World urea prices fall by 30%, putting pressure on grain market

Israel's war with Iran led to significant supply disruptions and rising prices for fertilizers and grains. However, the risks of unstable supplies are now decreasing, which is helping to lower prices.

 

Prices for the main nitrogen fertilizer, urea, have fallen by more than 30% in two months, completely erasing the war-induced growth. As a result, prices for corn, wheat and other agricultural products have fallen sharply. The Bloomberg Agriculture Spot Index, which tracks the prices of 10 major global crops, fell to its lowest level since March 5 on Friday (-10% for the month).

 

The blockade of the Strait of Hormuz in the early weeks of the war threatened almost a third of the world's urea supplies. Against this backdrop, fertilizer prices rose sharply and farmers began to look for alternative sources of supply.

 

Despite the fact that the threat has not completely disappeared, war risk premiums have decreased significantly.

 

The decrease in urea prices is due to a number of factors:

• The Chinese government has relaxed restrictions on fertilizer exports.
• Some producers in South Asia have increased production after it was reduced at the beginning of the conflict.
• The market once again took into account the volumes of products that were unavailable due to the blockade of the Strait of Hormuz.
• The decline in global demand for grain limits farmers' demand for fertilizers.

 

The fertilizer market is currently experiencing a seasonal decline in demand, as planting is now complete in most countries in the Northern Hemisphere and Brazil has reduced imports compared to last year. The market is now concerned not with how much more prices can rise, but with how much they can fall.

 

Along with fertilizer prices, agricultural prices are gradually falling. Markets are being pressured by good crop prospects in the US and the harvest in the Northern Hemisphere, which is increasing the supply of grain.

 

However, any escalation in the Middle East could lead to another jump in energy and fertilizer prices. Fertilizer prices could also be supported by a recovery in demand in the second half of the year from Brazil, one of the world's largest fertilizer importers. However, experts believe that the peak of urea prices in 2026 has already been passed.

 

The dynamics of fertilizer prices will be important in the summer and fall, when farmers begin purchasing for the 2027 harvest. If the war ends and the ceasefire is in effect, fertilizer prices will stabilize, although inflation risks will still remain high.