According to a recent report by CoBank, the current surge in fertilizer prices differs fundamentally from the 2022 fertilizer crisis, as the underlying drivers are more persistent. Geopolitical conflicts and supply chain disruptions will keep fertilizer prices elevated for the long term, making procurement increasingly difficult for agricultural input dealers and farmers.
The report projects that global fertilizer prices will continue to rise through 2028, remaining above pre-conflict levels. The ripple effects of the Middle East conflict, combined with tight supplies, will drive up prices and exacerbate procurement challenges. "Concerns over supply stability and cost pressures have already led to demand contraction and delayed purchasing, making future price trends increasingly difficult to predict. Ultimately, a return to market normalcy depends on the trajectory of the Middle East situation, fluctuations in sulfur prices, and shifts in global demand patterns," said Jacqui Fatka, an economist specializing in agricultural inputs and biofuels at CoBank.
While the 2022 Ukraine crisis triggered price hikes and reshaped global trade flows, the current Middle East conflict has caused plant shutdowns and infrastructure damage. Even if hostilities cease, restarting production capacity will require significant time and capital, extending the period of risk. Estimates indicate that 31 ammonia plants in the Middle East have been directly affected by the conflict or forced to halt production entirely; a further 49 plants across India, Pakistan, and Bangladesh have reduced output or suspended operations due to feedstock shortages; and at least 20 plants within Russia have sustained damage from Ukrainian drone strikes.
The Middle East plays a pivotal role in global fertilizer trade, exporting over 60 million metric tons of fertilizers and raw materials annually—45 million tons of which pass through the Strait of Hormuz. Notably, the region accounts for 50% of globally traded sulfur and over 30% of urea exports, making these products highly vulnerable to supply disruptions.
For U.S. agricultural input dealers, the most significant impact of the Middle East conflict lies in the price volatility of diammonium phosphate (DAP) and monoammonium phosphate (MAP). Reportedly, 12% of U.S. urea imports and 17% of phosphate fertilizer (DAP/MAP/TSP) imports originate from the Persian Gulf region.
Nitrogen fertilizer remains a priority for farmers.
Historical trends indicate that during periods of rising fertilizer prices, farmers prioritize nitrogen fertilizer inputs while cutting back on phosphate and potash. This pattern was observed in both 2008 and 2022. The current market is repeating this scenario; despite rising nitrogen prices, farmers remain reluctant to significantly reduce application rates, yet purchasing pressure persists. Unlike the price surge triggered by the Ukraine crisis in 2022, the current round of fertilizer price increases has not been accompanied by a simultaneous rise in agricultural commodity prices.
According to agricultural input distributors, demand for nitrogen fertilizer stocking in the U.S. this summer has been robust, with active trading at the retail level. Stocking volumes for Urea Ammonium Nitrate (UAN) solution exceeded expectations; prices were raised shortly after initial announcements, and suppliers moved product faster than anticipated. Typically, summer stocking prices represent the annual low, but market uncertainties this year suggest that prices may not yet have bottomed out.
The situation in the anhydrous ammonia market is similar; once stocking prices were finalized, distributors actively purchased inventory. However, current storage levels still fall short of the volumes typically required for the autumn application season, as distributors anticipate that farmers might delay purchases due to high costs. If fertilizer prices remain high or continue to rise—prompting farmers to postpone purchasing until spring—distributors will face steep inventory financing costs, compounded by high interest rates of 6% to 8%.
Reportedly, urea prices were already on an upward trajectory prior to the outbreak of conflict in the Middle East. Global fertilizer import demand is closely linked to procurement costs. Between April and June, global urea demand declined by 27%. The resumption of urea exports from China has alleviated some of the upward pressure on prices. By mid-June, the spot price for urea in New Orleans (NOLA) had fallen to $386 per short ton—an 18% drop from pre-conflict levels. Farmers Continue to Reduce Phosphorus and Potassium Fertilizer Application
Even though fertilizer prices have remained high over the past few years, most farmers have not drastically cut their total fertilizer usage; instead, they rely on soil testing, variable-rate application technology, and precision nutrient management to safeguard crop profitability. This is because the yield losses resulting from under-fertilization often exceed the costs associated with rising fertilizer prices—a key reason why most U.S. farmers have not reduced their nitrogen fertilizer application rates.
However, U.S. farmers have reduced their application rates of phosphorus and potassium fertilizers by 10% to 15% in recent years. Since 2008, the total application volume of nitrogen, phosphorus, and potassium (NPK) in the U.S. has fallen by a cumulative 20%. With farm cash flows generally tight, some farmers are reluctant to lock in fertilizer orders for the upcoming season in advance.
