If the Iran war continues unabated, with the Strait of Hormuz blocked to all shipping traffic, the world could possibly be heading towards a “global agrifoods catastrophe,” the UN’s Food and Agriculture Organization is warning.
“The clock is ticking,” FAO chief economist Maximo Torero said in a recent report.
Ships carrying critical agricultural supplies must start moving through the Strait of Hormuz as soon as possible to ward off the risks of a dangerous spike in food price inflation later this yr, the FAO warned.
If the U.S.-led war in Iran continues, the protracted conflict “could trigger a cascade of effects much like the aftermath of the COVID-19 pandemic crisis,” in keeping with the FAO.
“We’re in an input crisis; we don’t need to make it a catastrophe,” said David Laborde, director of FAO’s agrifood economics division.
“The difference is dependent upon the actions we take,” Laborde added.
The “input crisis” refers, specifically, to the dwindling global supply of fertilizer.
The war is straining the availability of agricultural inputs, said University of Guelph food economist Mike von Massow.
“A major volume of fertilizer comes through the Strait of Hormuz to the remaining of the world, particularly nitrogen fertilizer, which is made with natural gas,” von Massow said.
While estimates differ widely, the FAO says the exports of 20 and 45 per cent of all of the world’s key agrifood inputs depend on sea passage through the Strait of Hormuz.
The FAO said that while global food prices were relatively stable in March due to ample supplies of most food commodities, especially cereals, “pressure is rising in April.”
The pressure will only intensify if the conflict continues into May, the report warned, as “farmers will make decisions” on whether to change to a distinct crop or adapt as fertilizer supplies run dry.
“Identical to we’re seeing some countries right away having to ration gas since it just isn’t coming through the strait, we are going to see some farmers not have any fertilizer in any respect. Then yields will go down, particularly in developing countries,” von Massow said.
“That would mean famine,” he added.
Why is fertilizer so vital?
The fertilizer shortage is putting the livelihood of farmers in developing countries — already troubled by rising temperatures and erratic weather systems — further in danger, and could lead on to people in all places paying more for food.
The poorest farmers within the Northern Hemisphere depend on fertilizer imports from the Gulf, and the shortage comes just as planting season begins, said Carl Skau, deputy executive director of the World Food Program.
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“Within the worst case, this implies lower yields and crop failures next season. In the perfect case, higher input costs can be included in food prices next yr,” Skau said.
Nitrogen and phosphate — two major fertilizer nutrients — are under immediate threat from the closure of the Strait of Hormuz.
Supplies of nitrogen, including urea, probably the most widely traded fertilizer that helps plants grow and boosts yields, are the toughest hit due to shipping delays and the soaring price of liquefied natural gas, a necessary ingredient.
The conflict has restricted about 30 per cent of world urea trade, said Chris Lawson of CRU Group, a London-based commodities consultancy.
In keeping with a 2022 report, two-thirds of the world’s calories come from 4 staple foods: wheat, rice, maize and soybeans. No less than 72 per cent of those crops are grown in only five countries: China, america, India, Brazil and Argentina.
This raises fears of world food insecurity when a vital channel just like the Strait of Hormuz is choked.
Some food producers may start to limit exports as they struggle to provide enough food for their very own populations, von Massow said.
“We saw it in the course of the war in Ukraine. When there was less wheat available, countries like Argentina and India either curtailed, put quotas on exports or put a tax on exports,” he said.
In 2023, when India limited rice shipments to manage domestic prices, it had an impact on food prices globally.
Would a fertilizer shortage hurt Canadians?
A pointy jump in fuel and fertilizer prices has Canada’s agriculture producers engaged in a dear game of likelihood.
Prices for diesel and fertilizer have nearly doubled for the reason that war involving the U.S., Iran and Israel, because the stalemate has choked vital oil and gas shipments through the Strait of Hormuz.
Although North America’s farmers could also be shielded from the worst impacts for now, said von Massow.
“Fortunately, most farmers in North America pre-book their fertilizer in the autumn, so they may not be as affected this yr. But in some places, if fertilizer prices go up significantly and there wasn’t pre-booking, they may in the reduction of on fertilizer, which could harm yields,” he said.
But higher global fertilizer prices will even eventually hit Canadian farmers, he added.
Canadians are already grappling with higher food prices. Last week, Global News reported that a few of Canada’s largest food suppliers informed their grocery retail clients that they may start charging a fuel surcharge as fuel costs weigh on them.
Food prices in Canada soared in March. The costs of food purchased from stores rose by 4.4 per cent in March, in comparison with 4.1 per cent in February.
Fresh vegetables saw the steepest increase, with prices for fresh vegetables rising 7.8 per cent in March. This was a major increase in comparison with February, which barely saw any increase in the worth of fresh vegetables (0.5 per cent).
That is the most important increase in the costs of fresh vegetables since August 2023, once they grew by 8.7 per cent.
— With files from The Associated Press and The Canadian Press