Supply chain disruptions, droughts, higher farm input costs threaten global food supply – Richard Mills

2026.08.01

The war in Iran is heavily impacting global food availability by disrupting fertilizer supplies, spiking energy costs and closing vital shipping lanes.

Urea prices surged nearly 46% month-on-month, reaching some of the highest levels since 2022.

Farmers globally face a hard choice between expensive fertilizers or reduced crop usage, threatening future harvests.

Rising diesel prices inflate the daily cost of operating farm equipment, tractors and processing plants.

Higher fuel costs make shipping goods from farms to local grocery stores significantly more expensive.

Retail food prices inside Iran jumped over 40% year-over-year, with staples like rice and vegetable oils skyrocketing.

Import-dependent nations in South Asia, East Africa and the Middle East face acute hunger risks and worsening malnutrition.

Shipping bottlenecks

Hundreds of freighters and oil tankers remain stranded or delayed inside the Persian Gulf and surrounding approaches.

The Strait of Hormuz — the only water passage connecting the Persian Gulf to the open ocean — is currently closed, halting the export of millions of tons of nitrogen-based fertilizers and natural gas.

Traffic in the Strait of Bab el-Mandeb Strait has been severely disrupted. Yemen’s Houthi rebels declared a naval blockade targeting Saudi shipping and launched attacks on oil tankers in the area, causing crossings to drop by roughly 50% as some vessels turn back or reroute around Africa.

Traffic through the Suez Canal has also been directly affected by the Iran war, experiencing severe fluctuations, security-driven suspensions by major shipping lines, and volatile rerouting.

Daily transits have dropped below normal trend levels during peak flare-ups as major container carriers like Maersk, CMA CGM, and Hapag-Lloyd intermittently suspend or restrict vessel movements.

Proximity risks have escalated, highlighted by recent drone attacks on vessels at nearby Egyptian ports like Damietta, amplifying fears that the regional conflict is expanding closer to the canal corridor.

Invasive marine species threat

An unintended consequence of the Strait of Hormuz closure is that it has created conditions for an extreme biodiversity threat.

With more than 1,500 commercial vessels stuck in the Persian Gulf since the strategic waterway closed on Feb. 28, scientists are “warning that thousands of stranded ships could spread invasive marine species across the world’s oceans once they begin sailing again,” The Guardian reported this week.

The research describes the situation as a potential marine “bio-invasion super-spreader event”, arguing that no previous shipping disruption has involved so many vessels remaining idle for so long.

According to the study, ships normally only remain at anchor in a harbour for one to three days, limiting the growth of organisms on their submerged surfaces. But many vessels trapped in the Gulf have remained stationary for months, allowing dense marine communities to establish themselves.

If thousands of vessels leave carrying barnacles, algae, mussels and other organisms, they could introduce invasive species that outcompete with native wildlife, spread disease and permanently alter marine ecosystems.

Fertilizer trade disrupted

The key input in agriculture is fertilizers, which farmers use to supplement natural soil nutrients, antibiotics to prevent animal diseases, pesticides to protect crops against animals, insects, weeds and various microorganisms, and of course diesel to run tractors and delivery trucks. Fertilizers used by farmers today are synthetically created, as they have proven to produce much larger crop yields than organic sources for over a century.

While global usage varies by crop type and region, research indicates that just under 50% of the world’s population is fed by crops grown using synthetic fertilizers. Without this technology, roughly half of the global population could not be sustained on current agricultural land.

(Organic fertilizers made from natural plant or animal byproducts account for only a small fraction of total agricultural crop nutrition.)

The Iran war has disrupted major segments of agricultural inputs, cutting off more than 30% of the world’s nitrogen fertilizer supply and roughly one-third of global seaborne fertilizer trade due to the blockade of the Strait of Hormuz. While staple food supplies have not fully collapsed globally, the input crisis threatens billions of meals and drives significant cost pressures worldwide.

Over 30% of global nitrogen fertilizer and significant urea supplies are choked off, with producers halting hundreds of thousands of tons of output.

