By Jessica Domel
Multimedia Reporter

Global tensions continue to weigh on farm input prices, including the cost of fertilizer and diesel.

While there are other factors at play, the Iranian conflict that has led to disruptions at the Strait of Hormuz has played a key role in those price increases, and analysts say the disruptions could remain even after the conflict is over.

“If world peace breaks out tomorrow, how soon do we get to a better spot? First of all, that’s a big leap, but I think you’ve got months,” Former USDA Chief Economist Seth Meyer told the Ag Outlook Forum. “You’ve got facilities which have been damaged. You’ve got backlogs. I think that this lingers with us even if we have peace breakout tomorrow.”

Meyer, who is now the director of the Food and Agricultural Policy Research Institute at the University of Missouri, said although the market is very good at adjusting, prices won’t fall immediately.

Chinese restrictions on exports and higher prices for sulfur and ammonia have tightened global supplies of monoammonium phosphate (MAP) and diammonium phosphate (DAP).

“We do have a tail of distribution,” Meyer said. “MAP and DAP prices remained pretty strong even before this event because we had had some supply disruptions in the MAP and DAP markets to begin with.”

The Iranian conflict has reportedly led to limited, or even halted, traffic at times in the Strait of Hormuz, further tightening supplies of fertilizer.

The Strait of Hormuz is a narrow waterway between the Persian Gulf and Arabian Sea. It’s bordered by Iran, United Arab Emirates and Oman.

“Three of the world’s 10 largest urea exporters sit behind the Strait of Hormuz. Three of the world’s largest anhydrous exporters sit behind the Strait of Hormuz,” Josh Linville, vice president of fertilizer for StoneX, said. “One of the top five phosphate exporters sits behind there. A ton of gas that feeds other nitrogen manufacturing plants around the world comes from that body of water.”

He said DAP and MAP are also impacted by movement through the strait.

“Sulfur—half the world’s tradable supply travels through Strait of Hormuz and with the Strait of Hormuz problems, Russia shut theirs down,” Linville said. “That’s another 17% of the world’s tradable supply. Right now, two thirds of the world’s tradable sulfur supply doesn’t exist. And that’s why you’re seeing a lot of these problems.”

Over the past year, the Trump administration has worked to boost domestic fertilizer production to help alleviate higher costs.

One of the projects the administration has helped push forward is Blue Point One. The facility, touted as the world’s largest ammonia plant, is under construction now in Modeste, Louisiana.

“When I think about the prospect of increasing domestic fertilizer production, I certainly support the idea of expanding that, but that’s not an overnight solution,” Krista Swanson, chief economist at the National Corn Growers Association, said. “It’s going to take time.”

Increasing domestic production doesn’t always guarantee lower prices for U.S. farmers, though.

Linville recommended Congress move forward with approving ad hoc assistance to help U.S. farmers stay afloat while input costs remain high due to geopolitical tensions.

“If there’s even been a time to justify a payment to the farmer, this has been it,” Linville said.