Middle East Tensions and the Looming Food Price Crisis: A Fertilizer Executive’s Warning
The geopolitical climate in the Middle East is on a razor’s edge, and the ramifications could extend far beyond political borders, impacting what we eat every day. Svein Tore Holsether, CEO of Yara, one of the world’s largest fertilizer companies, recently raised a red flag, cautioning that escalating tensions in this volatile region could ignite a significant food price shock.
Heightened Risks in Global Supply Chains
As Holsether explains, the Strait of Hormuz plays a crucial role in global agriculture, with 40% of the world’s urea and 20% of liquefied natural gas (LNG) flowing through this narrow waterway. "Fertilizer groups and customers are monitoring closely the risks around this vital passage," Holsether stated, emphasizing that any disruption could create ripples in global food production.
Volatility in Fertilizer Markets
The fertilizer market has already displayed alarming volatility in recent weeks. "It shows how connected everything is," Holsether remarked, citing disruptions stemming from the shutdown of Israeli gas fields. This situation brought fertilization efforts in Egypt to a grinding halt, shedding light on how swiftly regional tensions can impact supply chains.
Latest Developments in Oil and Fertilizer Markets
As tensions between Iran and Israel intensified this month, Brent crude oil prices surged beyond $80 per barrel, only to retreat to the high $60s after a recent ceasefire. Such price fluctuations can have serious implications for both energy and agricultural sectors. Analysts warn that more than 20% of the world’s urea output has been compromised due to ongoing conflicts and supply disruptions. As noted by Sylvia Traganida, senior ammonia editor at ICIS, "Iran has shut all ammonia plants for security reasons, while Egypt remains offline due to halted Israeli gas flows."
A Fragile Food System
"The food system is fragile," Holsether cautioned. He continued, "If energy prices remain high over time, that will have a cascading effect on food systems," reminiscent of the disruptions experienced during the 2023-2022 global food price crisis triggered by the war in Ukraine.
Historical Context: The Urgent Need for Stabilization
The last significant upheaval in fertilizer markets occurred after Russia’s full-scale invasion of Ukraine, which sent natural gas prices soaring and fertilizer costs skyrocketing. While prices have eased since then, the dynamics remain precarious. "The European fertilizer industry is still under pressure," Holsether said, indicating that reliance on Russian imports is reshaping the landscape.
Interestingly, sanctions on Russian natural gas, a critical element in nitrogen fertilizers, have not similarly affected food and crop nutrients, allowing Russia to pivot its exports toward fertilizer production effectively.
The Weaponization of Food
Holsether didn’t mince words when discussing Russia’s strategies, accusing the nation of weaponizing food and fertilizer. This assertion encompasses both the manipulation of fertilizer exports to increase global dependency and the ruthless targeting of Ukraine’s agricultural infrastructure, including a staggering 20% of its farmland that has become mined or inaccessible due to ongoing conflict.
Before the war, Ukraine was a food powerhouse, exporting up to 50 million tonnes of cereals annually, feeding approximately 400 million people worldwide. However, this year, the country’s grain and oilseed production has plummeted from 78 million tonnes in 2023 to 72.9 million tonnes, illustrating the profound impact of war on agricultural output.
Conclusion: A Call for Action
The warnings issued by Holsether serve as a crucial reminder that the interconnectedness of global supply chains means that political unrest can lead to dire consequences for food prices. As tensions persist, it is imperative that nations take proactive measures to safeguard their food systems from external shocks. Now more than ever, a strategic approach to food security is essential to avert a looming crisis.
Additional Resources
In times like these, our meals may depend on more than just the ingredients themselves; they hinge upon the stability of far-off regions and the politics that shape them.
