Feedstuffs in Focus
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Feedstuffs in Focus
Ceasefire does little to ease fertilizer market woes
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A ceasefire can change the mood overnight, but it cannot instantly move ships, lower insurance, or restore trust in a trade lane that suddenly feels risky. We sit down with Chris Vlachopoulos, fertilizer specialist and senior editor at ICIS, to unpack what the U.S. and Iran two-week ceasefire really means for the fertilizer market and for anyone watching input costs ahead of planting season.
We dig into the disconnect between improved sentiment and stubborn reality: reports of no inbound traffic, significant volumes of fertilizer stuck in transit, and freight and insurance premiums that keep pressure on delivered prices. Chris explains why urea reacts so violently, how the market can change fast, and why a “return to normal” is hard when logistics remain constrained. We also map out which products carry the most exposure, from urea and ammonia to sulfur, sulfuric acid, and the knock-on impact those feedstocks can have on phosphate fertilizer pricing.
From there, we look at who feels it first and longest. India’s seasonal demand, Australia’s delayed shipments, and Europe’s demand destruction each tell a different story about availability and affordability. We also talk through what higher fertilizer and fuel costs can force at the farm gate, including crop pivots, reduced applications, and the risk that higher production costs eventually show up in consumer food prices.
If you want a clear, practical read on fertilizer prices, global supply chains, and agricultural market risk, press play, then subscribe, share the episode, and leave a review. What signal are you watching next?
Ceasefire News And Market Mood
SPEAKER_01News that the U.S. and Iran had struck a two-week ceasefire this week sent waves across the agricultural sector and left many wondering what's ahead for the fertilizer markets in the immediate term. Welcome to Feedstuffs in Focus, our podcast taking a look at the big issues affecting the livestock, poultry, grain, and animal feed industries. I'm your host, Sarah Muirhead. This episode of Feedstuffs in Focus is sponsored by United Animal Health, a leader in animal health and nutrition. You can learn more about United Animal Health and how they're working to advance animal science worldwide by visiting their website at unitedanh.com. Joining us to discuss the ceasefire and how it's influencing the fertilizer market is Chris Lahukalis, fertilizer specialist and senior editor with ICIS. So, Chris, recognizing that this is an ever-changing situation, how has the recently announced ceasefire impacted the fertilizer markets thus far, if at all?
Prices Firm Despite The Pause
SPEAKER_00Yeah, that's a fascinating question. I think the situation really has stopped the immediate panic and concerns, but really materially, uh, I'm not sure it's changed all that much on the ground or in the waters, I should say. Um the sentiment has really improved slightly, but I think that's an expression of how much people want a solution to be found and how much they really need trust and some element of predictability to be able to function. Uh, but honestly, physical uh logistics are very, very heavily constrained. Uh right now we see, as far as I can tell, no inbound traffic into the strait, and we have a tremendous amount of fertilizers still stuck within the strait, uh, by some estimates, around 900,000 tons of fertilizers. Uh, and of course, we shouldn't forget the um insurance premiums and the all the concerns that uh shipping entities have to deal with that may uh that are likely to remain with us for a while. This this conflict really has sort of taken an element of um predictability that is quite hard to reclaim, from what I can see.
SPEAKER_01If this two-week ceasefire holds, do you anticipate that this will have any short-term impact on prices, or are we going to see those holding pretty steady?
