On the menu today: Dear national media, I see that last night, a Florida state house special election in a district that includes President Trump’s Mar-a-Lago club flipped from a Republican to a Democrat. I’m not saying that election result isn’t newsworthy at all. But we know that if that special election race had gone 51 percent to 49 percent the other way, no one outside of that district would care. Because of this election, the Republican majority in the state house will change from 85–34 to 85–35. Little in the Florida state government or laws is going to be altered because of this election. Last night’s election was for the remainder of the term; keep in mind, the Florida state house has finished its regular legislative session for the year; there will be a budget-focused special session in mid-April, and possibly a redistricting-focused special session as well. Democrat Emily Gregory will presumably run for reelection in November.
Turnout yesterday was about 33,000 people. In 2024, about 96,000 people voted in this state legislative district, and in 2022, about 75,000 people voted here. Special elections have much lower than usual turnout, and sometimes strange things can happen. Again, not completely unnewsworthy, but not exactly shocking, either. In November’s election, with the usual midterm-year turnout, it would be surprising if the Republicans did not win the seat back; the previous Republican representative, Mike Caruso, won his last two elections with a bit more than 59 percent.
But a Democratic victory in a usually Republican district gives the national media another chance to say “neener neener neener” to President Trump and Republicans, and we know how much they love to do that.
I point this out because the outcome of a low-turnout special election in a state legislative chamber that is overwhelmingly Republican doesn’t seem all that consequential compared to the fact that a whole bunch of people around the world are going to starve to death because of the Iranian stranglehold on the Strait of Hormuz.
This isn’t me being Paul Ehrlich, this is just an observation that when fertilizer doesn’t get to farmers, they grow fewer crops, and when farmers grow fewer crops, food prices go up, and when food prices go up, the poorest people in the world starve. That feels like it should be a bigger deal in our news cycle, doesn’t it? Read on.
A Global Food Crisis in the Making
It’s not that no ships can pass through the Strait of Hormuz; it’s that they need to be approved by the Iranians either through geopolitical alliance; pay a “toll”; or take their chances that they don’t run into an Iranian missile, drone, or mine. The Lloyd’s Market Association’s best summary, as of Monday:
Since the start of March to late last week there has been very little traffic through the Strait of Hormuz. According to Lloyd’s List intelligence which covers cargo carrying vessels of more than 10,000 dwt, there have been 111 transits in total, although there may have been more who transited with their satellite tracking switched off. Lloyd’s List also stated that there have been 78 eastward bound vessels and 33 westbound. The latter is largely sanctioned/shadow fleet tonnage.
In terms of the types of vessels transiting, the best information to hand is that this is made up of 39 bulk carriers, 23 crude oil tankers, 16 containership, 14 product tankers, 10 gas carriers and 9 others. In terms of ownership/flag, the primary ones are Iran (26 percent), Greece (17 percent) and China (9 percent).
In terms of whether there is any link to Iran (i.e. ownership, flag, sanctions, shadow fleet, or caller to Iran); it is believed that over 60 percent of all traffic has an Iran nexus or has negotiated consent from Iran to transit.
Keep in mind, before the war, on average about 138 ships per day passed through the Strait of Hormuz. (And to think that some people objected to the term “stranglehold” in the headline of the March 11 edition of this newsletter.)
Back on March 12, the Carnegie Endowment for International Peace sounded the alarm about how the drastic reduction of shipping through the Strait of Hormuz affected farmers’ access to fertilizer, even in countries quite far from the Persian Gulf:
The Gulf region is a key producer not only of liquified natural gas (LNG) and oil products but also of fertilizer. About one-third of global seaborne trade in fertilizers typically passes through the Strait of Hormuz, which has been nearly entirely closed since the United States and Israel attacked Iran on February 28. In particular, Gulf countries are important producers of nitrogen fertilizers, which depend primarily on natural gas burned at high pressure in the presence of hydrogen to synthesize ammonia. (The hydrogen usually comes from natural gas as well.)
