Odd Lots - War in Iran Is Creating a Fertilizer Crisis Like Never Before

Episode Date: March 11, 2026

We all know that the war with Iran has sent oil prices spiking. But it’s also pushing up the cost of all sorts of chemicals, including fertilizers like urea, ammonia and other nitrogen products that are essential for food production. This is all happening at the worst possible time — just before the spring planting season, when fertilizer is most needed. And while farmers have seen higher spot prices for things like urea before, notably back in 2022, there are already signs that this crisis might be worse. So how is fertilizer actually made? And what do higher fertilizer costs mean for farmers and for food prices? On this episode we speak with Alexis Maxwell, senior analyst on Bloomberg Intelligence's agriculture team.Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

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What time of year? Yes, really? What time of year do you think would be the best time to actually do it? You know, I haven't thought about this before, if I'm being totally honest. You're not sitting at home thinking about if you were a Roman general at all hours of the day? I'm the one guy who doesn't think about stuff like that. I don't know much about Rome. Go on.

Okay. So for much of human history, if you were going to go to war, you would try to avoid certain times of year. And those times were generally the spring sewing season and the fall harvest. And there's two reasons you would do that. One is because a lot of your soldiers are actually farmers. They're part-time soldiers. So their day job is farming. And the second one is you don't want to completely disrupt your food supply, right?

That makes a ton of sense. hadn't thought about that, but yes, it makes a ton of sense. All right. So fast forward to 2026, and we've clearly forgotten much of human history because we have a U.S.-Israeli war against Iran that is coming at perhaps the worst possible time in terms of agriculture. You know, again, I hadn't thought about this at all. So I did learn over the last week, you know, when I think about the shutdown of the Strait of Pormuz and so forth, obviously, I think.

oil and energy, I have become aware, through your writing and others, that it's also a major choke point or major throughway for related foodstuffs, including fertilizer. I had not heard anything about the timing element, however, until you just brought it up just now. Yeah, so everyone's getting ready for spring planting at the moment. So this is precisely when you theoretically would be using a lot of fertilizer. And just in the past week or so, we've seen prices for urea, which is, you know, one of the, I guess, most popular types of fertilizer. Those have shot up like 25%. Yeah.

It's also fascinating to me. I didn't know this, but we have all these different types of urea. So you have Egyptian granular urea, New Orleans urea. We're going to talk about all of it. I've wanted to do a fertilizer episode for a long time. I want to talk about what's going on with the Moroccan fertilizer industry as well. But I am weirdly excited to be talking about urea today. I'm looking forward to it. Let's do it.

All right, and we have the perfect guest. We're going to be speaking with Alexis Maxwell. She's an analyst on the Bloomberg Intelligence Agriculture team, and she's been writing a lot about this. So, Alexis, thank you so much for coming on all thoughts. Oh, thank you for having me. Is that framing correct? Is this kind of not a great time slash the worst possible time to be driving the price of fertilizer up? Yeah, definitely.

I couldn't think of a worst time to have a supply size. shock and resulting surge in fertilizer prices for farmers effectively just about everywhere. Second quarter is the timeline when the Northern Hemisphere starts their planting season. What is urea? Yeah, so urea is the most commonly used form of nitrogen. Crops are going to demand a variety of fertilizers, but the big three that you have to use are going to be your nitrogen, phosphate, and potash. And in the industry, we call it your NPKs. Urea is a form of nitrogen. I think about this like a step ladder. If you want urea,

the way that you get it is by starting first with natural gas. You crack it into ammonia, and then you run another chemical conversion on it, and you turn it into a granular product that is easy to apply, easy to transport, and is about 46% nitrogen. And for those of you who've never applied fertilizer or planted crops, you've probably bought some flowers at some point in your life. And you get a little packet that has some white crystals in it, you're going to have your rea in there. It's kind of your flowers grow.

