Agri-commodity markets have not fully priced in the risks caused by concerns over rising fertilizer prices, according to Thijs Geijer, senior sector economist, food and agri, and Warren Patterson, head of commodities strategy at ING Think, the economic and financial analysis wing of ING. The key concern, they said, is that higher fertilizer prices will reduce usage, potentially weighing on crop yields and tightening agricultural supply over time. Farmers in developing nations, besides China, face pronounced risks, as they are generally more sensitive to prices than those in developed economies including the European Union.
Export Restrictions Worsen Vulnerabilities
Disruption to fertilizer markets has been exacerbated by the implementation of export quotas and restrictions by major exporters including Russia and China, the ING strategists noted. This further exposes vulnerabilities in key importing regions like Australia, Brazil, India, and the EU. The Agricultural Marketing Information System (AMIS) of the UN's Food and Agriculture Organisation (FAO) stated, "Higher energy prices may increase fertilizer costs and reduce fertilizer application rates, potentially lowering crop yields and production."
Regional Impact: India and China Face Pronounced Risks
According to research agency BMI, a unit of Fitch Solutions, "In our view, of the major agricultural markets, India faces the most imminent risk. China, which depends on sulphur imports from the region for phosphate fertilizer production, faces pronounced risks, though these remain manageable." BMI does not expect a rise in fertilizer application in Asia as farm profitability remains pressured. Overall, "still-high" input costs will restrict farm production and fertilizer use, it said. Despite concerns, the Indian government is confident of meeting demand for kharif crops during July-September, having covered 43% of its fertilizer demand for the kharif season, expecting domestic production to bridge the gap.
Signs of Easing but Affordability Remains a Constraint
AMIS reported that the fertilizer market showed signs of easing in June on improved flows through the Strait of Hormuz and softening energy prices. "While fertilizer affordability has improved in some regions, it remains a constraint in others," it said. According to BMI, per the latest World Bank Commodity Prices, fertilizer prices eased 4.6% in June overall. "Looking specifically at urea, prices eased, but remained elevated," BMI added. AMIS noted that in June, fertilizer cost indicators declined across most crops and locations, apart from rice production in China. Nitrogen prices declined as supply rebounded and subdued demand outside India.
Impact on Crop Production and Inventories
AMIS projected that Indian cereal production would decline by 2% in 2026, while Thailand would see declines of 3% in 2026 and 2% in 2027, reflecting lower fertilizer application due to higher input costs. Despite these pressures, a number of agri commodities heading into the 2026-27 marketing year are well supplied following strong output in 2025-26 amid record yields, leaving inventories at comfortable levels and helping to ease supply concerns, according to Geijer and Patterson.
| Region | Crop | Year-on-Year Change | Year |
|---|---|---|---|
| India | Cereal | -2% | 2026 |
| Thailand | Cereal | -3% | 2026 |
| Thailand | Cereal | -2% | 2027 |
Outlook: Moderate Price Strength Expected
Geijer and Patterson noted that current geopolitical conditions are clearly negative for commodity markets. However, they said fundamentals such as supply, demand, stocks, and broader economic factors remain more favourable according to the International Food Policy Research Institute (IFPRI), which helps limit the likelihood of immediate price spikes compared with previous shocks in 2007, 2010, and 2020. The expectation for 2026-27 is that while markets are expected to tighten as yields fall back from record levels, they are likely to remain comfortable, suggesting only moderate strength in prices this year. For commodity traders and procurement teams, this implies that while near-term price surges may be muted, the risk of under-appreciated supply disruptions remains, particularly for urea and phosphate fertilizers tied to exports from Russia and China.
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