In an April 7 blog post published by the International Food Policy Research Institute, or IFPRI, agricultural economists Shawn Arita and Joseph Glauber argue that the current Iran crisis is affecting global agriculture mainly through fertilizer and energy markets, not through a direct disruption in grain supply. That is keeping the risk of an immediate food price spike contained, even as input costs rise and market uncertainty deepens.
The latest analysis from International Food Policy Research Institute (IFPRI) suggests that the current Iran crisis is not, for now, creating the conditions for another major global food price surge. The main pressure point is fertilizer, not grain. More than a month into the disruption, urea prices had risen by about 40 percent, while wheat and maize prices were up only around 6 percent, soybeans less than 3 percent, and rice prices had declined.
That is an important distinction. In earlier food crises, grain, energy and fertilizer prices tended to rise together. This time, IFPRI argues, the market is reacting differently. The geopolitical shock is real, but several of the factors that usually turn a supply scare into a broader food inflation cycle are not in place. Global wheat stocks are still relatively comfortable, soybean stocks are near their long-term average, and rice stocks remain well above the levels seen during previous crises.
Conditions present during major agricultural price episodes (Search: IFPRI)
The article compares the current situation with 2022, when the Russia-Ukraine war hit both grain and fertilizer trade at the same time. That is not the case now. Gulf countries are not major grain exporters, but they are major fertilizer suppliers. Saudi Arabia and Qatar play a key role in global urea, ammonia and phosphate markets, and Saudi Arabia alone accounts for about 55 percent of US ammonium phosphate imports. With cargo movements through Hormuz disrupted and some producers declaring force majeure, the first and strongest effects are being felt in input markets.
That matters because fertilizer costs are rising at a time when crop prices are not especially strong. IFPRI notes that maize prices, at roughly USD 155 to USD 165 per tonne, are around 40 percent below 2022 levels, while diammonium phosphate prices at USD 700 to USD 750 per tonne are much less affordable in that environment. In practical terms, farmers are facing higher production costs without the support of a strong crop market.
For the grain trade, this creates a more uneven kind of risk. The problem is not an immediate shortage of wheat or maize on the world market. The problem is that higher fertilizer, energy, freight and insurance costs can gradually feed into production decisions, crop input use and, later on, yield potential. That risk is especially relevant for lower-margin producers and import-dependent regions, where cost inflation can quickly turn into supply vulnerability.
DEMAND-SIDE SUPPORT IS WEAKER THAN IN PREVIOUS CYCLES
IFPRI also points out that demand conditions are not as supportive of a major rally as they were in past cycles. China is no longer expanding imports at the same pace, and the old demand boost from US ethanol growth is no longer a major market driver. The US dollar also remains relatively firm, which tends to limit upside in dollar-denominated commodity prices.
Another issue the article raises is policy. In earlier crises, export restrictions on grain often made the situation worse. This time, the same kind of tightening is happening more visibly in fertilizer. China’s urea exports, for example, have dropped from about 5.3 million tonnes in 2021 to below 300,000 tonnes in 2024, sharply reducing the room for alternative supply just as Gulf trade is disrupted.
The grain market is not in the kind of panic seen in earlier food crises, and the fundamentals do not yet support that kind of move. But the cost side of agriculture is once again under pressure.