I don't know that. That's interesting. Okay, so one thing I know about fertilizer, other than most of it smells pretty bad, But you always hear this thing about the Haber Bosch process and how the guy who basically, I guess, invented the way we get fertilizer nowadays is responsible both for a massive boom in the human population because everyone gets to eat more, but also responsible for a lot of death at the same time. Can you talk about, I guess, the origins of all of this? Yeah, I think I'll call it one of the greatest paradoxes of humanity. Tracy, I can't think of an invention that on one hand is more responsible for billions of lives,

but also at the same time generates a product that is used as a weapon of war. Some people will tell you, you know, with the global population, just over $7 billion, about half of the people on the earth today are here because of conventional fertilizers. If we were to, let's just say tomorrow, stop using conventional fertilizer, and we converted everything back to organic, and we farmed every single acre of arable land out there, they say that the Earth could really only support a population of about 4 billion people. So conventional fertilizer is, I think, the most important invention to the most number of people on this planet. So, okay, explain to me, so urea comes from, it's downstream from natural gas. And so explain to me, like, what happens, like, why not ship the gas? I mean, right now nothing is shipping, or very little is moving through the straight. But why is the process such that the first step, the transformation of natural gas to urea happens at the source rather than later down somewhere else in the supply chain? Yeah, so you'll find nitrogen fertilizer plants will often be co-located with natural gas because to ship natural gas, you have to chill it to very low temperatures, and it's very expensive

to move it. In contrast, urea is, it's a granular, you can ship it as a bulk commodity item. It's much cheaper to do it that way, and you can reach a vast number of people. you'll find urea plants around the world but most of them are really located in places with low-cost gas because this is a competitive commodity industry so you'll see these plants in places like russia the middle east the united states and china yeah it's it reminds me a little bit of like aluminum like here is this thing that it's like okay you can ship it anywhere in the world it's a lot easier to ship aluminum than it is to transport electricity via batteries. So you have the

aluminum processing co-located where you have cheap electricity and then, of course, it's sort of trivial to move it elsewhere. How much of the world's urea is in conflict-affected regions right now? I just want to add one thing, too, about the urea and why we ship it. It has a very strong seasonality. So, you know, when you run a large chemical manufacturing plant, you want to capture the economies of scale, and you want to run your plant 365 days a year. But the problem that we see in the fertilizer industry is that farmers only demand urea at a very short period of the year, let's just say like two months of the year. So that puts these manufacturers in its sort of classic snake and egg supply chain problem. What do you do with the material the rest

of the year? So it's much easier to chip it out than it is to store it and keep it on hand for farmers 10 months out and to take that price risk. Oh, wait. Now I'm really interested. How storable is urea actually? Because I think about those little packets, they seem like they could last for quite a while. Yeah, I don't assume they last a while. Yeah, if you have urea and you can put it in a warehouse and you can have it covered from the rain and possibly other elements, you can probably keep it on hand for at least a couple of months, probably three, four, five months. However, you know, have a warehouse, the way that you really maximize the value of a warehouse is by turning the

inventory in your warehouse and selling that. So when you put urea in a warehouse, you're taking on price risk over the period that it will sit in storage, and you're not using your warehouse for what it's really designed for. So a lot of what we see with these urea facilities, it's make and ship. There isn't a strategic reserve of urea the same way that we We would have it like in oil, for example, which is partially why this crisis is really compounding for urea at this time of year. We don't have significant storage to replace what we're losing in the Middle East. Now the Middle East, if we look at the countries that are located along the Persian Gulf,

about 45% of the world's tradable urea comes from the Middle East and about about 20% of the American Gulf. comes from along the Middle East as well. So if you are in the business of trying to procure a replacement for what we've lost in the Middle East, there's not really a good next best alternative at this point in time. You could try going to Russia to procure materials, but a lot of the West has sanctioned Russia and their fertilizer products. You could try going to China, but China has an export ban currently on their Eurozone,

area fertilizers, and that's done to protect their domestic industry and their farmers. And that really kind of leaves you left over with places like Egypt or maybe the United States. So is most of the urea from the Middle East? Does most of it go into Asia? So the Middle East is a great supplier for urea. They ship effectively everywhere. Every single day they're in the market. You know, a urea plant in the Middle East, just to keep their inviative.

inventory sort of in balance. A lot of these producers are loading one vessel and shipping it every single day. And so where the shipments go from the Middle East depends on what time of year it is. So when farmers are demanding product like European farmers or American farmers in the second quarter, you'll see more of the Middle Eastern Eurea go there. But in the second half of the year, you're going to see a lot more of the Eurea move to places like India and Brazil, places that have a flipped season to the northern hemisphere and plants at a different time. Okay, this is my chance. What's the deal with fertilizer in Morocco? Because I remember when I was in Abu Dhabi, there were a lot of, you know, big national companies that were very excited about

striking some sort of fertilizer deals with Morocco. What's going on there? Yeah, so Morocco is among the world's, one of the world's largest producers of phosphate. It's so, Phosphate is one of those critical NPK nutrients. Morocco is expanding their phosphate production and their low cost. And because of their location in Africa, the relatively cheap freight to get it to move around the world. I think of phosphate to the Moroccan economy, a little bit like oil to the Saudi economy.

