The Strait of Hormuz Closure Is Already Hitting Supermarket Prices
Russia's Biggest Black Sea Oil Port Goes Quiet as Drone Threat Grows Despite headlines about factory closures… Haley Zaremba is an energy journalist and researcher with more than a decade of professional experience covering global energy systems, land and natural resources, and… Crop prices just hit a three-year high, indicating major downstream pain soon to come at the supermarket.
There are two major factors leading to high crop prices and a potential global food crisis: heat waves and intensifying conflict in the Black Sea threatening to disrupt global grain trades, and volatility in fertilizer markets stemming from the war in Iran and the closure of the Strait of Hormuz.
The International Food Policy Research Institute (IFPRI) is referring to the unfolding situation in fertilizer supply chains as an “input crisis” that could soon develop into a full-blown food crisis, especially in poor countries.
Synthetic fertilizer is a petroleum product, and markets for fertilizers and fertilizer components like urea and phosphate are therefore extremely sensitive to oil shocks and supply disruptions.
About one-third of the world's urea imports come from the Middle East.
Since the Strait of Hormuz closed to shipping traffic earlier this year, 3.9 million tonnes of urea exports, or about 30 percent of the region's annual fertilizer exports, have been effectively blockaded.
Fertilizer prices spiked in the months after the Strait initially closed at the end of February, but had since stabilized.
However, prolonged conflict in the region threatens to create sustained volatility in the market as factories cut back on fertilizer production and stockpiles threaten to spoil.
“Most production facilities in the region continue to operate at reduced rates to prevent excessive stockpiling,” IFPRI reports.
“While urea can generally be stored for several months, high temperatures and moisture can damage its quality.
The risk of substantial fertilizer supply shortages is rising as the conflict prolongs and the Strait of Hormuz stays closed.” SetOilPrice.comas a preferred source in Googlehere.
In addition to the supply chain disruptions in the Middle East, Ukrainian ports in the Black Sea are now the site ofrenewed conflict, causing major supply chain disruptions for staple grains.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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