The conflict cut off 17% of the world’s natural gas supply, a critical element required to manufacture nitrogen-based fertilizers.

Nearly half of the global sulfur market is controlled in the Middle East, and critical shipments have been stranded or blocked in the Persian Gulf. Sulfur is a vital secondary plant nutrient and is widely used as a fertilizer or mixed into fertilizer blends to boost crop yields and protein production.

According to the World Trade Organization, outbound fertilizer-related shipments through the Strait of Hormuz to destinations outside the Persian Gulf came to a standstill once the conflict started – and have remained close to zero since then. A stable resumption of shipments still remains to be seen.

Persian Gulf states face a severe grocery emergency with 70% of regional food imports disrupted, causing steep 40–120% local price spikes. Food inflation in the Middle East is worst in Iran, Lebanon and Turkey, driven by severe currency drops, regional conflict, and high import costs.

Lower fertilizer usage risks future harvest yields, threatening up to 10 billion meals globally per week, hitting poorer nations hardest.

The countries worst hit by fertilizer reductions from the Iran war are Sudan, Sri Lanka and Australia, alongside high dependency in Sub-Saharan Africa, India and Mexico.

Figure 5 shows that 18 economies – in the upper-right quadrant – are particularly exposed to nitrogenous fertilizers supply disruptions in the Gulf. These economies, which constitute around one-fifth of the 81 economies of those that import from the Gulf region, combine high import dependence with strong reliance on Gulf suppliers.

This group includes developing economies in Africa, such as Kenya, Malawi, Mozambique, Rwanda, South Africa, Tanzania, Uganda and Zimbabwe. It also includes Brazil, Nepal and Sri Lanka. Seven countries in this group are least developed countries (LDCs).

A perfect storm for farmers

Blocking vital shipments of fertilizers and natural gas from the Middle East has triggered skyrocketing input costs, forcing farmers to alter crop selections and raised concerns over compromised crop yields.

Farmers in Canada, the US and across Africa and Asia are facing exorbitant fertilizer price spikes, challenging farm operating budgets.

To manage high input costs, many farmers are substituting away from nitrogen-demanding crops like wheat and maize in favor of less demanding alternatives like soybeans. This shift threatens to alter agricultural outputs and available food commodities.

Many farmers are choosing to use less fertilizer overall to save money, a practice the Food and Agriculture Organization (FAO) warns will severely lower crop productivity and yields.

Unlike past supply chain crises, prices for harvested agricultural commodities have not experienced the same surge as nutrient and fuel costs. This leaves farmers facing significantly squeezed profit margins.

The FAO Food Price Index is a monthly measure tracking the changes in prices of a basket of globally traded food commodities, specifically cereals, vegetable oils and meat. While initially the index rose, from 124 points in January 2026, the month before the war started, to a peak of 131 points in April, it has fallen for two consecutive months.

According to Trading Economics, dairy prices in June slipped 1.5%, reaching their lowest level since 2023, with weaker prices across all major products. In contrast, meat prices edged up 0.4% to a fresh record high, driven primarily by higher poultry prices. Vegetable oil prices rose 3.8%, supported by stronger palm and rapeseed oil quotations, while sunflower oil prices remained broadly stable. 

The United States imports urea, ammonia, sulfur and processed phosphates from the Middle East. With the Hormuz blockade, US imports from affected ports fell to zero, resulting in a nearly 44% drop in overall crop nutrient imports and a 30% spike in domestic urea prices.

NPR reports:

An American Farm Bureau Federation survey released in April reported that 70% of respondents said they couldn’t afford all the fertilizer they needed this season.

Some farmers are more vulnerable to price swings than others.

Producers of corn and wheat, which rely heavily on fertilizer, can spend  around a third of their operating costs on fertilizer alone. Half of the farmers who responded to a survey released by the National Corn Growers Association in early April said they wouldn’t apply the full amount of fertilizer to their corn crop this year, due largely to higher costs and limited availability.

Southern producers face the highest pressure at 78% reporting unaffordability, compared to 48% in the Midwest where more pre-booking occurred.