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So if I'm looking at a 10-year chart of, back to Egyptian, but Egyptian urea prices, they soared to over $1,100 a metric ton in the wake of Russia's invasion of Ukraine. That peak looks like around spring, April, 2022. They got down to about a little under $300 a metric ton in 2024. They're close to 600 now. Before we get to the effects of what 600 a ton urea, what the impact of that is, what was the impact on the 2022 price spike? What were the domino effects of that massive surge? Yes, so the 2022 price surge was really two supply-side shocks.

In 2021, China started their export ban on urea and phosphate fertilizers. And the importance of China to the fertilizer market, it really cannot be overstated. So China is the marginal producer for urea and phosphate. So generally speaking, when China is exporting fertilizers, prices globally will tend to fall. And when China is out of the market, prices rise to the next level of production costs. And so in September of 2021, when China slammed the door on exports, the world had really scrambled for alternatives to supply. And then when we had the Russian invasion into Ukraine in the first quarter of 2022,

we saw fertilizer prices spike on top of that because the world was unclear about how we could source fertilizers from Russia. So Russia is a high-volume exporter. They're a low-cost producer. And Russia also is probably really the only country. that will do high volume exports of nitrogen, phosphate, and potash. You name the flavor of fertilizer that you want, you can get it out of Russia. And so there was just this general surge in the industry

to try to find an alternative. And I mentioned earlier that when we took China out of the market, fertilizer prices had to go above the marginal producer level production costs in China and bid in new supply. And the way that the nitrogen cost curve is oriented, that meant the world had to go to Europe to find new sources of nitrogen and turn those plants on in order to meet demand. Well, at the time, the price for natural gas in Europe, which is the feedstock for ammonia and then eventually urea, was surging over $60 per MMBTU. And so if you wanted to run the economics of what it costs to make ammonia, it's a very easy back of the napkin math to do this. It takes about 34 to 36 MMBTOs of natural gas to produce one ton of ammonia.

But if we needed 36 MMBTOs to make ammonia and I'm paying $60 for natural gas, I'm looking at an ammonia price that's over $2,100. So if I'm a farmer in the U.S. right now and I am getting ready to plant spring weeds, what am I doing when I, you know, I'm, hopefully I have a Bloomberg terminal. That would be nice as a farmer, but I'm looking at the chart of the price spike in something like urea. What am I thinking to myself in terms of offsetting this cost? Yeah, so farmers will have probably four options or decisions that they can make at this point. And I will tell you, I do think that U.S. farmers are probably best poised to weather this storm compared to farmers in, let's say, the European Union or India at this point. If you're a farmer, what you can choose to do is you can reduce your application rates. You can switch what you're planting, let's say from corn to shift into soybeans, which demands significantly less amounts of nitrogen.

The third option is, as a U.S. farmer, you can switch among your nitrogen products, and then the last worst option is just not plant at all. And what do you see happening right now? There was a headline, by the way, earlier that I saw where already senators in D.C. are hearing from farmers talking about wanting to get relief, from wanting to get some sort of bailout. It's not as extreme, but, you know, the price is to some extent global. And so we see the New Orleans price. that's shooting up too, that's at 570 pounds at 10.

Yeah, so this is really all, you know, as in economics, this is all really relative. So I want to just give some context as to why, even though, you know, Egypt, Urea is, I think today, close to $700, still below, about one third below the 22 price spike, what's happening now is probably the worst it's ever been for farmers looking to buy nitrogen. and we measure that in the industry by just looking at the urea price to the crop price ratio. Oh, that makes sense. Yeah, it's all relative. You know, that last incremental ton of nitrogen is going to give you a yield bump.

So you kind of want to run the economics and the agronomy on if I spend a little bit more on my nitrogen, am I going to get that yield bump? So I need to know what the price of the commodity is. And if I were today to look at the urea, to corn price ratio? Yeah. Last week it was at 124. The highest it's ever been is 143.

