to the American Farm Bureau Federation (AFBF).

Iran’s toll collection scheme adds nontrivial shipping costs to any goods passing through the Strait of Hormuz.

In the Southern states, corn and cotton planting have likely already started and may continue into May. But in the Corn Belt, planting generally happens between late April and early May, with soybean planting starting soon after. These farmers, as well as those in the colder Northern states, are likely making their fertilizer purchases now, right as prices skyrocket.

The impact is sure to be felt. American farmers are the biggest importers of urea in the world. At the end of February, just before the war began, the wholesale price of urea had a high-low spread of $460-480 per short ton. Just one week later, the price jumped to $520-620.

Even though the U.S. doesn’t typically import ammonia directly from the region, rising ammonia prices will still hit American farmers, because like oil, fertilizer is bought and sold on a globally integrated market. That means that supply disruptions in one part of the world can cause prices to spike in other regions.

Although these disruptions are hitting during a critical period for commodity crops like corn and soybeans, they may last far longer. “All crops use some inputs of fertilizer, so depending on how far it goes, it could really be most of the crops that are being planted,” said Faith Parum, an economist at AFBF. “And the longer the conflict goes on, that might even move out to things that are typically planted later in the year.”

So far, farmers are experiencing the most harm from rising costs, Parum explained. But if prices remain high and countries don’t figure out ways to mitigate supply chain disruptions in the strait, the pain could be shifted onto consumers both in the U.S. and abroad.

In the U.S., food prices would likely increase, hitting Americans’ wallets at a time when affordability is already top of mind. In other parts of the world, particularly regions already experiencing famine conditions, the impact is intertwined with survival, as food insecurity could reach record highs. The U.N. World Food Program estimates that, if oil prices remain above $100 a barrel in mid-2026, the number of people experiencing food insecurity could rise by 45 million and reach a record high of 363 million people.

In the U.S., the fertilizer supply chain disruption comes at a particularly hard moment for farmers, after three especially difficult years. “We’re already seeing producers closing their gates because of high production expenses,” Parum said.

That economic downturn was largely driven by post-pandemic inflation, which has leveled off but remains high. Parum pointed to a cotton farmer she recently spoke with who was cleaning out her grandfather’s desk and found old logs that detailed how he was selling cotton for 69 cents a pound, which is right around what she is selling for today.

“If this was year one of a bad farm economy, farmers have the risk mitigation tools, the debt rolls, things to help manage this situation,” she said. But “it’s four years of a downturn farm economy. So we need some long-term solutions here.”

LUCKILY, THERE ARE A NUMBER OF AVAILABLE SOLUTIONS, ranging from Band-Aid fixes to long-term systemic changes.

On the less intensive end of the spectrum, individual farmers can make changes to their business models. Parum told me that some farmers are already planning to shift toward less fertilizer-intensive crops like soybeans or use less fertilizer than is recommended. This would produce smaller yields but may be cost-effective for farmers given the fertilizer spike. In addition, some farmers plan to take on debt to purchase enough fertilizer or reduce planted acreage.

AFBF sent a letter to the White House in March with a list of recommended actions the federal government could take to mitigate the crisis. Among other things, AFBF recommended that the Navy escort fertilizer shipments through the Strait of Hormuz and help ships obtain insurance coverage for their journeys. This has been hinted at but hasn’t yet occurred. AFBF also recommended that the government waive the Jones Act, which prohibits foreign-flagged ships from transporting goods between U.S. ports. In mid-March, the administration imposed a 60-day waiver, which AFBF applauded. But the waiver only lowers shipping costs within the U.S. and does nothing to get product out of the Persian Gulf; estimates for cost relief are negligible.

Trump’s Delusional Escalations in Iran

Advocates like antitrust lawyer Basel Musharbash are pushing for a larger overhaul of the fertilizer industry in the U.S. to increase domestic production and make supply chain disruptions like the Iran war less relevant.

Currently, Musharbash explained, the domestic fertilizer production market is highly consolidated. The country’s top four nitrogen fertilizer firms control over 80 percent of production capacity, and just two firms control more than 90 percent of phosphate and potash fertilizer capacity.

These firms use vertical integration to limit competition within the market. Musharbash explained that many of the companies that own potash mines also own the processing plants, which blocks third parties from entering the market, as they would need to own both mines and plants to compete. Vertical separation through antitrust law could inject fresh blood into the market and ideally push prices down.

These oligopolists have a long history of shutting down plants and reducing production capacity, which helps their bottom line but ultimately makes consumers more vulnerable to supply chain disruptions. Breaking up this consolidation could prevent mass plant closures.

President Trump could alter the fertilizer market in a few other ways, too. He could order fertilizer companies to increase production under the Defense Production Act to temporarily increase supply.

The U.S. used to have a thriving domestic fertilizer industry, dating back to the establishment of the Tennessee Valley Authority (TVA) during the New Deal. In its heyday, the TVA produced fertilizer for American farmers and researched methods to boost crop yields. In the 1970s, though, the TVA’s mission was redirected toward supporting fertilizer production in developing countries, and its domestic production wound down.

Still, the TVA’s founding charter gives it the ability to open labs, manufacture, and distribute fertilizer, which again can be a natural complement to energy production. If the Trump administration has the political will, it could push the TVA to follow through on its mandate and boost fertilizer production at home. So far, there’s no sign of that happening.

Theoretically, the government could also try to seal off the U.S. fertilizer market from the global market, something that countries like China do to keep costs down. By restricting the exports of fertilizer or its constituent materials, Musharbash said, we could “avoid having domestic production chase high prices abroad.”

At the end of the day, farmers have experienced fertilizer supply chain disruptions before, including recently during the war in Ukraine. Prices reached record highs in 2022, when Russia invaded Ukraine. Russia is a top exporter of fertilizer, and was hit hard by sanctions on its financial systems (although fertilizer exports were exempted from direct sanctions) and disruptions to its infrastructure. At that time, ammonia fertilizer prices peaked at $1,600 per ton.

Though she sounded the alarm about fertilizer prices, Parum also emphasized her belief that farmers could handle the challenges thrown at them by the global market.

“Farmers are resilient, they’re adaptive, and they’re really great businesspeople, so they make the cuts and things when they can,” she said.