According to the Farm Bureau, “more than 80% of rice, cotton and peanut producers reported they cannot afford all required fertilizer, highlighting the vulnerability of these production systems to input cost shocks.”

The USDA’s 2026 June Acreage and quarterly Grain Stocks reports showed the USDA’s wheat acreage estimate, at just 42.7 million, was a hefty 1.1 million below expectations and deemed to be the lowest wheat acreage on record. Corn and soybean estimates were only modestly different from pre-report expectations.

Meanwhile, US ranchers face a severe crisis due to widespread drought, high input costs and tight hay supplies. Over half of the US hay-producing regions suffer from dry conditions, forcing early herd sell-offs and steep trucking expenses.

Pastures in states like Colorado, Wyoming, Montana and South Dakota lack enough grass for grazing. Previous fires destroyed vital grazing lands, leaving no new grass to grow. Multiple dry years mean local hay reserves are nearly gone.

The US cattle herd stands at 94.2 million head as of July 1, 2026. This marks a slight year-over-year increase of 200,000 head — the first mid-year inventory increase since 2018 — though supplies remain near historic multi-decade lows due to lingering drought and tight calf crops.

The New World screwworm is currently active in South America, Central America, Mexico, parts of the Caribbean, and recent 2026 detections in Texas and New Mexico.

The screwworm causes severe tissue damage, major livestock losses, and fatal infections by burrowing into the living flesh of warm-blooded animals.

Fertilizer backlogs and supply-chain disruptions have hit Canadian farmers with soaring input costs, reduced supply options, and significant risks to crop yields. When combined with Strait of Hormuz conflicts and existing tariffs, producers face severe margin squeezes, threatening domestic food security and forcing them into a high-risk financial environment.

Canadian farmers effectively lost access to nearly half of the global nitrogen fertilizer supply due to trade tariffs on imports from Russia and Belarus.

Conflicts in the Middle East have tightened global availability, raising replacement costs for urea and ammonia by upwards of $100 per ton.

Diesel prices remain elevated

High farm input costs exacerbated by high diesel prices have forced farmers to engage in a precarious gamble on whether crop prices will cover the cost of planting.

The Financial Times reports that Russia pulled roughly 11% of the world’s seaborne diesel supply after announcing a ban on diesel exports effective July 8 and lasting until at least July 31.

The reason is due to the war in Ukraine. Ongoing drone strikes on Russian oil refineries have steadily eroded the country’s refining capacity. According to the FT, by June 2026, Russian diesel exports had collapsed to roughly 428,000 barrels a day, more than 50% below prior averages.

Regions that had been relying on Russian diesel are now scrambling for alternatives. Turkey, Brazil, and North Africa face particularly acute supply constraints.

US retail diesel prices are currently $4.22 a gallon compared to the record-high $5.81 reached in June 2022 due to the war in Ukraine.

On average, diesel accounts for 5-15% of total farm operating expenses, depending heavily on the region and type of crop. However, when looking strictly at direct energy and fuel budgets, diesel typically makes up about 60% of total farm fuel and oil expenditures.

Water loss, heat, droughts, El Nino

Global warming disrupts the water cycle, causing severe droughts, shrinking snowpacks and glaciers, and saltwater contamination in coastal aquifers. These changes reduce the amount of fresh water available for people, farms and nature.

In North America, the canary in the coal mine for water loss is the Colorado River and its dams that hold back water in major reservoirs.

More than half of Colorado River waters are used in crop irrigation.

Recent data from the U.S. Bureau of Reclamation shows water levels at Lake Mead and Lake Powell — the country’s two largest reservoirs — are continuing to dwindle due to an historically warm winter and low snowpack.

ABC News reported:

As of Monday, pool elevation at Lake Mead, which indicates how much water is inside the reservoir, measured at 1,041.17 feet, coming close to the record low of 1,040.58 feet in July 2022, according to Bureau of Reclamation records.

