Deteriorating situation in the Middle East and soaring fertilizer prices impact crop production

The worsening situation in the Middle East is also affecting fertilizers, which are essential for growing rice and vegetables. In particular, there is growing uncertainty over the availability of urea, a nitrogen-based fertilizer that is essential for promoting the growth of leaves and stems. Because it is made from ammonia derived from natural gas and crude oil, it is produced in large quantities in oil-producing countries, and the blockage of the Strait of Hormuz has disrupted supply from major producing regions such as Saudi Arabia and Qatar.

Japan imports 97% of its urea, but most of it comes from Malaysia and Vietnam, so the direct impact of the strait closure is small. According to the National Agricultural Cooperative Association (JA Zenchu), it surveyed the impact on JAs in each region in early April and says they have secured enough fertilizer to grow crops for the time being.

However, the trading price of urea on the international market more than doubled from January to April. This is because the supply of products from the Middle East, which account for over 30% to 40% of exports, has been disrupted, pushing up prices.

The customs price for urea imported by Japan was 93,100 yen per ton in March, an increase of nearly 20% from the previous month, marking the highest level since 2022, when Russia began its invasion of Ukraine.

Agriculture, Forestry and Fisheries Minister Norikazu Suzuki visited Malaysia in early May and met with executives of Petronas, a state-run company that produces urea. According to Suzuki, in addition to ensuring a stable supply of urea, he also asked the company to consider a long-term contract.

In addition to urea, international prices for phosphoric acid and potassium fertilizers, for which Japan is almost 100% dependent on imports, are also on the rise due to rising crude oil prices and rising transportation costs. Agricultural materials made from naphtha, which is derived from crude oil, are becoming difficult to procure, and if the situation in the Middle East continues to deteriorate, production sites will gradually be hit hard.

JA official: ``We have no choice but to raise fertilizer prices''

The majority of fertilizers distributed in Japan...