SPEAKER_00Yeah, so I think uh everyone's has seen prices firm so significantly, particularly urea. We've seen uh around a 70% increase since the conflict began. Um, and everyone's that's the first question on everyone's minds, you know, when are prices going back to normal? Uh, with all these constraints that we spoke about, I have to say that steep declines do not seem likely to me. Um, but the rallies that we have seen for products such as urea uh could uh pause, or uh, you know, we could see uh things remain at the uh the level they're currently at. Um everyone is really at a stage where they're just waiting to see. They're they're really just trying to predict the next step. Um, and so especially for products like phosphates, we're seeing a wait and see approach with everyone just very reluctant to commit to anything. Uh, up till now, buyers in uh hubs like India they had reasons for waiting. They had uh uncertainty regarding uh government subsidies, and they had uncertainty regarding, for example, the phosphoric acid price for Q2, both of which now have been resolved. Um, so in theory, we could see some activity for phosphates, and you know, we should remember that India is really heading into caref season. Uh, we're expecting them to really commence buying uh at some point. But the the problem is that you know the physical infrastructure is really not there at the moment. Um, also insurance costs, freight costs, um, those really are in some ways a reflection of the perceived dangers. And if those uh perceived dangers are not going away, then we shouldn't expect those premiums to go away either. Um, so the lingering geopolitical risk, you know, if we've seen disruptions in Saudi Arabia, uh sodium producers have very ingeniously pivoted to shipping product from the west of the country. However, those are limited avenues and those are um uh opportunities that can only ship specific amounts of product, by some estimates, around 100,000 tons per month. Uh, so not really uh anything close to what we used to see before. Um, so to answer your question, if we see the C SPAR extended and we have an element of predictability, uh, the most likely outcome, in my opinion, is that prices stay at current levels for the immediate future. We don't see a steep decline just because those risks are seem to be built in at the moment.
SPEAKER_01Which fertilizers remain the most exposed? Are there certain ones that you're more concerned about than others?
SPEAKER_00Yeah, of course. So uh just by volume, urea seems to be the most exposed product. Um, we we see a tremendous amount of products shipped through the uh strait, around 1.5 million tons per month from uh the Arab Gulf and Iran, which of course is a major producer of uh uh ammonia and urea. Um, and this is reflected in the prices, uh, as we mentioned, around 70% rise since the conflict began. And there's a lot of parallels uh that come up when we talk in the market, and uh the closest approximation is really the beginning of the conflict in Ukraine, though we could go into why this is, even though this is the closest example, the situation really is a lot more sensitive to how it was back then. Uh, other products that are um very highly exposed are, of course, ammonia, uh, with um several vessels are still stranded and waiting for resolution, uh, and sulfur and sulfuric acid um are disrupted, not pri not um because of uh uh any changes with regards to sentiment, but primarily because of logistics. Uh, sulfur and sulfuric acid are very interesting products in that they are byproducts of fossil fuels. And we have seen as the planet sort of very slowly moves away from fossil fuels, we're seeing that uh structurally uh there's less product available, and uh disruption such as this really brings us into the foreground. Uh, and of course, sulfur and sulfuric acid are very important feedstocks for phosphates, um, which uh are expected to remain firm primarily, like I would say primarily through sulfur, but also you know, concerns about availability and shipping and all those concerns.
SPEAKER_01So if if we see the conflict continue through spring and into summer, which end markets could see the greatest impact?
SPEAKER_00So we're seeing we mentioned already India, uh, which is heading into care season and is building up stocks. Uh, and of course, we have some concerns for ammonia availability for domestic production and urea. Uh, then of course we have Australia, which uh, from what we understand, there's some delayed shipments and reduced availability there right now, uh, in the near term. Uh, of course, then there's other buyers in Europe which for now seem content to defer purchases, but we really are seeing very significant demand destruction there. Um, so those concerns are the primary ones for the market. Um, we do expect to see farmers pivoting to other products like maize um uh or alternative crops just to be able to uh utilize the best as they can or skip application whenever possible when it comes to phosphate, but that option is not always available. And uh so we would see those costs when farmers really are forced to make purchases would be passed on to consumers uh later on. And of course, uh another important consideration is that, of course, the cost of gas, which really comes into everything, and you know, uh I would expect that um consumers uh see those costs in the months to come. So this this really is like a prolonged uh event that we're likely to see consequences, even if things ended right now, even if things ended right this second and there was as fast a return to normality as possible, the effects would be felt for weeks and months to come.
SPEAKER_01Fuel costs are certainly going to hit the farmers as well.
