Farmers see fertiliser price surge as Iran war blocks exports, threatening losses

At the same time, sulphur ​output has been cut in other parts of the Middle East.

"We have lost a ‌significant chunk of the global supply because of this situation," Linville of StoneX said.

India buys more than 40% of its urea and phosphatic fertilisers from the Middle East. While imports could be hit, output within India has already been affected.

Three Indian plants have been forced to reduce urea output as LNG supplies from Qatar have dropped sharply, said a New Delhi-based senior industry official. As a result, supply is expected to be tight for urea and diammonium phosphate in the short term, the person said.

FERTILISER MARKET TIGHT BEFORE IRAN WAR

The global fertiliser market was already tight, with China restricting exports this year to ensure domestic availability, while producers in Europe have cut output due to the loss of cheap Russian gas supply, analysts said.

Urea prices had risen by around $80 per ton from around $470 per ton quoted before the start of the Iran war, they said.

China is likely ‌to expand fertiliser export controls because of the conflict, two agricultural analysts said, although the restrictions may not be formally announced ​and instead communicated to major producers and customs.

While China sources more than 50% of its sulphur imports from the Middle East, Indonesia ​relies on the region for nearly 70% of its supplies, traders said. Sulphur is a key ​ingredient for phosphate fertilisers like diammonium phosphate and monoammonium phosphate.

"It is really hard to find readily available spot cargoes now. There are no spot cargoes anywhere," said one Chinese ‌sulphur trader.

Australia is dependent on imports to meet most of its fertiliser needs, say industry ​analysts.

Agricultural economist Corne Louw of GrainSA, which represents South ​African farmers, told Reuters that fertilizer can make up as much as 50% of their production costs.

"Any increases in the current situation where farmers are already struggling with record low grain prices will just be another nail in the coffin," he said.

Markets might not yet have fully priced in the possibility of a long war, according to Morningstar analyst Seth Goldstein, who estimates that nitrogen prices could ​roughly double and phosphate prices rise 50% from current levels.

"If the supply shock ‌lasts more than a few weeks, I wouldn't be surprised to see prices go back to the highs of 2022, when the Russia-Ukraine conflict began," Goldstein said.

(Reporting by Naveen Thukral ​and Ed White; additional reporting by Lewis Jackson, Daphne Zhang and Amy Lv in Beijing, Trixie Yap in Singapore and Rajendra Jadhav in Mumbai, Tristan Veyet in Gdansk, Gus Trompiz in ​Paris, Wendell Roelf in Johannesburg, Nigel Hunt in London; Editing by Sonali Paul, Emily Schmall and Aurora Ellis)