Global Urea Prices Surge on Middle East Conflict

By Ryan Hanrahan

Bloomberg’s Hallie Gu and Salma El Wardany reported that “global prices of key fertilizer ingredient urea have surged alongside escalating violence in the Middle East, which threatens to choke supplies of the crop nutrient from a significant producing and exporting region.”

“Nearly half of world’s urea exports are sourced from manufacturing facilities on the Persian Gulf, according to Bloomberg Intelligence, with recent strikes putting those supplies at risk,” Gu and El Wardany reported. “Egypt and Iran have already curtailed production, which alone were responsible for almost 20% of global urea trade last year, according to Chris Lawson, head of fertilizers at consulting firm CRU Group.”

“Urea, the world’s most commonly used nitrogen fertilizer, provides one of the essential nutrients that underpin global food production,” Gu and El Wardany reported. “U.S. Gulf urea spot prices, a global benchmark, surged about 16% in the past week, according to Green Markets data, and prices in the Middle East also rallied 11%.”

StoneX VP of Fertilizer Josh Linville reported Tuesday that “the fertilizer market faced significant disruption after the U.S. joined Israel in striking Iran.”

“Following the strikes, both Iran and Egypt halted production,” Linville reported. “‘We have seen Iranian production shut off. They shut down their gas fields as a precautionary measure. That means their nitrogen production goes offline. Israel did the same to their gas field. So they’re not a nitrogen manufacturer, but Egypt relies a lot on them. They’re the fourth-largest exporter in the world. They had to shut down their production. So we lost numbers three and four for global exporters and very quickly because of these strikes.’”

Progressive Farmer’s Russ Quinn reported that “for the nitrogen market, the Strait of Hormuz is important in the movement of fertilizer. Roughly 52% of global urea exports come from the Middle East, Linville wrote. Iran has voted to close this narrow body of water with the intention of cutting the West off from this very important body of water, which would stop oil shipments.”

“The strait is also incredibly important for urea movement in the region, Linville wrote. If oil is the target, urea will be the innocent bystander caught up in the fight,” Quinn reported. “‘This strait is not only important to the U.S., but a lot of the Western world, who is not going to sit idly by and allow this to happen,’ Linville wrote. ‘Still, even the threat has had bullish connotation to start this week.’”

Linville reported that “news of a ceasefire eased prices, but fundamental supply issues remain. ‘I do think that we will see values come off from these highs that we’ve said here in the last couple of days…. However, we also have to understand the fact that we’ve lost production. We have lost several weeks of production in Iran. We have lost several weeks of production in Egypt. This is on top of a lack of exports from places like China [and] production issues in Europe. So unfortunately, while yes, we think the price is going to come down from the highs, I also don’t believe it’s going to come down to the lows we had previously expected.’ Linville suggests that the global fertilizer market will remain tight, with price volatility likely to continue.”

Renewable Fuels Group Urges Expansion of E15 Sales

Progressive Farmer’s Todd Neeley reported that “with the threat of Iran potentially closing the Strait of Hormuz in the ongoing conflict with Israel, the head of the Renewable Fuels Association asked President Donald Trump to make regulatory changes to allow more E15 to be sold across the country.”

“About 20% of the world’s oil moves through the Strait of Hormuz so closing it can affect oil supply and prices,” Neeley reported. “The ethanol industry continues to push for a legislative fix to allow permanent, year-round E15 sales nationally.”

“In a letter to Trump on Tuesday, RFA president and CEO Geoff Cooper asked the administration to take several deregulatory steps to allow E15 to be stored and distributed in existing pumps,” Neeley reported. “‘Last year, you confirmed that your vision is to let fueling stations ‘use the existing pumps’ to distribute E15,’ Cooper said in the letter. ‘We wholeheartedly support that vision and believe now is the time to act, given the potential for price spikes at the pump.’”

“Cooper asked Trump to ‘immediately eliminate’ all E15 misfuelling mitigation plan requirements and to adopt a requirement that retail gasoline stations offering E15 for sale must also continue to make E0 or E10 available in at least one ‘clearly marked’ dispenser at stations,” Neeley reported.

Global Urea Prices Surge on Middle East Conflict was originally published by Farmdoc.