SunSirs: Oil Prices Surpass $100 + Strait Blockage: Disruptions in the Global Fertilizer Supply Chain and Upgraded Food Security Strategies

Recently, international oil prices have surged significantly, with Brent crude oil prices breaking through the $100-per-barrel mark. Coupled with disruptions to shipping through the Strait of Hormuz, the global fertilizer trade chain has been severely impacted. The Middle East is a key global exporter of nitrogen fertilizers, accounting for approximately 25% of global nitrogen fertilizer exports. Furthermore, about one-third of global urea exports must pass through the Strait of Hormuz. These disruptions have directly led to major adjustments in the global fertilizer supply landscape, with supply gaps gradually widening.

Meanwhile, food security strategies continue to be upgraded. The “15th Five-Year Plan” outline has been officially released, explicitly proposing to increase comprehensive grain production capacity from 1.39 trillion jin in 2025 to approximately 1.45 trillion jin by 2030, placing food security in a critical strategic position. Additionally, during the 2026 Two Sessions, relevant departments provided specific responses regarding the enhancement of agricultural production capacity and quality-efficiency, further reinforcing the policy orientation toward food security. Notably, today’s agricultural, livestock, and potato sectors have also focused on food security, emphasizing the critical role of ensuring agricultural input supplies and optimizing crop varieties during the spring plowing season in boosting grain production capacity, thereby aligning with the upgraded food security strategy. German media have echoed this sentiment, pointing out that current disruptions in the global fertilizer supply chain and geopolitical tensions have already posed potential threats to global food security, highlighting the global significance of food security. As China is currently in the peak season for spring plowing, demand for agricultural inputs such as fertilizers is at a seasonal high. The convergence of multiple factors—including rising oil prices, tight fertilizer supplies, and the upgrading of food security policies—has further highlighted the strategic importance of the food industry chain.

Market attention on food-related sectors stems primarily from the synergy between two key trends: the “linkage between grain and oil prices” and the “upgrading of food security policies.” This can be examined from two perspectives:

First, soaring international oil prices are directly driving up agricultural production costs, with key sectors such as fertilizers, pesticides, and agricultural machinery fuel facing significant price pressures. Meanwhile, disruptions to shipping through the Strait of Hormuz have restricted urea exports from the Middle East, further widening the global fertilizer supply gap. This pressure continues to be transmitted to the grain price side, strengthening expectations of rising grain prices. According to relevant research, there is a strong positive correlation between grain prices and oil prices; during the previous oil price surge cycle, grain prices rose significantly in tandem. Currently, the global grain stock-to-use ratio stands at only 23.8%, a historically low level. Combined with the fertilizer supply shortage, momentum for a systemic rise in grain prices is building, which in turn is boosting the entire agricultural industry chain.

On the other hand, the 14th Five-Year Plan has clearly quantified the target for comprehensive grain production capacity. Coupled with the current low global grain stock-to-use ratio, the policy priority of domestic food security continues to rise, with sectors such as seed industry, agricultural machinery, and grain processing receiving clearer policy support. According to relevant research, the Middle East, as a key global supplier of urea, has seen its supply capacity reduced due to regional geopolitical tensions, which will directly drive up international urea prices. Meanwhile, during the Two Sessions, there was a continued emphasis on deepening the implementation of seed industry revitalization and promoting smart agricultural machinery. The concept of post-harvest processing of agricultural products was introduced for the first time, signaling a shift in agricultural production from a focus on quantity to a balance of both quantity and quality. The importance of agricultural security was also underscored, with attention directed toward upstream agricultural chemicals, thereby charting a course for the development of various agricultural sub-sectors.

Development Trends in Related Industries

Combining policy directions with market conditions, various agricultural sub-sectors are showing clear development trajectories, as detailed below:

1. Seed Industry: As the foundational link in food security, the 14th Five-Year Plan and the Two Sessions have consistently emphasized the in-depth implementation of the seed industry revitalization initiative and the accelerated breeding and promotion of breakthrough varieties. Currently, the coverage rate of high-quality crop seeds in China exceeds 96%, but reliance on foreign sources persists for certain core varieties. Against the backdrop of clear targets to enhance comprehensive grain production capacity, entities with independent R&D capabilities and seed reserves will receive greater policy support and market opportunities.

2. Fertilizer Sector: Fertilizers are a key input for grain production, and demand is currently at a high level as we are in the peak season for spring plowing. Disruptions to shipping through the Strait of Hormuz have affected approximately one-third of global urea exports transported via the strait, putting upward pressure on international urea prices. As the world’s largest producer and consumer of fertilizers, China is expected to see an adjustment in the industry landscape against the backdrop of tightening global supply.

3.  Grain Processing and Distribution Sector: The Two Sessions introduced the concept of post-harvest processing of agricultural products for the first time, emphasizing the need to enhance value-added activities by focusing on “grain at the beginning and food at the end” and “agriculture at the beginning and industry at the end,” while addressing shortcomings in warehousing, preservation, and cold-chain logistics. Amid expectations of rising grain prices, entities with control over grain supply channels and processing capabilities will directly benefit from increased revenue as grain prices rise. Meanwhile, the policy emphasis on the agricultural processing sector has opened up new growth opportunities in this area.

4.  Smart Agriculture Sector: The Two Sessions emphasized advancing the R&D and application of advanced and practical agricultural machinery. Currently, the domestic fleet of agricultural drones exceeds 300,000 units, serving 460 million mu of farmland, while new equipment such as intelligent harvesting robots and AI-powered laser weeding robots has also begun to be deployed. Driven by both the upgrading of the food security strategy and the continuous rise in labor costs, there remains significant room for growth in the penetration of agricultural intelligence. Sub-sectors such as agricultural drones, smart agricultural machinery, and the agricultural Internet of Things warrant continued attention.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.