Fertilizer Crisis: The current political turmoil and disruption of global trade routes have now impacted Indian farmers directly. Rising tensions along crucial sea passages such as the Strait of Hormuz have not only interrupted the oil and gas supply chain but have also indicated a worldwide fertilizer crisis.
The Chief Economist of the FAO has cautioned that if conditions do not improve, shortages of fertilizer and soaring prices could severely affect agriculture in the near future. This situation is particularly alarming for farmers who are in the midst of preparing for their upcoming crop.
Fertilizer supply chain hindered in trade corridor
The Strait of Hormuz is among the most critical sea routes globally, responsible for a substantial share of the international fertilizer market. Even minor disruptions to this route can delay fertilizer shipments from reaching their destinations on schedule. When shipping lanes are obstructed or postponed, the costs associated with transporting fertilizer rise dramatically.
Experts warn that if this supply chain continues to be disrupted for an extended period, there will inevitably be a shortage of vital fertilizers such as urea and DAP. For a nation like India, which relies heavily on fertilizer imports, this scenario presents a considerable challenge.
The fertilizer crisis extends beyond just stranded vessels. It is also closely tied to gas supplies. Natural gas is the key raw material necessary for operating fertilizer plants and producing urea. Crises in oil and gas can arise when gas prices surge or supplies dwindle.
Fertilizer manufacturing facilities are compelled to cut back on their production. A decline in fertilizer output worldwide will have a direct effect on farmers’ finances. This shortage of fertilizer heightens the risk of black market activities, forcing farmers to pay inflated prices, which disrupts their entire crop budget.
Threat to food security
This crisis won’t just be limited to fertilizers. It could gradually jeopardize food security overall. If farmers don’t receive fertilizers at the right time and at the right price, yields will decline, and grain prices will rise in the market. To avoid this, it’s time to reduce our dependence on chemical fertilizers and adopt alternatives like nano urea or organic fertilizers. The government must also work swiftly to establish buffer stocks and alternative trade routes to ensure that our farmers don’t suffer losses due to this global market turmoil.
DAP has increased to a range of $920 to $930 per tonne
As per report, Indian fertilizer companies have finalized agreements to import around 1.5 million tons of DAP for the Kharif season. Sources reveal that the global price of DAP was between $720 and $730 per ton in February, but it has now surged to $920 to $930 per ton. This indicates an approximate 30% rise in import costs. Additionally, the strengthening of the dollar against the rupee is compounding the issue.
The cost of urea has more than doubled since the war
Moreover, the importation of urea, which is the most commonly used fertilizer in agriculture, has seen a significant price hike. India has secured agreements to import about 2.5 million tons of urea at prices ranging from $935 to $959 per ton, a stark contrast to the $435 per ton prior to the Iran war.