SPEAKER_00Absolutely. Yeah, that is a very significant concern we're hearing. And it it really is baked into every part of the process as well. Yeah, you're very right to point that out.
SPEAKER_01Do you have any particular things that have surprised you in all of this um that you've seen there in the marketplace as a result of the conflict?
SPEAKER_00Um, a few things. One is really how adaptable the market is and how um it it's the market can be very good at you know finding uh solutions to things. For now, that solution in most products seems to be a wait and see cautious approach. Um, we have seen that that is particularly evident for phosphates, for example, where that is an option. There's products where that isn't so much an option, and that would be products involving sulfur, and we have seen uh the emergence of a two-tier pricing structure there, uh, with some industrial applications really outbidding fertilizer demand, which is quite interesting. And I would be curious to see how that plays out in in the medium term. Uh, but that wasn't uh something that we saw before, and of course, it is another concern which uh is hard to see it going away quickly, is really the question of logistics and the element of trust. And you know, once trust is eroded, it's very difficult to get it back. And uh, in order for the market to function, we do need an element of that. And trust manifesting through supply and logistics, it's very difficult to see how some that that is not priced in in some way going forward, considering the the risks or perceived risks uh through the strait. Another element that's been quite uh interesting to see has been the um the speed at which the market has uh uh has reacted, particularly for urea, uh, with that big jump of 70% uh uh following the initial escalation. And um then really we have seen fertilizers being talked about in the mainstream more and more. We have conversations and people become more and more aware of how crucial fertilizers are for our food security, for consumers, which is great. On the one hand, on the other hand, we despite all these headlines, we haven't really seen much move, which is part of the problem. But also, um, people have this cautious approach and ships are physically stuck. So even though prices have jumped, uh, we haven't seen much physically change as yet. And of course, people are concerned about availability and supply and trying to come up with rudimentary plans for the next weeks and months, and that isn't always possible, and that's an element of concern that we see more and more as we speak to the market.
SPEAKER_01Here in the US, we're just going into spring planting. Do you think farmers are are ready to go in terms of having their supplies? I've seen numbers like 20% is you know are the ones that are most at risk of not maybe having the fertilizer they need. Have you seen anything or do you track anything like that?
SPEAKER_00So we're seeing spring demand for the states. Well, we we understand that things are quite a good level. The the immediate needs for spring are covered. Um, some the there have been those who are uh seeking products either for re-export, uh, but uh as far as I can see, this the market in the states is covered for spring, which does come with an element of uh the ability to see them wait and see how things play out.
SPEAKER_01Really depends on how long the conflict continues. Any any final thoughts, key takeaways to uh leave our audience with today, Chris?
SPEAKER_00Something that's been really hardening has been really the adaptability and you know the resilience of the market. And I'm really hoping that a solution is found for the conflict as soon as possible because ultimately, from all the things we've discussed today, Sarah, you and I, really the best determinant for everything, I believe, is going to be the duration of the conflict. Really, that is primarily the most important thing. Uh you know, there's of course the human element to all this, and we all wish to see a speedy resolution to the conflict. But really, the resilience is something that I keep coming back to. And uh fertilizers, uh, products, you know, that build communities, that provide food, that provide security. And it's really heartening to see the industry respond to that um in the manner that they have and uh just be cautious and just wish for the best.
SPEAKER_01Very good. Thank you for sharing your insights here with us today, Chris.
SPEAKER_00It's been a pleasure. Thank you so much for having me.
SPEAKER_01This episode of Feedstuffs in Focus was sponsored by United Animal Health, a leader in animal health and nutrition. You can learn more about United Animal Health and how they're working to advance animal science worldwide by visiting their website at unitedanh.com. I'm Sarah Muirhead, and you've been listening to Feedstuffs in Focus. If you would like to hear more conversations about some of the big issues affecting the livestock poultry, grain, and animal feed industries, subscribe to this podcast on your favorite podcast channel. Until next time, have a great day and thank you for listening.