CoBank says fertilizer prices are likely to remain high for another two years.
Although prices have declined from the historic highs seen at the start of the war against Iran, elevated fertilizer expenses remain a major headwind for farmers, it said in a new report led by Jacqui Fatka, CoBank’s farm supply and biofuels economist.
Instability in the Middle East, constrained feedstock supplies and tightening phosphate availability will keep fertilizer costs elevated for ag retailers into 2028, she said.
“Ultimately, market recovery will depend on stabilization in the Middle East, lower sulfur prices and shifts in global demand patterns,” she wrote.
The Middle East supplies more than 60 million tons of fertilizers and raw materials annually, with 45 million tons shipped through the Strait of Hormuz that Iran controls.
Half of globally traded sulfur and more than 30 per cent of global urea exports originate from the region, making these commodities particularly vulnerable to supply disruptions.
Conflict in the region has resulted in fertilizer plant shutdowns and damaged facilities that will require significant time and resources to repair, she wrote.
An estimated 31 ammonia plants in the Middle East have been directly impacted by the war or shut down completely. Across India, Pakistan and Bangladesh, operations at 49 plants have been curtailed or halted due to limited feedstock availability. Meanwhile, at least 20 plants in Russia have been damaged by Ukrainian drone attacks, further exacerbating global supply challenges.
The disruptions have reshaped global trade flows and increased fertilizer prices for North America’s agricultural retailers, particularly for Diammonium Phosphate and Monoammonium Phosphate.
While most domestic use is supplied by U.S. production, 17 per cent of those two those phosphate imports originate from the Persian Gulf — now one of the most unstable supply regions.
Phosphate markets are expected to remain especially tight. Even before the war, global phosphate supplies were constrained, and rising sulfur and ammonia costs have further limited production.
Ammonia and sulfur are the two biggest variable cost inputs for phosphate production, and three of the world’s 10 largest ammonia exporters are located behind the Strait of Hormuz.
China, the largest producer and exporter of phosphate fertilizer, has banned phosphate exports through August and high sulfur prices may lead to an extension of the ban.
Farmers have already responded by conducting more soil testing, adopting variable‑rate application technology and precision nutrient management to maintain yields.
Under-fertilization can be more costly than higher fertilizer prices, which is why many farmers have not reduced nitrogen applications but have lowered phosphate and potassium levels by as much as 10 to 15 per cent in recent years.
“Lower or no fertilizer use creates a two‑ to three‑year gap before yield begins to suffer,” said Fatka. “The question now becomes how much longer the mining of the soils can occur without sacrificing yield.”
If fertilizer prices remain high through fall as expected, more farmers may push applications into spring, creating logistical challenges for retailers who must manage tight planting windows and uncertain demand. Lower global application rates could modestly reduce yields and support commodity prices, easing some inventory concerns for retailers, she said.