But it’s not just that Gulf fertilizer can’t make it to export markets such as Sudan, Brazil, or Sri Lanka. It’s also that fertilizer producers elsewhere lack key ingredients. This is where the second-order effects of a supply chain crisis appear, just as they did during Russia’s invasion of Ukraine in 2022, which sent fertilizer prices soaring.
Deprived of their natural gas supplies from Qatar, fertilizer firms in India, Bangladesh, and Pakistan have had to shut down production. Egypt, another important producer, has lost its gas imports from Israel and must turn to the ever-pricier LNG market. The benchmark price of urea, the most widely traded fertilizer, is up about 30 percent in the last month.
According to a United Nations report, in 2024, the countries that most relied on fertilizers imported by sea and originating from the Persian Gulf region included Sudan, Sri Lanka, Australia, Tanzania, Somalia, Pakistan, Thailand, Kenya, and New Zealand.
There’s never a good time for fertilizer — and the cost of transporting it! — to become significantly more expensive, but there are definitely times that are worse than others. And this time of year, early spring, is a particularly bad time if you’re in the northern hemisphere. From CNBC:
Farmers in the northern hemisphere are heading into the crucial spring months, during which major fieldwork must begin. Their peers in the south, meanwhile, are busy harvesting crops before the winter sets in. . . .
“It’s a long supply chain — if farmers aren’t able to get the urea that they need, crop yields will inevitably go lower,” said Chris Lawson, VP of market intelligence and prices at CRU. “Nitrogen is the main nutrient that a crop needs to grow, [and] there will be inventories that can be drawn down, so you’re not really going to see an impact on crop yields and a loss of crop production until later in the year.”
Dawid Heyl, a co-portfolio manager for the Global Natural Resources strategy at Ninety One, told CNBC that nitrogen fertilizers like urea were at the forefront of the Middle East crisis because — unlike other fertilizer groups like potash and phosphates — nitrogen is “the one element that you need to get to the plant every single year.”
“You can skip a season of potash, you can skip a season of phosphates, but you can’t skip a season of nitrogen,” Heyl said.
Hey, guess which countries drastically reduced their fertilizer exports earlier this month? Which regimes are most inclined to put the squeeze on vulnerable countries to maximize their leverage? I’ll bet you guessed the first one:
China is tightening its curbs on fertilizer exports as the war in Iran disrupts trade of key crop nutrients, driving up prices globally.
The government has asked exporters to halt outbound shipments of nitrogen-potassium fertilizer blends, people familiar with the matter said. Beijing also reiterated existing export restrictions on urea, quashing traders’ hopes that new sales quota would be issued soon, they said.
With the latest measures, the country has effectively halted outflows of most fertilizer types, including compound varieties, said the people, who asked not to be named as they were not authorized to talk to the media. A key exception is ammonium sulfate, which made up about half of the country’s fertilizer shipments last year and is so far unaffected, they added.
If you read this newsletter regularly, you can probably guess the other major geopolitical villain and source of fertilizer that suddenly dramatically cut their exports:
Russia, which controls up to 40 percent of the global trade in ammonium nitrate, said on Tuesday it will stop exports of the fertilizer for one month until April 21 to ensure sufficient supply during the spring planting season.
Russia, a major fertilizer exporter, lacks the capacity to boost production this year amid a global supply crunch caused by the closure of the Strait of Hormuz, through which 24 percent of global trade in ammonia, an ingredient of ammonium nitrate, passes.
The regime in Moscow may not be the root of all evil, but it’s not for lack of trying.
In other words, nearly simultaneously, three of the world’s biggest suppliers of nitrogen fertilizers (China, Russia, and the Persian Gulf states) stopped selling on the global market. That’s an enormous gap for other countries to make up, and increasing fertilizer production capacity can’t happen overnight.
