Fertiliser price spike triggered by Hormuz disruption raises concerns over rice output across Asia

• Urea prices touch multi-year highs, rice cultivation costs soar
  
  
• Rising input costs may reduce fertiliser usage, impact rice yields
  
  

Escalating tensions in the Middle East are beginning to ripple through global agricultural markets, with disruptions around the Strait of Hormuz pushing fertiliser prices sharply higher and threatening rice production across Asia. The surge in urea prices during the critical May-to-August planting season is placing severe financial pressure on farmers in major rice-producing nations, raising concerns over lower fertiliser usage, reduced yields, and worsening regional food security.

Urea prices hit multi-year highs

According to World Bank data, benchmark urea prices surged to $857/t in April, significantly higher than the previous four-year high of $726/t recorded in March and more than double the levels seen during the same period last year. The World Bank further projects overall fertiliser prices to rise by 31% in 2026 compared to 2025, with urea prices potentially increasing by as much as 60%.

The sharp rise has been largely triggered by disruptions in the Strait of Hormuz, one of the worlds most critical energy and commodity trade routes. The waterway handles nearly a quarter of global seaborne oil trade and more than one-third of global urea exports. Major Gulf producers such as Qatar and Saudi Arabia account for nearly 30-35% of global urea exports, making the region central to fertiliser availability across Asia.

Shipping disruptions, rising freight costs, higher insurance premiums, and damage to production infrastructure following regional conflict have tightened global fertiliser supplies at a time when Asian farmers are entering peak sowing operations.

Farmers begin cutting input usage

The impact is already becoming visible across key rice-producing nations including India, Vietnam, Thailand, Bangladesh, Indonesia, and the Philippines. In several regions, stagnant paddy prices coupled with soaring fertiliser and fuel costs are eroding farmer profitability and discouraging investment in crop inputs.

Reports indicate that farmers are beginning to reduce fertiliser application and reassess sowing plans as cultivation costs continue to rise sharply. According to regional assessments, the combined rise in fertiliser, fuel, and transportation costs could increase overall rice production expenses by 50-80% during the current planting season.

Vietnam, the worlds second-largest rice exporter, is reportedly witnessing pressure on production economics as higher energy-linked costs compress farmer margins. Thailand and Bangladesh are facing similar challenges, while the Philippines has warned that domestic rice output could decline by 20-30% without policy intervention.

India faces fertiliser dependency risk

India, despite currently holding comfortable rice stocks, also remains vulnerable due to its dependence on fertiliser imports from Gulf nations. The country imports nearly 40% of its fertiliser requirements from the region, exposing it to prolonged supply disruptions and elevated prices.

Although the Indian government subsidises fertiliser costs for farmers, a sustained rise in global urea prices could significantly increase subsidy burdens and strain fiscal resources. Higher input costs may also discourage balanced fertiliser application, potentially impacting yields during the upcoming kharif season.

The situation carries major implications for the global rice trade, particularly given Indias dominant role in exports. Any policy-led export restrictions triggered by domestic production concerns could tighten global rice supplies considerably, as competing exporters such as Vietnam, Thailand, and Pakistan possess relatively limited exportable surpluses.

Outlook

The period from May to August represents the key transplanting and sowing window for Asias rice crop ahead of the monsoon season. If elevated fertiliser prices persist through the planting cycle, reduced input usage could eventually translate into lower yields during harvest, converting the present cost shock into a broader production and food security challenge.