OMAHA (DTN) -- The potential of a deal between the United States and Iran that would reopen the Strait of Hormuz could ease some of the world's concerns about fertilizer challenges and food shortages, but it will take time to sort out.

The result could leave global fertilizer supplies 20% to 30% short of demand, an executive for Mosaic Co., explained to DTN.

Fertilizer companies such as Mosaic Co. have been forced to idle production of phosphate, for instance, because sulfur exports from the Persian Gulf have slowed dramatically. The strait normally handles roughly 50% of all sulfur exports. Additionally, supply constraints have emerged as countries such as China and Egypt have imposed export restrictions on sulfur.

Even if shipping traffic resumes normally, fertilizer markets should not expect an immediate recovery, said Ben Pratt, Mosaic's vice president of public affairs.

"There are a lot of ships parked in the strait right now," Pratt said in an interview with DTN. "It'll be months to get normal supply routes back and fully functioning."

Pratt spoke to DTN about production challenges tied to the Strait of Hormuz and global food security risks, as well as issues such as farmer anger over fertilizer markets and the ongoing countervailing duties case involving phosphate imports.

PHOSPHATE'S SULFUR PROBLEM

Mosaic's phosphate production challenges are being driven almost entirely by a global sulfur shortage that has intensified following disruptions tied to the conflict involving Iran and shipping through the Strait of Hormuz.

Pratt said phosphate production requires roughly 0.4 tons (880 pounds) of sulfur for every metric ton of phosphate fertilizer produced. Historically, sulfur was available for roughly $100 to $300 per ton, but prices have surged to more than $1,000 per ton, and supplies remain difficult to secure.

"The problem is sulfur," Pratt said. He added, "Sulfur prices have essentially tripled since the conflict in Iran started. And basically, sulfur is just not moving around the world."

Pratt added, "At those prices, we can't afford to make it. We'd lose money on every ton."

The sulfur shortage forced Mosaic to idle phosphate processing facilities in Brazil back in April. The situation has forced production curtailments across the phosphate industry.

"Most of the big phosphate producers in the world are really struggling to produce at all because they either can't get sulfur, period, or they just can't afford it," Pratt said.

The two main phosphate fertilizers -- monoammonium phosphate (MAP) and diammonium phosphate (DAP) -- continue to climb as well, according to DTN Retail Fertilizer Trends. For U.S. farmers, MAP is averaging $953 a ton, up about 8.4% since the conflict began, while DAP is $914 a ton, up 7.4%.

Global phosphate fertilizer demand typically totals about 75 million metric tons annually, Pratt said. Based on known production curtailments and reports from competitors, available supply could fall 20% to 30% short of demand.

The availability of phosphate fertilizer in Brazil is expected to remain severely constrained leading up to planting season. Brazilian farmers are already vulnerable because the country already imports most of its nitrogen fertilizer.

GLOBAL FOOD SECURITY RISKS

Pratt said the fertilizer industry is raising more concerns about broader food-security implications if fertilizer supplies remain constrained for an extended period. He pointed to past fertilizer shortages that destabilized countries such as Sri Lanka and Sudan when fertilizer supplies failed to meet food demands.

Qu Dongyu, director-general of the United Nations Food and Agriculture Organization (FAO), also opened a session of the FAO this past week by calling the closure of the strait "a global food security risk." Qu said farmers in Asia, Africa and Latin America are cutting back on fertilizer use as a result. Qu called for avoiding export restrictions on agricultural inputs and protecting shipping lanes for humanitarian food. Qu warned in May that disruptions in fertilizer shipments would reduce global crop yields and tighten food supplies going into 2027.

Also, the Wall Street Journal reported that the chief executive of the Abu Dhabi fertilizer manufacturer Fertiglobe warned about the risks that grain prices could spike and increase global hunger. With the Strait of Hormuz closed, Fertiglobe has been trucking some of its nitrogen products, but roughly 30% of urea exports are not leaving the Persian Gulf region, said Ahmed El-Hoshy, chief executive of Fertiglobe.

CONFLICT OVER ANTITRUST CONCERNS AND COUNTERVAILING DUTIES

Iowa farmer Lance Lillibridge has been focusing on fertilizer prices and competition issues since 2022, when prices rose during the start of the Russian invasion of Ukraine. Lillibridge led a roundtable discussion in Texas with the chairman of the Federal Trade Commission (FTC) in late May.

Pratt confirmed the FTC has contacted Mosaic about its investigation into pricing and competition.

A collection of 65 national and state farm groups earlier this month also wrote Commerce Secretary Howard Lutnick, asking him to end the 16.6% to 16.8% countervailing duties on phosphate fertilizer from Morocco. Those duties, which have fluctuated, have been in place since 2021. The countervailing duties stemmed from a petition led by Mosaic Co. and Simplot.

Currently, the duties remain under review as part of the required five-year sunset process.

Farm groups argue the duties have given Mosaic control over three-quarters of U.S. phosphate supplies, and they challenged Mosaic's moves to lower its production.

Lillibridge said his review of U.S. trade law and conversations with trade attorneys have left him convinced that the system heavily favors manufacturers while giving little consideration to farmers who ultimately bear the costs.

Lillibridge pointed specifically to what is known as the "public interest test." According to Lillibridge, the United States is one of the few countries that does not require regulators to formally evaluate how trade duties affect downstream consumers before imposing them.

"There are provisions in the law where they do not have to take into account how it affects the end user of products," he said.

Lillibridge argued that omission is particularly damaging in agriculture because farmers cannot pass higher fertilizer costs on to customers.

"It would be different if we could simply charge more for our grain," he said. "We can't pass that cost on."

Pratt said phosphate prices in the United States currently are lower than prices in other major global markets despite the duties remaining in effect.

"The fact is the price of phosphate in the U.S. is lower than it is in any other major market in the world," he said.

Because phosphate fertilizer is facing a worldwide supply shortage tied to sulfur availability, Pratt argued removing the duties would do little to reduce prices in the current market environment.

"The countervailing duties, if you lift them, it wouldn't drive prices down in the current market," he said.

Lillibridge is advocating for legislation introduced in Congress, the Lowering Input Costs for American Farmers Act (S. 4418), which would eliminate countervailing duties on Moroccan phosphate imports and potentially refund some duty payments.

Lillibridge also noted that some farm advocates have explored whether presidential emergency authorities could be used to suspend or bypass the duties, citing precedents involving other imported products. However, he acknowledged those legal arguments remain uncertain.

"I think the administration and even Congress can step in and put an end to this," Lillibridge said.

Pratt maintained that the conditions that justified the duties five years ago have not changed. Producers in Morocco and Russia continue to benefit from government support programs that lower their production costs relative to U.S. manufacturers.

"There were valid reasons for the imposition of the duties to start with," Pratt said. "The facts behind all that still exist."

See related stories on DTN:

-- "Why Do Duties Remain on Phosphate?" https://www.dtnpf.com/…

-- "DTN Retail Fertilizer Trends, Urea Moves Lower; 6 Fertilizers Continue To Be Slightly Higher," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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