The third domino to fall amid the retreat of globalization: famine

Today, I will refine the discussion from my previous analysis on famine in ‘window countries’ of globalization and nations dependent on globalized supply chains. This round is not a simple famine—it is a confluence of oil crisis, fertilizer crisis, and food crisis, compounded by the retreat of globalization, resulting in a problem of extraordinary severity—even by historical standards. Let’s begin with the near-term picture—the crisis already unfolding. The origin of this crisis lies not in the fields, but in the Strait of Hormuz. Under normal conditions, the Strait of Hormuz handles approximately 20 million barrels of crude oil per day—35% of global crude oil flows—as well as one-fifth of global liquefied natural gas (LNG) trade and 30% of global international fertilizer trade. The Gulf region accounts for nearly half of global sulfur trade. Sulfur is a critical raw material for producing sulfuric acid, which in turn is indispensable for converting phosphate rock into phosphate fertilizer. Within days of escalation in the conflict, tanker traffic through the Strait of Hormuz collapsed by over 90%. According to the latest WTO research, since the outbreak of hostilities in the Middle East, fertilizer-carrying vessels departing via the Strait of Hormuz have virtually disappeared—not a single one remains visible. Fertilizer prices have begun surging. Offshore prices for granular urea from the Middle East jumped from around USD 400 per ton pre-war to over USD 850. Global fertilizer prices have surged 50%–115% year-on-year. The World Bank’s April 29 Commodity Markets Outlook confirmed that fertilizer prices overall will rise 31% in 2026, with urea prices soaring 60%. The World Bank also forecasts energy prices will surge 24% in 2026—reaching their highest level since the Russia-Ukraine conflict erupted in 2022. Why is fertilizer so critical? Natural gas accounts for 70%–90% of nitrogen fertilizer production costs. The Middle East is the global core of nitrogen fertilizer production: the Gulf region supplies 36% of global urea exports, 29% of ammonia, and 26% of diammonium phosphate (DAP). Soaring oil prices drive up natural gas prices; rising natural gas prices force nitrogen fertilizer plants offline; skyrocketing fertilizer prices lead to acute spring planting shortages of nitrogen fertilizer. José Rosero, Chief Economist at the FAO, characterized the situation thus: “This is not merely an energy shock—it is a systemic shock affecting the entire global agrifood system.” FAO Director-General Qu Dongyu was even more direct: “Closure of the Strait of Hormuz is not a regional issue—it is a global food security risk. The greatest danger is not immediate food shortages, but rather disruptions to fertilizer supply and agricultural production.” Crop reductions are already materializing. According to FAO estimates, fertilizer shortages alone have already reduced rice output across Asia-Pacific by 3.3 million tons. Thailand’s 2026 paddy output is projected to fall by 5.4 million tons. Indonesia’s rice production declined 11.2% between March and May. Overall rice output across Southeast Asia has dropped 3%–5% year-on-year. The International Grains Council (IGC) confirms that global grain production in the 2026/27 season will decline 2.7%, falling to 2.421 billion tons. Global grain trade volume will shrink by 17 million tons, down to 450 million tons; carryover stocks will decrease by 26 million tons. In July 2026, the FAO Food Price Index rose to 131.1 points—the highest since January 2023. JPMorgan’s warning is stark: “Global crop price increases have yet to peak.” To be precise: regional production declines are already evident; global production declines are now all but guaranteed. The impact of fertilizer shortages on staple crop yields carries a 6- to 9-month lag.

How is the fertilizer industry faring? What is its current state of development?

Nitrogen fertilizer industry | Phosphate fertilizer industry | Potash fertilizer industry Because most Middle Eastern urea production facilities use natural gas as feedstock, surging natural gas prices will further push up production costs in the region—and thereby lift international urea prices. As tensions in the Middle East intensify and persist, sulfur prices are likely to remain elevated and volatile for the long term, driving up downstream phosphate fertilizer costs and supporting related product prices. Closure of the Strait of Hormuz may also raise international shipping freight rates and extend voyage durations—both of which will push up international potash prices. The primary raw materials for nitrogen fertilizer are coal or natural gas. Internationally, natural gas is the dominant feedstock for nitrogen fertilizer production, whereas domestically, coal is predominantly used. Major global nitrogen fertilizer producers include several European countries led by Norway, Gulf countries led by Saudi Arabia, Russia, and the United States. Due to the Russia-Ukraine war, natural gas prices have fluctuated sharply, prompting some European nitrogen fertilizer plants to suspend or scale back operations—tightening global nitrogen fertilizer supply and sustaining high prices. China is both the world’s largest nitrogen fertilizer producer and exporter—ranking first globally in output and among the top five in exports. Its nitrogen fertilizer production relies almost entirely on coal. As China is also a major agricultural country, domestic and international nitrogen fertilizer prices have diverged significantly in recent years. During peak operating periods, the government implements measures—including mandatory inspection—to temporarily restrict exports, aiming to stabilize domestic prices and ensure supply security. Thus, domestic nitrogen fertilizer price trends depend primarily on two factors: coal price movements and the duration of export restrictions. Phosphate fertilizer is produced mainly from phosphate rock, which accounts for over 50% of total production costs. The phosphate fertilizer industry is highly concentrated: China produces over 60% of the world’s phosphate fertilizer (though data sources vary—CRU estimates China’s share at ~40%), making it the world’s largest producer and exporter of phosphate fertilizer. Hence the saying: “The world watches China for phosphate fertilizer, and China watches phosphate rock.” China holds the world’s second-largest phosphate rock reserves—but they constitute only about 5% of global reserves, with an average grade of just ~22%. The rapid growth of the new-energy vehicle sector has also boosted demand for phosphate rock, increasing annual consumption by 1–2 million tons. Domestic phosphate resource fees have risen to around CNY 50 per ton, while the price of 30%-grade phosphate rock has climbed to approximately CNY 1,100 per ton. Compared with coal, natural gas, and potash resources, phosphate resources are even more geographically concentrated: roughly 80% are located in North Africa—in Morocco, Egypt, Algeria, Tunisia, and the Sahara region—with average grades reaching 30% and shallow deposits often amenable to open-pit mining. However, aside from Morocco, other countries in the region possess limited mining capacity and produce relatively little phosphate rock. Morocco holds the world’s largest phosphate rock reserves—67% of the global total—but its state-owned enterprise monopolizes these resources. Its expansion pace has been slow, failing to keep up with growing demand.

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