North Dakota State University (NDSU) forecasts that fertilizer prices will continue to rise before plateauing at high levels for the long term, remaining above pre-Middle East conflict levels through 2028. Projections for average annual fertilizer prices in 2027 are as follows: urea at $496, diammonium phosphate (DAP) at $666, monoammonium phosphate (MAP) at $660, anhydrous ammonia at $619, and urea ammonium nitrate (UAN) solution at $361. While these projected prices are lower than the spikes seen at the onset of the Middle East conflict, they remain significantly higher than pre-conflict benchmarks.
Phosphorus Fertilizer Supply Remains Tight
Global supplies of phosphorus fertilizer were already tightening and prices steadily rising even before the outbreak of the Middle East conflict. Ammonia and sulfur are core raw materials for phosphorus fertilizer production, and three of the world's top ten ammonia exporters are located along the Strait of Hormuz. Argus forecasts a 13% decline in global ammonium phosphate consumption by 2026; due to global raw material shortages and production cutbacks, the projected output of phosphorus fertilizer has been revised downward from nearly 69 million tonnes to below 60 million tonnes. The Middle East conflict has further constrained the supply of raw materials for phosphorus fertilizer, with the most significant impact felt in Southern Hemisphere markets and major consuming nations such as India and Brazil—countries that collectively account for 39% of global phosphorus fertilizer consumption. China, the world's largest producer and exporter of phosphate fertilizers, has extended its export ban through August. Market forecasts suggest that high sulfur costs may compel China to prolong export controls, further tightening global phosphate fertilizer supplies. Domestic policies aimed at ensuring supply, combined with the export ban, are expected to lead to a slight decline in China's phosphate fertilizer consumption. North Dakota State University estimates a 40% probability that China will lift the export ban in the fourth quarter; should the ban be lifted, the country could release 3 million tonnes of diammonium phosphate (DAP) onto the global market.
High sulfur prices have prompted The Mosaic Company (Mosaic) to cut its domestic phosphate fertilizer production capacity in the U.S. During an investor call, Mosaic's CEO stated that if U.S. purchasing volumes fail to return to historical levels, the company would shift production capacity to serve overseas markets.
U.S. phosphate fertilizer prices have remained firm since the summer; market quotes rose further following Mosaic's announcement of production cuts. The agricultural inputs industry generally expects phosphate fertilizer application volumes this year to remain on par with last year's levels. Notably, U.S. phosphate fertilizer application has declined for five consecutive years.
Farmers in the U.S. Corn Belt typically secure DAP supplies during the July–September stocking period for autumn application in October and November, though the application window may be delayed this year. Early this summer, U.S. distributors began gradually building autumn phosphate fertilizer inventories using a phased stocking strategy. Farmers have consistently reduced their application of phosphate and potash fertilizers over the past few years, and distributors anticipate this cautious sentiment will persist. Drought conditions in the Western and Southern Great Plains have further depressed regional phosphate fertilizer application rates.
In June, President Trump signed an executive order suspending countervailing duties on Moroccan phosphate fertilizers for eight months, or until the relevant state of emergency is declared over. U.S. agricultural organizations welcomed the policy, viewing it as a way to alleviate the pressure on farmers caused by squeezed profit margins and high input costs. However, given that the spot price of DAP in New Orleans has long been the lowest among major global markets—and amidst the current backdrop of tight global fertilizer supplies—the tariff exemption is unlikely to significantly boost imports of Moroccan phosphate fertilizer into the U.S. The Fertilizer Market Must Adapt to a New Landscape
The report predicts that if fertilizer prices remain high into the autumn, farmers will likely postpone application until next spring. This would require distributors to coordinate fertilizer transport and application scheduling within a narrow planting window, significantly increasing operational complexity.
Fertilizer companies noted in recent investor briefings that the current price surge differs from the 2022 trend; agricultural commodity prices have not risen in tandem with fertilizer costs. However, a global decline in fertilizer application could slightly reduce crop yields, providing some support for agricultural commodity prices. This dynamic may encourage farmers to return to normal purchasing patterns, helping distributors avoid the risk of holding high-priced inventory with no buyers.
Overall, the fertilizer market is unlikely to quickly revert to the landscape that existed prior to the Middle East conflict. Supplies of nitrogen and phosphate fertilizers continue to face risks such as plant shutdowns, raw material shortages, and unstable trade flows; potash is relatively more resilient, with pressure stemming primarily from rising shipping costs.
The report highlights that the core challenge for agricultural input distributors is balancing supply assurance against inventory risk: they must guarantee product availability during the brief application window while avoiding large-scale commitments to high-priced stock, thereby mitigating potential losses from delayed farmer purchasing or reduced demand. For farmers, the high-price environment will influence nutrient application decisions, and the trend of reduced phosphate and potash usage is likely to persist. Even if prices do not reach the extreme levels seen briefly following the blockade of the Strait of Hormuz, the industry must adapt to a new landscape characterized by a structurally higher baseline for fertilizer costs and increased operational challenges over the coming planting seasons. (Source: Agricultural Inputs Herald)
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