Rabobank warns global agri-input prices could double as geopolitical choke point tightens; India and Brazil most exposed

In a high-stakes geopolitical scenario with direct implications for global agriculture, Rabobank analysts caution that any closure of the Strait of Hormuz—however temporary—could severely disrupt global fertilizer supply chains and send prices soaring. The findings, published in the RaboResearch Food & Agribusiness report titled “What a closure of the Strait of Hormuz could mean for global fertilizers”, dissect a range of impact scenarios across nutrients, markets, and time horizons, with Brazil and India flagged as the most vulnerable.

Often dubbed a “nutrient highway,” the Strait of Hormuz is far more than an oil corridor. It serves as the primary route for approximately 45 per cent of global urea exports, with significant contributions from Iran, Qatar, the UAE, Bahrain, and the eastern ports of Saudi Arabia. When nearby Oman is included, the concentration of urea-exporting nations exposed to regional tensions rises dramatically. In total, nearly one in every two tonnes of globally traded urea flows through waters now at risk of disruption due to escalating tensions between Iran, Israel, and the United States.

The RaboResearch team models both full and partial closures of the Strait. Under a full closure, urea prices in Brazil could surge by over 100% within three months, with India close behind at 80 per cent, given their combined import demand exceeding 15 million metric tonnes annually. Phosphate and sulfur markets, though slightly less exposed in volume terms, are structurally vulnerable due to their production reliance on sulfuric acid—much of which is downstream of Persian Gulf sulfur trade. In phosphate markets, prices in India and Brazil could still spike by up to 40 per cent, with prolonged fallout expected well into 2026.

The fertilizer implications mirror past price spikes triggered by the Russia–Ukraine war and natural gas crises in Europe, but Rabobank warns the Strait of Hormuz may prove harder to circumvent. Unlike Belarusian potash, which could be rerouted via Russia, the Hormuz route offers fewer logistical alternatives. Saudi Arabia’s growing share of U.S. MAP and DAP imports—now at 30 per cent and 50 per cent respectively—underscores the risk of infrastructure concentration on the Persian Gulf side rather than the Red Sea.

The immediate pricing volatility would coincide with seasonal import peaks in Brazil (June–November) and India (late monsoon to Rabi sowing), further compounding supply chain fragility. Brazil is already behind schedule on urea imports for the upcoming Safrinha corn crop, increasing the likelihood of local affordability shocks and demand destruction. For India, while nutrient subsidies may buffer short-term impacts, the systemic risks remain elevated.

Secondary and tertiary impacts could include speculative purchasing, wartime insurance premiums, and a shift toward bilateral offtake agreements—potentially fragmenting the global fertilizer trade. Structural responses could see countries like India accelerate phosphate procurement pacts with Morocco, or Brazil pivot toward diversified sourcing from Morocco, Russia, or even inward-looking investments in U.S. fertilizer infrastructure.

While the European Union is not front and center in the short-term fertilizer fallout, its recent tariff barriers against Russia and Belarus have increased reliance on Egypt and North Africa—regions now also grappling with gas shortages and unrest. EU producers may be forced to scale up output, but at far higher energy costs, which—coupled with upcoming CBAM (Carbon Border Adjustment Mechanism) mandates—could inflate production costs into the 2026 crop cycle and beyond.

In closing, the RaboResearch team cautions that urea is the most vulnerable node, but broader nutrient pricing—including phosphates and sulfur—is poised for sustained volatility. In a full-closure scenario, the current high-price environment could transition into a new normal, eroding farmer margins globally and rewriting near-term procurement strategies.