Agricultural and food production are under immense pressure amid geopolitical risks in the Middle East and the decline in tanker traffic through the Strait of Hormuz, as energy costs have been on the rise over the past month, triggering price hikes in critical commodity markets for global food supply.
Following the start of US and Israeli attacks on Iran on Feb. 28 and Tehran's subsequent retaliations, the tensions in the Middle East intensified the pressure on global energy, food, and commodity prices. The ongoing war has caused supply chain disruptions.
The security risks around the vital waterway following the attacks led to a new wave of price hikes in global agriculture markets via energy, fertilizer, and transport costs, which have also been on the rise.
Producers have been prompted to adjust their planting preferences due to these developments, which is reshaping their crop rotations.
Supply concerns alone did not lead to so much change in agriculture, as the widespread impact of rising energy and freight costs affected the agricultural production chain.
High nitrogen-based fertilizer costs could accelerate the shift towards crops like soybeans, which need less fertilizer, rather than crops like corn and wheat, as investors expect corn planting areas in the US to shrink and soybean planting to expand.
The S&P GSCI Agriculture global benchmark index (SPGSAG), which measures the spot price movements in agriculture prices, rose around 4.1% since the start of the conflict.
The index surged from 345.47 on Feb. 27 to 368.83 on March 27.
During the same period, wheat surged 2.3%, corn 4.1%, and rice 3.2% per bushel, while soybeans fell 0.3%.
Sugar surged 13.7%, cotton 7.3%, and coffee 6% per pound, while cocoa plummeted 11.9% per ton.
Rising input costs for farmers and price movements could add sustained upwards pressure on agricultural commodity prices in the medium term.
Rahmi Incekara, a macroeconomics expert at Istanbul-based Bahcesehir University, told Anadolu in an interview that the effective closure of the Strait of Hormuz and the consequent supply shock in global energy and fertilizer markets seriously threaten agricultural production and global food supply security, with the vital waterway positioned at the center of global fertilizer trade.
"Around 39% of the world's fertilizers transit via the strait, while countries in the region, namely Qatar, Iran, the United Arab Emirates, Saudi Arabia, and Bahrain, make up nearly half of the world's urea exports," he said. "Some 20% of diammonium phosphate, 10% of monoammonium phosphate, 25% of ammonia, and 30% of sulfur are shipped via this route, so a complete closure of the strait would seriously disrupt the global supply chain."
"Disruptions in fertilizers, urea, and energy supply chains created a food crisis risk deeper than the one that began with the Russia-Ukraine crisis in 2022," he said.
Incekara emphasized that the halt in shipments via the strait disrupted 38% of the world's nitrate-based fertilizer supply and 20% of the phosphate-based fertilizer supply, and that even the slightest disruption in the supply chain for nitrogen, phosphorus, and potassium could lead to irreversible declines in global crop yield estimates.
He added that the start of planting season in the northern hemisphere means that any disruption in shipping routes will directly impact agricultural productivity and food supply, while in places like Australia, where more than 60% of its urea is sourced from the Middle East, current stockpiles could be depleted by mid-April.
Zeki Bayramoglu, a professor from Türkiye's Selcuk University, told Anadolu that global food indexes have yet to fully reflect the impact of the war over the past month.
"We can't really interpret the current situation as a direct 'food prices have surged' scenario but rather as the foundation for a 'second-round shock in food prices,'" he said, noting that the sharpest price reaction in the first month of the war has been in the fertilizer market.
"If no alternative trade routes are found, we won't be dealing with just more expensive energy prices — the entire chain of fertilizers, feed, grains, vegetable oils, and animal proteins will be under pressure, and if tensions persist and no alternative route is implemented, the world will suffer from supply shock on top of inflation and on top of weakening growth," he added.
Kenan Aslanli, an assistant professor of international relations at Ankara Yildirim Beyazit University, told Anadolu that the effective closure of the Strait of Hormuz and the attacks on key energy infrastructure in the region brought crude, petroleum, LNG, fertilizers, and metals coming out of the Persian Gulf to a standstill.
Aslanli stated that Gulf countries are major producers of products like nitrogen-based fertilizers, sulfur, aluminum, helium, and bromine, while the rise in fertilizer prices versus pre-war levels will affect crop yields and global food prices.
"Just as in the oil sector, the absence of global coordinated strategic reserves in the fertilizer sector makes managing disruptions all the more difficult," he said.
Kaan Devecioglu, North and East African studies coordinator at Ankara-based think tank Center for Middle Eastern Strategic Studies (ORSAM), told Anadolu that the rising risk perception and actual threats of attacks in the strait led tanker insurance premiums and freight costs to surge, indirectly affecting "not only oil and LNG shipments but also container trade."
"Rising fertilizer and fuel costs are adding upwards pressure on food prices, especially in import-reliant African and South Asian countries," he said.
"In agricultural markets, upwards expectations especially for grain and fertilizers emerged, while a widespread supply crisis has yet to come true — the situation shows that there were limited impacts accompanied by high risk in the war's first month, but if the conflict persists, the effects could be exponentially devastating," he added.
