By Jonathan LaPorte and Kurt Steinke
Passage through the Strait of Hormuz was nearly impossible due to the ongoing conflict between the United States and Iran. The strait is a major throughway in the Middle East for global exports of crude oil, natural gas and nitrogen fertilizers. Approximately 50% of global exports of Urea and sulfur and 20% of global exports of natural gas pass through the Strait of Hormuz. Natural gas is a key ingredient for manufacturing anhydrous ammonia which is a basic building block for many nitrogen fertilizers. With global exports reduced, supply concerns have led to a significant increase in nitrogen fertilizer prices.
Reports from USDA’s Agricultural Marketing Service (AMS) indicate that price per ton on nitrogen products have increased between 12.41% to 41.48% in the past month (Table 1). The price increase has put consideration pressure on buying decisions as farms finalize planting intentions and crop needs. Especially for farms who may not have purchased inputs in the fall due to tax strategies or limited available cash.
The changes in nitrogen products of Anhydrous Ammonia (NH4), Urea Ammonium Nitrate (UAN), and Urea. Of the three nitrogen products, Urea has had the most significant change in pricing with an increase of 41.48%. Price increases are due to a combination of supply reductions in both the actual fertilizer and a major ingredient (natural gas) used to manufacture additional supplies.
To better understand the impact of these price changes, nitrogen fertilizer prices are often compared to the price of corn.
Source : msu.edu