Elevation at Lake Powell is currently measuring at 3,522.78 feet, according to the Bureau of Reclamation — nearing the previous record low of 3,519.92 feet set in April 2023 and the critical level needed for the reservoir to produce hydropower. A new record low at Lake Powell could be reached in August, projections show.

Parts of Canada are also facing notable water shortages and drought conditions this summer, with British Columbia and parts of the Prairies experiencing the most severe concerns.

Global droughts are devastating farmers through severe crop yield losses, escalating production costs and critical livestock threats.

Farmers are forced to grapple with depleted soil moisture, dying orchards, and skyrocketing feed prices, often leading to total income collapse and threatening rural livelihoods worldwide.

Nearly 40% of the US is currently in moderate drought or worse.

USDA Cuts Corn Stocks as Weather Threats Loom Over Tight Supplies

El Nino conditions are currently present and intensifying. A strong El   Nino generally makes the whole world warmer, as heat wafting up from the ocean gets spread far beyond the tropics. That, combined with heat domes, is bringing a hotter-than-usual summer in the western US and Canada, worsening the wildfire season for both countries.

The BBC reported that Over the weekend, dozens of wildfires burned over 1 million acres in the US state of Oregon. Thousands are under evacuation orders as the fires have burned homes and forced the closure of major highways.

In Canada, thousands of lightning strikes from storms over the weekend also ignited fresh fires in British Columbia. Prime Minister Mark Carney has said this is one of the worst wildfire seasons on record for the country.

US media is reporting an unusually strong heat dome is expected to descend on much of the western United States this weekend, with temperatures climbing to between 10 and 20 degrees hotter than they should be. Around 40 million people are under heat alerts.

We know what heat does to plant growth. Yields begin to decline at temperatures above 30C for most agricultural crops.

An El Nino event could put upward pressure on cocoa, food oils, rice and sugar, bananas, tea, coffee, chocolate and soy-fed meat.

If the El Nino morphs into a “Super El Nino”, the effects on crops could be significantly worse. A column in Seed World says a rare climate setup is taking place that could rival the 1877-78 Super El Nino — one of the worst droughts in Asia. Two warning signs are high sand dust aerosols in the atmosphere from the Arabian Peninsula, which help suppress the Asian monsoon during the growing season; and an early start to the western Pacific typhoon season which helps pull moisture away from Asia.

“The number of variables aligning in ways similar to the 1877-78 super El Niño is one reason the drought unfolding across Asia, particularly in India, could rival the severity of the event 150 years ago….

“We could see extreme shortages develop in key crops like rice, sugar, corn, soybeans and palm oil over the next 12 months.”

Conclusion

According to the World Food Program, an estimated 645 million people face chronic hunger globally, and about 2.1 billion experience moderate or severe food insecurity.

If the war in Iran continues, and there is no sign of it stopping, access to food will be even more restricted because synthetic fertilizers feed up to 5 billion people, roughly half of the world’s population.

The Iran war has cut off more than 30% of the world’s nitrogen fertilizer supply and roughly one-third of global seaborne fertilizer trade due to the closure of the Strait of Hormuz. The Houthis in Yemen have blockaded the Strait of Bab El-Mandeb. Traffic through the Suez Canal has also been affected, with freighters having to reroute around Africa.

The conflict has blocked 17% of the world’s natural gas supply, a critical element required to manufacture nitrogen-based fertilizers.

Farmers are being hit by a perfect storm of factors that threaten the food supply of tens of millions of people.

They include supply chain disruptions from the closure of key waterways in the Persian Gulf, higher input costs (fertilizer, diesel), Russian tariffs on fertilizer, droughts/ water shortages, global warming, a Super El Nino, and farmers’ need to purchase expensive GMO seeds annually.

While global food supplies are broadly adequate on a macro scale, the world is facing severe localized food crises driven by wartime conflict, economic shocks and climate extremes.

The UN Food and Agriculture Organization highlights high-risk hunger areas including Yemen, Nigeria and Somalia, where millions face acute food insecurity.

Richard (Rick) Mills
aheadoftheherd.com

Subscribe to AOTH’s free newsletter