Crop Comments: Strait of Hormuz Hogs Center Stage … Again
In 1972, then-President Richard Nixon expressed great worry that most of America’s supply of imported oil could become quite vulnerable to a strangle-hold focused on the Strait of Hormuz. Such a constriction could be enacted by our adversaries in the Middle East.
The Strait of Hormuz is approximately 21 miles wide at its narrowest point, between the coasts of Oman and Iran. While the total span is small, the shipping lanes for inbound and outbound traffic are even narrower, with each lane being only about two miles wide, separated by a two-mile buffer.
Nixon’s worry became reality in 1973 with the oil embargo enacted by OAPEC (Organization of Arab Petroleum Exporting Countries). That embargo spawned the first energy crisis, complete with car lines at gas stations: owners of specifically license-plated vehicles could buy only seven gallons at a time on specific days, etc.
Fast forward to late February, when we saw limited (as I write) military action between Iran and the U.S. Transportation of Middle East crude oil through the Strait of Hormuz was becoming very sluggish. Artificially reduced crude oil supply, destined for the U.S., forced oil prices past $100/barrel in early March for the first time since 2022. This was a result of intensified conflict between the U.S./Israel and Iran. The conflict has targeted energy infrastructure in the Middle East and threatened the shipping lanes in the strait.
With very few exceptions, disruption of energy supply/demand scenarios rapidly impacts the global fertilizer economic picture. My most informed contact in the fertilizer industry is Jeff Cassim, general manager of Liquid Products in Seneca Falls, NY. With all the excitement in the Middle East energy arena, Cassim made sure I received the most recent edition of his best fertilizer industry periodical, dated March 2.
This particular issue headlined “NOLA [New Orleans, LA] urea skyrockets on Mideast tensions.” That lead-in was followed by the statement, “The price of urea barges surged higher at NOLA over the weekend in response to the conflict between U.S./Israeli forces and Iran because of the risk posed to global urea supplies.” According to the same reporters, “Diammonium phosphate (DAP) re-export at NOLA drove prices higher as traders looked to capture a premium in the global market while the U.S./Israel conflict with Iran unfolds.”
The ammonium sulfate market traded higher in the wake of this conflict, which threatens to tighten global ammonia and sulfur feedstock availability. Ammonia- laden vessels are currently unable to move in or out of this Mideast Gulf because of this conflict. Not surprisingly, most ship owners are avoiding transit through the Strait of Hormuz whenever possible.
Sulfur exports from the Middle East remain subject to delays following the backlog of vessels building up outside the strait since the March 1 attack on Iran. Those attacks were followed by counterattacks on U.S. military installations in the region.
Traveling far across the Atlantic, we see the Canadian firm Saskatchewan Mining & Minerals has acquired U.S. specialty fertilizer and salt business Compass Minerals’ (CM) sulfate of potash production facility in Wynyard (in that province). The transaction occurred because CM considered the asset to be surplus to its portfolio – very peaceful economics compared to what’s happening halfway around the planet.
Now let’s examine some current fertility commodity prices quoted from Cassim’s resources, the most prominent being the Argus Industry Newsletter for March 2. The following values are strongly influenced by the above-mentioned geopolitical facts. These are average values calculated from a range of dollar prices per short ton (2,000#) for the day of the quote. The location of the quote is the freight point of origin nearest the Northeast. In parentheses is that particular commodity’s price year earlier: Urea (Cincinnati) $523 ($455); ammonium nitrate (Mid-South) $415 ($333); ammonium sulfate (Minneapolis) $433 ($478); urea/ammonium nitrate (Cincinnati) $373 ($328); ammonia (Eastern corn belt) $760 ($630); DAP (Cincinnati) $685 ($665); mono-ammonium phosphate (Cincinnati) $720 ($665); muriate of potash (Vancouver) $326 ($271); sulfate of potash (West Coast) $705 ($630); and sulfur (Gulf Coast) $489 ($161).
The sorest thumb here is sulfur, which apparently is hardest hit by the conflicts in the Middle East. Ammonia’s big price hike is supported by demand for ongoing applications in the U.S. southern plains and the Corn Belt as well as the ongoing conflict in the Middle East. The ammonia market anticipates that more suppliers will raise offers as growers in the Corn Belt move closer to direct applications of this crop input.
According to Farm Bureau economist Shelby Myers, fertilizer is a global commodity and can be influenced by multiple market factors beyond the control of U.S. producers. Similar to globally traded non-agricultural commodities, 44% of all fertilizer materials are exported to a different country. This factor has an outsized impact on fertilizer prices, because fertilizer production is not only influenced by events occurring where it is produced or the cost of production in that country of origin. It’s also affected by many other countries demanding fertilizer products, plus transportation services to get these plant foods to their final destinations. And Myers released all this information before the Middle East mess took center stage!
With me sounding once again like a broken record, if ever there was a time to soil test, it’s the present. If too low pH is a factor limiting crop performance, applying lime is always a paying proposition, particular for phosphorus. Raising soil pH from 5.8 to 6.8 more than doubles the bioavailability of this nutrient to plant’s root systems.
Lime costs have increased less in the last 40 years than some of the other crop inputs have increased in the last 40 days. Lime is a domestic input, seldom if ever contacting a barge.
by Paris Reidhead
