The potential blockade of the Strait of Hormuz is rapidly affecting the agricultural supply chain following its impact on the energy markets. Bank of America noted in its latest report that the disruption of this crucial waterway is triggering a systemic price linkage of "natural gas - fertilizer - food".
In terms of supply structure, the Gulf region accounts for about 30% to 35% of global urea exports and about 20% to 30% of ammonia exports, with approximately 30% of global fertilizer trade relying on this passage. If transportation is hindered, the global supply of agricultural inputs will be directly impacted.
The current path of impact is gradually becoming evident:
First stage: A surge in energy prices, with Brent crude oil rising to $115–$120 per barrel.
Second stage: Rising fertilizer costs, with urea prices increasing by 30%–40%
Third stage: Agricultural production constrained, with an increased risk of potential production cuts
On the demand side, rising energy prices are also boosting demand for biofuels, further diverting grain supply.
Looking at specific crops, corn is most significantly affected. Its high dependency on nitrogen fertilizer could lead prices to increase by 20% to 30%. Wheat, as an alternative grain, is expected to rise by 15% to 20%.
Meanwhile, rising feed costs will be passed down the line, pushing up prices for proteins like meat. For example, in Brazilian chicken production, feed costs account for about 65%, which is expected to result in a cost increase of 6% to 7.8%.
