Countries are seeking ways to respond to supply chain disruptions.

Recent disruptions in the Strait of Hormuz region are putting significant pressure on the food supply chain.

A vital food supply route has been disrupted.

Amidst rising tensions in the Middle East, global market attention has been largely focused on energy in recent days. However, another far-reaching impact is quietly spreading and gradually affecting the meals of millions of families.

The focus remains on the Strait of Hormuz – a shipping lane that accounts for approximately 20% of the global energy supply and is also a crucial gateway for food imports for Gulf nations. Recent disruptions in this region are putting significant pressure on the food supply chain.

According to CNN, countries in the region such as Saudi Arabia, the UAE, and Qatar are highly dependent on food imports (from 80% to nearly 100%). When transportation is affected, the supply immediately becomes unstable. Many shipments are delayed, or even stranded offshore, with no definite arrival date. Logistics costs also increase sharply, with shipping surcharges potentially reaching around $4,000 per container.

Alternative routes are both more expensive and take longer to deliver, further increasing cost pressure. In this context, consumers are beginning to face the risk of food prices rising – potentially by around 20% for some items – while choices are also shrinking. Although a food shortage crisis has not yet emerged, international organizations are warning that supply chains are at risk of serious disruption. 

Approximately one-third of all fertilizers transported by sea globally pass through the Strait of Hormuz.

The risk of fertilizer shortages is increasing.

While transportation disruptions are creating immediate pressure, a deeper risk is emerging: the potential for a breakdown in the fertilizer supply chain – a key element of global agricultural production.

According to research firm Kpler, approximately one-third of the world's sea-borne fertilizer shipments pass through the Strait of Hormuz. And when this shipping route is disrupted, the market quickly becomes unbalanced.

The risk of shortages is therefore no longer hypothetical. JPMorgan estimates that the world has only about 25 days' worth of strategic fertilizer reserves before supply shortages begin to directly impact agricultural production capacity.

Pressure intensified when liquefied natural gas (LNG) supplies – a crucial input for fertilizer production – were also disrupted, forcing many plants in Egypt, India, and Bangladesh to cut production. As a result, fertilizer prices have surged by 30-45%, and in some places up to 60%, compared to the same period last year – enough to reverse the agricultural cost equation in many countries.

In Germany, this is a crucial period for crop growth. Yet many farmers still lack access to the necessary fertilizers.

Dirk Peters, an agricultural engineer from Germany, said: "I know of farmers who haven't received a single kilogram of nitrogen for their farms. This is clearly a big problem because the entire crop will be stunted. The plants don't grow well in the early stages, so there will be problems with both yield and quality."

The pressure comes not only from supply shortages, but also from rising costs.

Achim Siepen, a German farmer, shared: "Fertilizer prices have risen sharply, especially nitrogen fertilizers. Compared to last year, the price of each kilogram of nitrogen has increased by 0.5 euros. A 100-hectare farm will need an additional cost of 5,500 to 6,000 euros."

In another major economy , India, the situation is also becoming worrying. As the world's second-largest consumer of fertilizers, India relies heavily on supplies from West Asia. As tensions in the Middle East escalate, the risk of shortages is becoming increasingly apparent.

Bharat Bhushan Chugh, a fertilizer retailer in India, shared his concerns: "There will be a serious shortage of DAP fertilizer, which is crucial for rice cultivation. Urea fertilizer will also be in short supply, as its production requires a large amount of natural gas. When gas supply is affected, urea production will decrease."

In the short term, farmers in some areas are trying to adapt with alternative sources, but the effectiveness remains limited. According to warnings from the World Food Programme, the impact will not be limited to production.

Carl Skau, Deputy Executive Director of the World Food Programme, stated: "Reducing fertilizer supply will increase input costs for farmers. This means lower agricultural productivity. In the worst-case scenario, this leads to crop failures in the next season. In a better-case scenario, the higher costs will be passed on to food prices next year. This is still better than widespread crop failures, but the increased prices will weigh heavily on already struggling families."

According to Morningstar analysts, if the conflict continues, nitrogen fertilizer prices could double while phosphate prices could increase by around 50%, directly threatening agricultural production and global food security.

According to the United Nations Food and Agriculture Organization, fertilizer costs currently account for 30-50% of the total cost of grain production. The organization warns that yields in key areas could fall by 20-30% if farmers lack access to fertilizer or are forced to reduce their fertilizer use.

The impact of these fluctuations will not be immediate. This is because food price indices typically react slowly, 6-9 months after increases in input costs. This means that inflationary pressures on food are likely to become more apparent towards the end of this year – when the accumulated effects begin to spread to the consumer market. 

Many countries have begun proactively adjusting their strategies to ensure food security and mitigate risks.

Countries are seeking ways to respond to supply chain disruptions.

Faced with increasingly evident supply chain disruptions—from food transportation to fertilizer supplies and escalating input costs—pressure is spreading globally. In this context, many countries have begun proactively adjusting their strategies to ensure food security and mitigate risks.

In the US, the Trump administration has stated it has implemented measures to reduce fertilizer costs, including increasing imports from Venezuela to offset shortages. Agricultural associations have also called for a temporary halt to tariffs on fertilizer imports from Morocco and Russia to cool prices. Some American farmers are also planning to switch from corn to crops less dependent on fertilizer, such as soybeans, in order to reduce costs.

In Asia, the Philippines is actively negotiating with China, Russia, and Belarus to secure fertilizer supplies. Meanwhile, the Indian government has assured fertilizer companies that providing natural gas to the industry remains a top national priority.

For countries that export large quantities of agricultural products to the Middle East, such as Brazil, businesses have requested urgent financial assistance from the government to maintain trade operations. Meanwhile, in Australia, businesses are proactively shifting exports to markets less affected by the pandemic.

Andrew Cox, representing the Australian Meat and Livestock Association, commented: "Australian exporters are highly adaptable. We have significant trade with the Middle East, but we are not entirely dependent on the region. Goods can be diverted to other, less affected markets with large tourist numbers and strong economies. From a demand perspective, this is also an opportunity for Australia to strengthen its position as a stable and reliable supplier."

At the small business level, the challenge is to minimize risk and adapt to price fluctuations.

Jerome Biles, a bakery owner in France, said: "We will be increasing our stock of ingredients, especially sugar, between now and summer, at least to prepare for the possibility of significant price increases in the short term. We also need to postpone planned projects for the next two or three years, such as business expansion, renovations, or investments in equipment."

Ahmad Ramzani, a retail store owner in Singapore, shared: "We realized that a single importer couldn't import everything. So, we sat down together and divided up the regions. Each person imports goods from a different area, then brings them back and shares them with each other."

From large corporations to small shops, adaptive solutions are being implemented at every link in the supply chain. The common thread is an effort to maintain supply, control costs, and reduce reliance on a single region, in a market expected to remain volatile.

The upheavals in the Middle East once again demonstrate that, in a closely interconnected world, a geopolitical bottleneck can quickly escalate into global economic pressure. However, these challenges are also prompting countries and businesses to proactively adjust, diversify supply sources, and enhance their adaptability. These efforts will be crucial in mitigating negative impacts and stabilizing global food supply chains in the long term. 

Source: VTV