The global fertiliser market faces a prolonged period of tight supply, weak affordability, and heightened price risk, even if current geopolitical tensions ease soon, "normalisation will be slow", according to a recent industry report.
In its latest Semi-annual Fertiliser Outlook, Rabobank says the market ended the first quarter under strain.
"The escalating geopolitical disruption in the Middle East and the effective closure of the Strait of Hormuz have removed a substantial volume of fertilisers and critical inputs from global trade, triggering an abrupt supply shock that cannot be quickly replaced. The resulting market environment is characterised by tight availability, sharply higher prices, and elevated volatility across major nutrients," the report said.
Fertiliser affordability was already under pressure in 2025, with rising nitrogen and phosphate prices. It has since deteriorated further.
"Prices for nitrogen and phosphates have risen far faster than agricultural commodity prices, which is compressing farm margins globally and accelerating affordability pressure," the report says.
"RaboResearch's fertiliser affordability index has moved decisively into negative territory and is expected to remain constrained throughout 2026, with only limited recovery in the second half of the year."
RaboResearch senior analyst Bruno Fonseca said this "raises the risk of widespread fertiliser 'demand destruction' as farmers reduce application rates, delay purchases or shift crop choices".
"The outlook for 2026 points to continued pressure on farm economics and increased downside risks for global crop production and food price stability," he said.
Fonseca added that a prolonged conflict or continued closure of the Strait of Hormuz would further disrupt supply chains and extend affordability pressure.
"In such a scenario, farmers may switch to planting crops that require less nitrogen or choose to lower application rates and/or planted areas, impacting demand for a longer period," he said.
© Rabobank
Paul Joules
Australia
For Australian farmers, margin pressure has been a key concern, intensified by the Middle East conflict. RaboResearch commodities analyst Paul Joules said the situation highlights Australia's reliance on imports such as urea and MAP.
"Accounting for currency movements, we estimate Middle East granular urea prices have surged an eye-watering 94 per cent year to date (YTD)," he said. "DAP FOB prices have risen eleven per cent YTD, while Vancouver spot FOB potash prices have risen by two per cent."
"Geopolitics aside", Joules said the Australian dollar has strengthened over the past year, but fertiliser prices remain elevated due to global supply constraints.
While a stronger currency may help offset costs, volatility in urea and phosphate markets means global supply and demand will continue to drive pricing.
"Against this backdrop of compressed margins, Australian farmers may increasingly favour crops that have historically demonstrated greater margin resilience," Joules said. "Barley and canola are therefore likely to gain ground relative to wheat."
RaboResearch expects a decline in fertiliser consumption in Australia as growers adjust to higher costs.
For more information:
Denise Shaw
Rabobank
Tel: +61 (0) 2 8115 2744
Email: [email protected]
www.rabobank.com.au
