- Michael Allison, CFA
- 3 days ago
- 2 min read
By Michael Allison, CFA
Why Fertilizer Could Be the Real Inflation Story
This week’s Chart tells a familiar story: energy prices are surging. Heating oil up 107%. Brent crude up 56%. WTI crude up 44%. The boxes drawn around those numbers tell you what the market is focused on. But there may be a far more consequential story hiding just below the surface.
The closure of the Strait of Hormuz, now entering its fourth week following U.S.-Israeli strikes on Iran, isn’t just an oil shock. It’s a fertilizer shock. The agricultural reckoning that follows could potentially dwarf the energy price spike in both duration and breadth.
Nearly 50% of global urea exports originate from countries west of the Strait and transit through that critical waterway. Urea is the world’s most widely used solid fertilizer, the input that makes large-scale corn, wheat, and soybean production economically viable. Prices for urea have already surged more than 30% since the war began, and at least 21 ships carrying nearly a million metric tons of fertilizer cargo are physically stranded in the Gulf.
The timing couldn’t be worse. This disruption falls in the middle of spring planting season, which generally runs from mid-February to early May in the Northern Hemisphere. Even if the Strait reopens soon, restarting production and transport for fertilizers could take weeks, weeks that Northern Hemisphere farmers simply do not have.
What does this mean for grocery bills? More than many realize. Higher fertilizer costs squeeze grain yields, and grain is the feedstock for virtually all livestock. Cattle, hog, and poultry producers are all downstream consumers of corn and soybeans. The Chart shows live cattle up 14% and lean hogs up 8.6% over the past year, and those figures predate the full fertilizer crunch working its way through the supply chain. Chicken, not shown in the chart, faces similar pressure.
Oxford Economics has already raised its Q2 2026 fertilizer price forecast by roughly 20%, with risks “skewed to the upside.” Energy costs represent approximately half the total retail food bill, meaning the inflationary impulse from this shock is broad-based and persistent, not a one-month blip in the CPI.
The energy commodities in the Chart are attention-grabbing. But I’m watching the agricultural commodities. The second-order effects of a fertilizer shortage are slower, stickier, and harder to reverse. I believe that’s the inflation story for the next 12-18 months, and I don’t think that it’s been fully priced in yet.
Sources: Center for Strategic & International Studies, The Fertilizer Institute
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