Middle East tensions could trigger food price shock, warns fertiliser boss – Financial Times

Middle East tensions could trigger food price shock, warns fertiliser boss – Financial Times

Impact of Middle East Tensions on Global Food Security and Fertiliser Supply Chains

Introduction

The ongoing geopolitical tensions in the Middle East have raised significant concerns regarding the stability of global food supply chains. This report highlights warnings from industry leaders about potential disruptions in fertiliser and energy supplies, emphasizing the implications for achieving Sustainable Development Goals (SDGs), particularly SDG 2 (Zero Hunger), SDG 12 (Responsible Consumption and Production), and SDG 13 (Climate Action).

Risks to Fertiliser Supply Chains

Svein Tore Holsether, CEO of Yara, one of the world’s largest fertiliser companies, has alerted stakeholders to the risks posed by heightened tensions near the Strait of Hormuz. This critical maritime passage accounts for:

  • 40% of global urea transport
  • 20% of global liquefied natural gas (LNG) flows

Any disruption in this region could have cascading effects on global food production, impacting crop nutrient availability and energy supplies essential for fertiliser manufacturing.

Recent Disruptions and Market Volatility

Recent events, including the shutdown of Israeli gas fields affecting fertiliser production in Egypt, exemplify the fragility of supply chains. Key points include:

  1. Fertiliser markets have experienced extreme volatility in recent weeks.
  2. More than 20% of global urea production has halted due to conflict and supply interruptions.
  3. Iran has ceased operations at all ammonia plants citing security concerns.
  4. Egypt remains offline due to halted Israeli gas supplies.

These disruptions threaten SDG 2 by potentially increasing food insecurity through reduced fertiliser availability.

Geopolitical Impact on Energy and Fertiliser Markets

Tensions between Iran and Israel have caused fluctuations in Brent crude prices, briefly exceeding $80 per barrel before stabilizing. Industry analysts warn that these conflicts have led to:

  • Major disturbances in nitrogen markets
  • Ongoing risks to phosphate, potash, and sulphur supplies
  • Significant portions of key fertiliser exports passing through or produced west of the Strait of Hormuz

These factors contribute to the fragility of the global food system and underscore the need for resilient supply chains aligned with SDG 12.

Historical Context and Current Challenges

The fertiliser market last faced a major disruption in 2022 due to Russia’s invasion of Ukraine, which caused natural gas prices to surge, escalating fertiliser costs and triggering a global food price crisis. Since then:

  • Crop nutrient prices have somewhat eased with declining natural gas prices.
  • Europe’s fertiliser sector remains pressured by increased Russian market share.
  • Sanctions have limited Russian natural gas exports but exempted food and crop nutrients, allowing continued fertiliser production.

These dynamics highlight the intersection of geopolitical conflict and sustainable agriculture, relevant to SDG 2 and SDG 16 (Peace, Justice, and Strong Institutions).

Policy Responses and Strategic Recommendations

Holsether welcomed the European Union’s recent imposition of tariffs on Russian fertiliser imports but noted the measure was overdue. Key recommendations include:

  1. Avoiding past mistakes in energy import dependency by diversifying food and fertiliser supply sources.
  2. Recognizing and countering the weaponization of food and fertiliser in geopolitical conflicts.
  3. Supporting Ukraine’s agricultural sector, which has suffered from land mines, occupation, and reduced productivity.

These actions are critical to advancing SDG 2, ensuring food security, and promoting sustainable agricultural practices.

Impact on Ukraine’s Agricultural Output

Ukraine, a major global food exporter, has experienced a decline in agricultural production due to ongoing conflict:

  • Over 20% of farmland is mined, occupied, or unusable.
  • Grain and oilseed production decreased from 78 million tonnes in 2023 to 72.9 million tonnes in the current year.
  • Prior to the conflict, Ukraine’s food exports fed approximately 400 million people annually.

Restoring Ukraine’s agricultural capacity is vital for global food security and aligns with SDG 2 and SDG 17 (Partnerships for the Goals).

Conclusion

The current geopolitical tensions in the Middle East and Ukraine pose significant threats to global fertiliser supply chains and food security. Addressing these challenges requires coordinated international efforts to strengthen supply chain resilience, promote sustainable agricultural practices, and uphold the Sustainable Development Goals, especially those targeting hunger eradication, responsible production, and peace.

