Iran conflict and gas prices drive global fertiliser costs to multi-year high
Urea prices have surged by 80 per cent as the closure of the Strait of Hormuz and damage to ammonia plants disrupt supply chains, prompting farmers to look toward microbe-based alternatives.
Global fertiliser prices have experienced a significant spike this year, driven by the conflict in Iran and the resulting volatility in fossil fuel markets. Urea, the most commonly applied fertiliser, reached a peak of over $850 per metric ton in April. This represents an 80 per cent increase from pre-conflict levels and marks the highest price point since 2022, when the Russian invasion of Ukraine previously pushed costs to record highs.
The surge is directly linked to the dual role of natural gas in ammonia production, serving as both an energy source and a chemical input. As natural gas prices have spiked due to the war in Iran, fertiliser costs have followed suit. The disruption extends beyond production inputs to trade logistics, with the Strait of Hormuz effectively closed to commercial traffic. This closure has impacted approximately one-third of global seaborne fertiliser trade, a disruption that the World Bank warns could particularly affect access for some of the world’s poorest countries.
Long-term supply concerns are compounded by physical damage to infrastructure. Thirty-one ammonia plants in the Middle East have been affected or shut down completely due to the conflict. This damage is in addition to 20 ammonia plants that have sustained damage in Russia in recent years. While the United States largely meets its nitrogen fertiliser demand through domestic production, it still relies on some imports from the Persian Gulf, leaving it partially exposed to these regional disruptions.
Forecasts suggest that elevated prices may persist for several years. CoBank, one of the largest banks for the agriculture industry in the US, reports that some fertiliser prices could remain high through at least 2028. Travis Frey, chief technology officer of Pivot Bio, described the current situation as an "out-of-control supply chain that’s a lot more volatile than it’s ever been." These rising costs, combined with high diesel prices, are squeezing farmer margins and potentially contributing to higher food prices for consumers.
In response, companies such as Pivot Bio and Switch Bioworks are promoting microbe-based alternatives that reduce dependence on natural gas. Pivot Bio has increased its planned production volume, dropped prices, and offered farmers three-year price locks to provide stability. Tim Schnabel, founder and CEO of Switch Bioworks, noted that because farmers operate on "paper-thin margins," the current price spikes present a real problem. These biological products are not subject to the same fossil fuel price spikes as synthetic options.
However, these alternatives currently replace only a fraction of synthetic fertiliser. Pivot Bio states that its products can replace about 25 per cent of synthetic fertiliser today, with a target of reaching 40 to 50 per cent depending on crop and conditions. While not a complete substitute, these technologies represent an initial step toward untangling food supply chains from fossil fuel markets.
