Chris Vlachopoulos, Senior Phosphates Editor at ICIS, examines how the issue of food security has been brought into focus as fertilizer costs surge while the US and EU make moves to protect domestic agriculture.
With the conflict in the Middle East showing no immediate signs of resolution, government efforts are underway in both the US and Europe to shield farmers from surging fertilizer costs.
Reduced fertilizer application could put crop yields at risk, adding to concerns around food availability as the crisis deepens.
The near closure of the Strait of Hormuz since late February 2026 has disrupted flows of ammonia, urea, sulfur, and phosphatic fertilizers from the Gulf region, through which close to one-third of globally traded fertilizers typically transit.
Prices for nitrogen-based products have surged, while phosphate and sulfur markets have also tightened.
There has also been concern that this could lead to the formation of a two-tier fertilizer market, where regions such as sub-Saharan Africa, which are less able to absorb higher costs, could be priced out, increasing downside risks to food security.
Svein Tore Holsether, Chief Executive of Yara International said the combination of supply disruptions and subsidies could create a “global auction” for fertilizer, where poorer countries are priced out. He cautioned that sub-Saharan Africa, where soils are already chronically under-fertilized and fiscal support is limited, would be particularly exposed.
This highlights how quickly fertilizer affordability can become a binding constraint in volatile market conditions.
Against this backdrop, policymakers in the EU have moved to insulate farmers from higher costs.
European Commission provides more aid
Meanwhile, the European Commission has temporarily loosened state aid rules, allowing member states to subsidise up to 70% of the extra cost of fuel and fertilizers for farmers, fishing businesses and road hauliers until the end of 2026. Small operators will be able to access fixed payments of up to €50 000 with simplified administrative requirements, while energy-intensive industries such as chemicals and steel can receive higher compensation for electricity costs.
European Commission officials framed the measures as an emergency response to prevent production losses.
The reaction from the European fertilizer market has been mixed. One market participant said: “Hard to say on how strong the effects will be of the aid subsidies and how efficiently it will be implemented.”
A phosphate market participant said: “This is positive, at least [it mitigates] the fertilizers surges.”
Another source said: “In my opinion, those subsidies will only be like a drop in the ocean,” adding that the proposed aid would cover only a small fraction of urea needs once CBAM-related costs are factored in.
With all this in mind, the source went on to ponder: “Does the subsidy then resolve insolvency issues in a market that has been heavily dealing with perhaps the most unaffordable input/grain relationship?” adding: “The answer is certainly no, in my view.”
EU CBAM debate resurfaces amid Hormuz crisis
As markets face higher fertilizer costs, long-running policy debates have resurfaced.
The Carbon Border Adjustment Mechanism (CBAM) has been in place since 1 January 2026, and covers several sectors, including fertilizers.
The CBAM can translate into additional costs for carbon-intensive products such as ammonia, phosphates or nitrogen-based fertilizers. Discussions in the EU examined whether flexibility mechanisms could be added to CBAM under exceptional market conditions.
As the conflict at the Strait of Hormuz has impacted fertilizer prices and product availability, those questions resurfaced yet again, as recently as this week.
Some welcomed the suggestion that an exemption for fertilizers could be considered. “I hope so,” a phosphate market participant said.
Others were more pragmatic, pointing to the fact that even if the political will was there, EU institutions would likely move too slowly to act in time. An ammonia market participant wondered: “Guess it will take another year before the Parliament and the Council actually make a decision.”
They added that even if the CBAM were to be suspended for fertilizers, it will take 4 - 5 months for it to enter into force at the very earliest. “God knows what the NH3 [ammonia] market will look like 4 - 5 months from now,” they concluded.
Another source was sceptical, pointing to a recent meeting between industry players and the German Government, the source said: “It was clearly stated that there is no way CBAM will be suspended, simply because it would make domestic production in the EU uncompetitive and would lead to plant closures.”
The source added that the agricultural industry would become dependent on supply from sources that cannot be considered stable and consistent. This could also bring food security under scrutiny.
They concluded: “People may complain but nobody wants this scenario.” Therefore, despite this renewed debate, it appears that a suspension of CBAM for fertilizers remains unlikely in the near term. The fact that the debate is ongoing, however, points to the strain farmers are under.
US Government action
While Europe debates cost containment through additional aid and CBAM, the US has focused on securing product availability.
Legislation introduced in the US Senate would eliminate tariffs and countervailing duties (CVDs) on phosphate fertilizer imports from Morocco, reversing measures imposed in 2021 following a trade dispute over alleged subsidies.
US Senator Roger Marshall (Republican, Kansas) introduced the bill, saying: “Kansas farmers are getting hit by a fertilizer market that’s working against them,” and went on to add, “Phosphate is a critical nutrient for crop production, and right now farmers are paying prices that threaten their bottom line.”
Farm groups have argued the duties restricted supply and led to higher prices, and therefore additional costs over recent growing seasons.
The bill follows court rulings that significantly reduced the assessed subsidy rate on Moroccan phosphate and comes amid pressure from higher fertilizer costs.
Around 70% of US farmers report being unable to afford sufficient fertilizer for the current planting season, according to an American Farm Bureau Federation survey, with many cutting application rates or shifting acreage away from nutrient-intensive crops.
A two-tiered market?
As governments move on to protect domestic agriculture, market participants say the key risk is that fertilizer markets increasingly move in favour of subsidised buyers, leaving price-sensitive regions exposed.