And with the price surge that we're seeing again this week, I expect, you know, once we have prices settle on Friday, that we'll set a new record for the most expensive that Eurea has ever been to a corn farmer. Tracy, this is going to make a good chart in the newsletter because I just charted it as our guest was talking about it. And yes, we are very close to that. So even though on the pure urea price, not necessarily at all-time highs, but relative to corn, we are very close to all-time highs there.

Yeah, I think this is important. So the other thing I wanted to ask is you've heard, I mean, it's a running joke on this show that farmers are always complaining about something. But one of the things they've complained about is fertilizer prices even before, you know, the Iran situation, even before the 2022 price spike. some grumbling. What's going on in the structure of the market that seems to make fertilizer prices an issue for the farming industry? Yeah, so the farming industry in the U.S. right now is, margins are incredibly thin. If we look at, like, for example, the difference between what

farmers pay for their inputs versus the prices that they get for their agriculture products, it hit a record negative spread in January. There's a lot of price pain out there in the U.S. farm economy, and we're seeing Chapter 12 bankruptcies. Chapter 12 is a specialized form of bankruptcy for farms and fisheries starting to pick up here in 2025. So I'll say the economic pain is real. And if you look at fertilizer prices, they tend to cycle, just like all other commodities. the last time we really saw an amplified price cycle for fertilizer was 07 and 08, kind of in line with the financial crisis. But what makes this different is, in contrast to, I think it was more of a demand cycle in 07 and 08 that caused the amplification. But this time, this is a supply-side crisis.

You know, I think about this as like a three-legged stool. We've taken China out of the market. Russian supply seemed difficult to acquire. And now you throw in, we have this global choke point for urea in the Strait of Hormuz, where almost, let's say, 40% of the nitrogen that we need is you can't get it. Those are the supply-side drivers that are keeping fertilizer prices at mid-cycle level for much longer than many in the industry would have expected when this started in 2020, 2021. When you say you can't get it, do you foresee a situation where you can't get it at any price, basically?

Oh, Tracy, my e-com professor would roll over in his grade if I ever said that, but I'll just kick it back to, you know, applying fertilizer, you know, you have to do it when the crop wants it. So that's really pre-planting and during the early emergence of your crop. It's, you know, having a kid and needing to feed them, you know, vitamins at a certain point in their, as they start to grow. That's right. Everyone knows after they're three years old, you don't have to feed them anymore. They offend for themselves. They're good. They're good at that point.

Yeah. You're on your own. Go fix me a hot dog. Yeah. So if you miss the urea application window, it's really difficult to go back or nearly impossible to go back and apply nitrogen. You just will have to take the yield penalty. Yeah, it's interesting, you know, again, just looking at the pure urea chart, you mentioned, you know, some of the legs of the stool have already been kicked out. So the lowest it got after the invasion of Ukraine was still not anywhere close to, say, pre-Ukraine or pre-pandemic levels at all.

So we've shifted into a higher regime generally, even before the war in Iran. So when we're talking about oil markets, we know that there's infrastructure that's already been destroyed. so even if the Strait of Hormuz is opened in short time, there's infrastructure that's been damaged. And of course, we know wells have been shut in because they're running out of storage space for oil. What do we know about the fertilizer infrastructure period, you know, the damage that's been done? And so, like, you know, say there's a miracle and suddenly things started flowing through the Strait of Hormuz immediately tomorrow, which doesn't seem very likely. What do we know just about the condition of the infrastructure and how long it would take things to get moving again? Yeah, that's a great question.

I think we'd be looking at least two weeks before you'd start to see fertilizer come out along the straight again. We haven't seen much in the way of these facilities being attacked directly. And so a lot of the manufacturing sites have shut down preemptively. And so then to restart a fertilizer facility, it's going to take two or three days of a natural gas burn just to get the plant to where it is producing urea again. And then you have to load a you have to bring a vessel in. You have to load the vessel. You have to get it back out. And nobody at this point has any clarity on when the straight reopens.

Who gets first priority? Is it oil or is it fertilizer? I'm just going to guess oil. We'll get the priority. So, you know, once this has a clear end date, at least two to three weeks before we see fertilizer come back out of the middle. Eating well shouldn't be complicated, but somehow it turns into recipes, prep, cleanup, and half your Sunday gone. Factors solves all that. These are fresh, ready-to-eat meals designed by dietitians, delivered to your door, and ready in just minutes.

