The next crisis is agriculture: How the 'gas cutoff' at Hormuz could trigger a grain crisis in South America

On March 19, Brent crude oil surged to $110 per barrel. Global attention focused on oil prices breaching $100, the U.S. dollar hitting $100, and soaring U.S. Treasury yields—yet few noticed another set of numbers quietly brewing: One million tons of fertilizer stranded in the Gulf region. Urea prices jumped 30% in a single week—the highest since 2022. Fertilizer production lines in India and Pakistan sharply curtailed output due to natural gas shortages; Turkey began restricting exports to secure domestic supply. These figures point to a single conclusion: the energy crisis is now transmitting into an agricultural crisis. And this time, the most dangerous destination for that shockwave is not the Middle East or Europe—but South America. I. From Energy to Food: Three Transmission Channels To understand why a blockade of the Strait of Hormuz could ignite an agricultural crisis, we must first trace three tightly interlinked transmission channels between energy and food. The first channel is fertilizer. Natural gas accounts for 60–80% of nitrogen fertilizer production costs. The Middle East is both a major global exporter of liquefied natural gas (LNG) and a leading exporter of urea and other common nitrogen fertilizers. Approximately 30% of seaborne urea shipments worldwide pass through the Strait of Hormuz. When shipping through the strait is disrupted, the problem becomes twofold: first, Middle Eastern fertilizer cannot be exported; second, fertilizer plants dependent on Middle Eastern natural gas cannot produce. Following an attack in early March, QatarEnergy suspended operations—directly causing severe production cuts at fertilizer plants in India and Pakistan due to insufficient gas supply. Major fertilizer producers—including Turkey’s and Europe’s Agrofert—have also begun scaling back capacity. According to maritime analytics firm Kpler, nearly one million tons of fertilizer are currently stranded aboard vessels in the Gulf region. Most fertilizer must be applied before crops begin growing; if it arrives late, it will miss this year’s spring planting season. The second channel is transportation. Energy prices amplify food price increases via transport costs. Data show U.S. trucking costs have risen nearly 30%, while maritime freight costs have climbed 6–8%. In Brazil, inland freight accounts for 10–20% of export prices; given the country’s heavy reliance on road transport, diesel constitutes roughly half of trucking operating costs. Transport costs alone represent 2–3% of total food prices. This means cost inflation alone—without any supply contraction—can significantly push up food prices. The third channel is biofuels. Agricultural commodities serve not only as food but also as energy sources. Take soybean oil, for example: as a key feedstock for biodiesel, its price correlates strongly with energy prices. Data indicate soybean oil rose ~10%, while diesel rose ~50%. When energy prices rise, agricultural commodities face dual pressure—not only cost-push inflation but also demand-pull effects. Together, these three channels form a classic 'energy–fertilizer–food' tripartite transmission mechanism. The 2022 Russia-Ukraine conflict already demonstrated this once—and this time, the shockwave is squarely aimed at South America. II. South America’s Structural Vulnerability: Why Here? If the Middle East is the source of fertilizer, then South America is its endpoint. Brazil is the world’s largest fertilizer importer: approximately 85% of its fertilizer is imported, including about 20% from the Middle East. Argentina’s fertilizer import dependency exceeds 60%. When urea shipments from the Strait of Hormuz stall and global fertilizer prices surge, South American agriculture faces direct cost shocks. But this is only the surface cause.

The natural gas and fertilizer cycle has arrived

When farmers stop planting—or when planting costs become unbearable—the amount of grain available on the market shrinks, pushing food prices upward. Even more critically, the timing of this event could hardly be worse! It is now March—the crucial pre-planting period for spring fertilizer application across the Northern Hemisphere. U.S. farmers are preparing to spread fertilizer on their fields; Chinese farmers are actively procuring spring agricultural inputs. Precisely during this narrow window, the world’s largest fertilizer export hub caught fire. Foreign media outlets erupted in alarm, declaring: 'The timing of this conflict could not possibly be worse for the entire fertilizer industry!' Urea barge prices at the Port of New Orleans surged by $60–$80 per ton within a week. Industry insiders warn that if the situation persists, prices may climb several hundred dollars more in the coming days! So just how large is this shock? A useful benchmark is the 2022 Russia-Ukraine conflict. That year, Russia and Belarus were major global exporters of potash and nitrogen fertilizers. After the outbreak of hostilities, global fertilizer prices spiked sharply. Many farmers in developing countries simply could no longer afford fertilizer, leading to regional crop shortfalls and significantly fueling global inflation. That shock was already painful—but this one may prove even more severe! There are several reasons. First, during the Russia-Ukraine conflict, trade was obstructed—but physical goods remained available, merely unable to depart; this time, production itself has halted. Qatar’s fertilizer plant shut down entirely, cutting off supply at the source. Second, the Strait of Hormuz is a chokepoint: as long as it remains blocked, all Persian Gulf exporters are simultaneously locked in—unlike the Russia-Ukraine conflict, where alternative shipping routes offered some flexibility. Third—and most easily overlooked—is the far-reaching impact of Qatar’s natural gas on the global fertilizer supply chain, extending well beyond its own urea output. Natural gas is the core raw material for nitrogen fertilizer production. It serves as the feedstock for synthesizing ammonia, which is then processed into urea—the foundational process for the entire nitrogen fertilizer industry. Qatar ranks among the world’s top LNG exporters. Its factory shutdown tightens global natural gas supply, forcing fertilizer plants in Europe and elsewhere to scale back production due to soaring input costs. An attack on a single facility can ripple across continents: European natural gas prices surged over 70% immediately after the incident. The energy–fertilizer–food transmission chain operates via multiplicative—not additive—effects! Now let us shift focus back to China. Many people’s immediate reaction is: 'Doesn’t China have strong domestic fertilizer production capacity?' Indeed, China is the world’s largest fertilizer producer: domestic output of urea and phosphate fertilizer is largely self-sufficient—even enabling net exports. Yet one critical gap remains: potassium fertilizer. Potassium is one of the three essential macronutrients for crop growth. Domestic potassium ore resources are relatively limited, resulting in persistently high import dependency. Of China’s imported potassium fertilizer, approximately 10% originates from the Middle East—primarily supplied by Israel’s ICL and Jordan’s APC. Combined, these two companies produce roughly 6.5 million tons annually, accounting for about 11% of global potassium fertilizer exports. Israel is already embroiled in active conflict, while Jordan’s logistics have been disrupted by the Strait of Hormuz blockade. This import source is now highly uncertain.

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