Iran war spreads to Latin America with commodities crunch

Soaring fertilizer prices sapping demand for the region's farm exports

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Yara International’s fertilizer facility in Porsgrunn, Norway, is its largest and includes Europe’s biggest green hydrogen plant. Photo: Yara International ASA.

(Michael Molinski is a senior economist at Trendline Economics. He’s worked for Fidelity, Charles Schwab and Wells Fargo, and previously as a foreign correspondent and editor for Bloomberg News and MarketWatch.)

SAO PAULO, Brazil (Callaway Climate Insights) — The Iran war and the closure of the Strait of Hormuz has created a double-edged sword for Latin American fertilizer companies and corn and grain producers, a problem growing by the day.

On one hand, fertilizer producers ranging from Brazil to Chile to Argentina have seen their goods shoot up in price as the world reaches out to Latin America to fill the gap from fertilizer producers from the Persian Gulf and delays on shipments from other countries that use the Strait of Hormuz.

It has also caused a shortage of urea, a key high-nitrogen ingredient in many of the fertilizers produced in Brazil and elsewhere. ​Before the war, an estimated 41% of Brazilian imports of urea passed through the Strait of Hormuz, data from Agrinvest showed.

On the other hand — and more importantly — the delay has created a bottleneck for many of the massive shipments of corn and grain that Latin America ships to the Persian Gulf. And down the road, rising fertilizer prices are likely to result in higher prices for agricultural products like corn and grain. Those grains need fertilizers to grow.