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which is we are recording this on March 10th, and who knows what will happen by the time this episode comes out. But how do you anticipate this actually feeding into food prices? I mean, this is the big question. So people use less fertilizer, you get lower yields, supply goes down, I assume prices go up, or you have farmers that continue to use fertilizer, but it costs them a lot more, and so they have to offset it with higher prices, and prices still go up.

Yeah, I'll think about this in sort of a time frame of when we might start to see some of this flow through the system. It's the relationship between fertilizer prices and when that piece of food arrives on your dinner plate, there's a lot of decisions and price inputs how that all works. So what we're thinking right now is we'll see. In fact, the market's calling for a reduction of nitrogen application rates here in the U.S. And so I'm looking at what I might expect for U.S. corn yields to be this year. Last year, we had a yield of 186 bushels per acre.

I'm thinking at this point that we could see the U.S. corn yield be 182 bushels. But again, we still have a long road of production potential ahead of us. A lot of the corn yield depends on what the weather looks like during the summer season, how soon farmers can get out there in plants. And then also, you know, the thing about commodity prices is they'll snap up and then at these levels, you know, I mentioned earlier, this is a record, we are expecting to see a record urea to corn price ratio. That will destroy a lot of urea demand.

And so if the straight reopened next week, you know, you would see urea prices sort of snap back to before. Maybe you would see them snap back to where they were before this war. So thinking about like food production and the relationship with this, so we're planting now in the spring. I'm expecting lower yields for corn, for example. That corn isn't going to get harvested until probably about September or, October of this year. And then it'll have to move to, let's say, a milling location or an ethanol plant. Lower yields is going to be something that will move through the food production system over a time span of about a year or two. All right, Alexis, thank you so much for coming on

op-lots and finally letting us talk fertilizer. I wish it was under better circumstances, but this was absolutely fascinating. Thank you. Thank you for having me. It was my pleasure. Joe, I'm never going to look at one of those little packets that comes with flowers, fresh flowers, the same way again. No, I had never used this. No, maybe I put them in the water. I had no idea. But no, that was super interesting. And the sort of the money chart for me was really seeing that urea to corn futures ratio, which is very clean and very elegant.

And you can just see farmers are how much stress they're already feeling and then how much additional stress they're seeing just in the last weeks. But there haven't really been good conditions for fertilizer costs really since the pandemic. It has seemed like in particular since the war in Ukraine started, this structural shift in supply. Yeah. So there are a few things that stood out to me. So number one, tough times for farmers. And it seems like in all these instances, the pain usually falls on the smaller scale of farmers versus the big ones. I imagine in this particular situation, if you're a huge farmer out in Iowa or wherever,

you probably have enough scale to ensure that you're still getting some sort of fertilizer. Those business relationships are going to help you versus, say, a small-scale farmer who's making these decisions on an individual basis. The other thing that stood out to me, and we've heard this before in our oil discussion with Rory Johnston, this idea that, well, again, the big fare better, so the U.S. is probably going to make it out better than, say, in India, which means gnat gas from the Middle East in order to make its own fertilizer. And then the other thing that stood out to me was that idea of storage.

So we know that in commodities, storing something can cost a lot of money. And it seems like fertilizer in particular hasn't really been stored in the way maybe some other metals have been because, you know, most of the time, you only need it, I guess, twice a year, you know, once in the southern hemisphere and once in the northern hemisphere. Yeah, it does not seem as though the supply. chain has been optimized for sort of long-term accumulation. There aren't strategic urea reserves the way there are with other commodity reserves. It's really going to be a mess. And, you know, when we talk to Rory Johnston about energy and, you know, again, in the U.S., it's going to show up mostly at higher

prices in the pump. Elsewhere, it's going to show up as literally an unavailability, a reduction in the amount of energy, the amount of oil that's capable. It's really disturbing to think, like, yeah, I mean, no one wants to pay higher groceries, but it's a lot better than outright family, which is the risk when you do such a massive shock to food supply. Yeah. All right. Shall we leave it there? Let's leave it there.

This has been another episode of the Oddlots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wisenthall. You can follow me at the stalwart. Follow our producers, Carmen Rodriguez at Carmen Armid. Dash Obenet at DashBot and Kail Brooks at Kail Brooks. And for more OddLod's content, go to Bloomberg.com slash OddLots.

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