And while U.S. farmers aren’t the ones most directly affected . . . they’re not completely immune from the effects of more expensive fertilizer around the world. From the Associated Press:
Tennessee farmer Todd Littleton expects to pay $100,000 more for fertilizer this season, a 40 percent spike from his bill last year, thanks to the war in Iran — and he is scrambling to cover that extra cost.
“The problem is, we’re so strained financially coming into this issue,” said Littleton, a third-generation farmer from Gibson County in the state’s northwest corner. “We have had a couple of record losses the last couple years, so everyone’s kind of grabbing at straws anyway, and then to have input prices increase yet again, it just really couldn’t happen at a worse time.” . . .
About 15% of fertilizer imports to the U.S. are from the Middle East, and about half the global supply of the key ingredient urea comes from the region, along with 30% of ammonia, according to the American Farm Bureau Federation.
“When the ports started raising their nitrogen prices due to the conflict due to shipping concerns, that directly affects me here on the farm,” Littleton said.
But it could be worse, as some farmers may not be able to obtain fertilizer at any price, said Zippy Duvall, president of the American Farm Bureau Federation.
“We’re being told that many of our farmers who haven’t preordered their fertilizer and paid for it may not even obtain the fertilizer that they’re going to need during the season or for spring planting,” Duvall said. “That’s why this situation is so serious.”
It’s a similar story for the corn growers in Iowa, according to the Des Moines Register:
Mark Mueller, a northeast Iowa farmer, said his price for anhydrous ammonia ― another form of nitrogen fertilizer produced with natural gas ― climbed $100 to $950 a ton, or about 12 percent, over four days in early March. Mueller, the Iowa Corn Growers Association board president, said another supplier “quit taking orders for nitrogen fertilizer,” sending an email to customers that said, “We’re not sure we can get it.”
When farmers face supply shortages or major price spikes, “those impacts ripple through the entire food chain” resulting in “higher prices for our families across America,” said Zippy Duvall, president of the Farm Bureau, who raises chickens and beef cattle in Georgia.
Higher costs of fertilizer and production means Americans will pay higher grocery bills. But when the cost of food goes up, the poorest people in the world starve to death.
On a planet of about 8.2 billion people, about 670 million people face hunger. Michael Werz, a senior fellow at the Council on Foreign Relations, lays out that the ripple effects will hit hardest on Sudan, South Sudan, Yemen, Mali, and . . . the Gaza Strip. He points out how Russia halting the export of raw materials for fertilizers shortly after the invasion of Ukraine had a domino effect on other countries’ willingness to export food:
At the time, Russia produced 25 percent of the world’s raw materials for fertilizers, the export of which the Kremlin restricted immediately. A chain reaction followed: countries restricted or halted their food exports. Serbia stopped exporting wheat, corn, flour, and cooking oil. Argentina, India, Indonesia, and Turkey took similar measures. With nearly half of the world’s population depending on food produced with the help of fertilizers, rising food prices further complicated efforts to combat hunger in conflict-ridden and fragile states like Afghanistan and Haiti. . . .
The cost was most pronounced in vulnerable societies, with the conflict driving a total of 27.2 million more people into poverty and 22.3 million more into hunger in the two years following the invasion. As so often is the case, Sub-Saharan Africa was particularly exposed.
I know there’s no “neener neener neener” angle, U.S. media, but try to pay attention.
If I were an American administration that wanted to rally world opinion against the remaining Iranian regime and their ruthless decision to take the Strait of Hormuz hostage, I would point out how the mullahs are willing to starve the world’s poorest people in order to get what they want. But if this administration cares about world opinion, they’ve hidden that fact quite well.
ADDENDUM: There is a picture floating around social media, supposedly of Iran’s Ayatollah Mojtaba Khamenei, in a hospital bed with one leg amputated and wrapped in more bandages than Dengar from The Empire Strikes Back. One more roll of gauze and tape and the guy’s gonna look like a kid dressing up as a mummy for Halloween.
The president says the Iranians are “totally defeated,” but that seems like an exaggeration. You can’t say the ayatollah doesn’t still have a leg to stand on.