Disruptions to shipping through the Strait of Hormuz could ripple far beyond energy markets, with Goldman Sachs warning of significant knock-on effects for global agriculture prices, according to a Goldman Sachs note.
The strait is a key artery for the global nitrogen fertilizer market, which accounts for about 60% of total fertilizer use worldwide and is critical for crops such as corn and grains. More than a quarter of global nitrogen fertilizer trade and roughly 20% of LNG, the main feedstock for fertilizer production, typically pass through Hormuz, leaving supply chains highly exposed to geopolitical risks, Goldman Sachs said.
Since the start of the Middle East conflict, nitrogen fertilizer prices have jumped around 40%, reflecting tightening supply and higher input costs. These disruptions are not only constraining availability but also increasing production costs globally, particularly in regions dependent on imported LNG, the note said.
Goldman Sachs said the bigger risk for agricultural markets may come from reduced crop output rather than just higher input costs. Fertilizer shortages could lead to lower yields due to delayed or suboptimal application, while some farmers may shift toward less fertilizer-intensive crops, tightening grain supply further.
The impact is expected to vary by region. While the U.S. may be relatively insulated in the near term due to pre-season fertilizer purchases, regions such as Europe, Australia and the Southern Hemisphere could face greater disruption, potentially boosting demand for U.S. grain exports and lifting global prices, Goldman Sachs added.
source https://www.investing.com/news/economy-news/how-hormuz-disruptions-are-impacting-global-agriculture-prices-4586526
