The Persian Gulf War is disrupting the entire value chain of global agricultural production. It has cut off access to fuel and fertilizers, endangering global food security and people’s living standards.
Forced to reduce their use of fertilizers, farmers — especially the poorest — would see yields damaged and shortages created that would worsen hunger in poor countries, according to the United Nations.
The Gulf region has become a major producer of fertilizers. A third of the world’s fertilizer trade passed through the Strait of Hormuz. Gulf countries have exported $50 billion worth of nitrogen fertilizers since 2020. The fertilizer shortage has caused input prices to soar and triggered a frantic search for new sources of supply.
Collateral damage
The Gulf is not the only region affected by the war. Fertilizer production is struggling across all fertilizer-producing regions. The war is causing both a drop and a surge in gas prices — the main ingredient in nitrogen fertilizers. India and Bangladesh have reduced their production, and Europe is under pressure.
Nitrogen fertilizers contribute to half of global food production. Reduced fertilizer use will inevitably lead to lower yields and a spike in agricultural prices, coupled with a production shock.
The damage does not stop at fertilizer production. Oil drives tractors, gas heats greenhouses. Various fuels power ships transporting agricultural products around the world. Oil is also used to manufacture plastics for food packaging, not to mention cardboard production.
All agricultural machinery that sows, harvests and sprays is at risk of being grounded due to rising oil prices. Many rice producers across Asia are reconsidering planting altogether because of the surge in fertilizer and oil costs.
Food inflation
The disruption of maritime traffic is leading to higher transport costs and longer delivery times for cereals and oilseeds. Rising oil prices are driving up demand for diesel and biodiesel, causing a significant diversion of agricultural products — soybeans, rapeseed, corn — used to manufacture biofuels, to the detriment of human and animal food supplies.
While food prices had begun to fall after the peak reached in 2022 at the time of Russia’s invasion of Ukraine, they have been rising again since March. The FAO is pessimistic about the months ahead. Shortages, it warns, tend to produce delayed price increases.
The purchasing power of Americans and Europeans, according to many economists, will decline by Christmas. In Great Britain, food inflation is expected to reach 10% in the coming months — it already stood at 3.7% in March.
The Gulf War will clearly have a strong political and economic impact. Inflation could force central banks to cut interest rates in order to revive growth. As for poor countries, where food accounts for a large share of household income, they are exposed to the risk of popular uprisings similar to the “Arab Spring”.
According to the FAO, countries in Africa, Asia and Latin America are among those most exposed to this crisis, while in wealthy nations, farmers can count on government support.
It is estimated that 45 million additional people would join the ranks of already hungry populations. The World Food Programme (WFP) does not hesitate to raise the possibility of a full-scale food catastrophe.