1. Sustainable Development Goals (SDGs) Addressed or Connected

  1. SDG 2: Zero Hunger – The article highlights risks to global food production and food security due to disruptions in fertiliser supply chains and agricultural output.
  2. SDG 7: Affordable and Clean Energy – The article discusses the impact of energy supply disruptions, particularly natural gas and LNG, on fertiliser production and prices.
  3. SDG 12: Responsible Consumption and Production – The article touches on the need to manage supply chains and imports responsibly, including the EU’s tariffs on Russian fertiliser.
  4. SDG 16: Peace, Justice and Strong Institutions – The article references conflict and geopolitical tensions affecting food security and supply chains, including the war in Ukraine and tensions in the Middle East.

2. Specific Targets Under Those SDGs Identified

  1. SDG 2: Zero Hunger
    • Target 2.3: By 2030, double the agricultural productivity and incomes of small-scale food producers.
    • Target 2.4: Ensure sustainable food production systems and implement resilient agricultural practices.
    • Target 2.a: Increase investment in rural infrastructure, agricultural research, and extension services.
  2. SDG 7: Affordable and Clean Energy
    • Target 7.1: Ensure universal access to affordable, reliable, and modern energy services.
    • Target 7.a: Enhance international cooperation to facilitate access to clean energy research and technology.
  3. SDG 12: Responsible Consumption and Production
    • Target 12.2: Achieve sustainable management and efficient use of natural resources.
    • Target 12.4: Environmentally sound management of chemicals and wastes.
  4. SDG 16: Peace, Justice and Strong Institutions
    • Target 16.1: Significantly reduce all forms of violence and related death rates everywhere.
    • Target 16.6: Develop effective, accountable, and transparent institutions at all levels.

3. Indicators Mentioned or Implied to Measure Progress

  1. SDG 2 Indicators
    • Prevalence of undernourishment and food insecurity (implied through concerns about food price shocks and reduced agricultural output).
    • Crop yield per hectare (implied by the reduction in Ukraine’s grain and oilseed production).
    • Volume of food exports (Ukraine’s food exports feeding 400 million people).
  2. SDG 7 Indicators
    • Access to natural gas and LNG supply (implied by the discussion of supply disruptions through the Strait of Hormuz and Israeli gasfields).
    • Energy prices (Brent crude price fluctuations impacting fertiliser production costs).
  3. SDG 12 Indicators
    • Trade tariffs and import dependency rates (implied by EU tariffs on Russian fertiliser and dependency on Russian gas for fertiliser production).
    • Supply chain stability and market volatility indices (fertiliser market volatility mentioned).
  4. SDG 16 Indicators
    • Number of conflict-related disruptions to food and energy supply chains.
    • Percentage of agricultural land affected by conflict (20% of Ukraine’s farmland mined or unusable).

4. Table of SDGs, Targets, and Indicators

SDGs Targets Indicators
SDG 2: Zero Hunger
  • 2.3: Double agricultural productivity and incomes of small-scale producers.
  • 2.4: Ensure sustainable food production systems.
  • 2.a: Increase investment in agricultural research and infrastructure.
  • Prevalence of undernourishment and food insecurity.
  • Crop yield per hectare.
  • Volume of food exports.
SDG 7: Affordable and Clean Energy
  • 7.1: Universal access to affordable, reliable energy.
  • 7.a: Enhance international cooperation on clean energy technology.
  • Access to natural gas and LNG supply.
  • Energy price fluctuations (e.g., Brent crude prices).
SDG 12: Responsible Consumption and Production
  • 12.2: Sustainable management and efficient use of natural resources.
  • 12.4: Environmentally sound management of chemicals and wastes.
  • Trade tariffs and import dependency rates.
  • Supply chain stability and market volatility indices.
SDG 16: Peace, Justice and Strong Institutions
  • 16.1: Reduce violence and related death rates.
  • 16.6: Develop effective, accountable institutions.
  • Conflict-related disruptions to food and energy supply chains.
  • Percentage of agricultural land affected by conflict.

Source: ft.com