(11:56 GMT) *Fertiglobe CEO: Not Enough Being Done to Avert a Global Food Crisis (11:56 GMT) *Strait of Hormuz Closure Threatens Fertilizer Usage, Particularly in Poor Countries, CEO Says (11:56 GMT) *Farmers Need Financial Support to Pay for Fertilizer, CEO Says (11:56 GMT) World's Food Supply Imperiled by Iran War, Fertilizer Manufacturer Fertiglobe Chief Says — Interview
By Adam Whittaker
Conflict in the Middle East is threatening to spike grain prices and exacerbate hunger among the world's poor, the chief executive of fertilizer manufacturer Fertiglobe says.
Global governments need to step up efforts to get fertilizer moving through the Persian Gulf and offer financial support for farmers to help offset the jump in prices, Ahmed El-Hoshy said in an interview.
Fertiglobe, majority owned by Abu Dhabi state oil company Adnoc, uses natural gas to produce fertilizers. The prices for ammonia and urea fertilizers have jumped since the conflict began, when supply from the Middle East fell and the energy supply shock sent gas prices soaring. Nitrogen fertilizers-like ammonia and urea-are particularly important for boosting yields of crops like corn, wheat and rice.
With the Strait effectively closed, Fertiglobe has been trucking some of its product from the strait by road to other regional ports, but not enough to fully offset the hit to supply. Some 30% of urea exports aren't leaving the region, El-Hoshy said. Gas prices have also risen after facilities in the Middle East were hit, pushing costs up for producers globally.
Fertiglobe has continued to produce fertilizer at a facility in Abu Dhabi and has been storing it at different locations. It also has significant production facilities away from the strait that continue to operate.
Failure to get fertilizer supplies moving or provide financial support risks worsening food shortages and triggering higher grain prices that could take time to come down, El-Hoshy said.
Overall, there is optimism that a peace agreement between the U.S. and Iran is close to being completed. President Trump and Iranian state media have both said in recent days that the strait could open up as soon as an agreement is signed.
The prospect of the waterway reopening was enough to send Brent crude futures below $90 a barrel Friday, but investors remain wary. Previous talks have stalled despite Trump saying a deal was imminent.
Fertilizers are responsible for producing the calories for around half of the world's 8 billion people, El-Hoshy estimates. With some fertilizer supply trapped in the strait and prices elsewhere high, there is a risk farmers will cut usage, depressing crop yields and tightening agricultural supply.
His comments echo warnings from the Food and Agriculture Organization of the United Nations, which said last month an impending systemic agrifood shock could trigger a severe global food price crisis.
European Union authorities said Friday they would provide 540 million euros-around $625 million-in financial support for farmers in the bloc to buy fertilizers, citing the need to ensure food security amid sharply rising costs.
Still, the impact of the conflict on fertilizer and agriculture markets is best described as "a tragedy unfolding in slow motion," analysts at ING wrote in a recent note.
Farmers in the Southern Hemisphere are disproportionately affected, given they are currently planting crops and have limited access to the credit or government support needed to buy fertilizer. Higher fuel prices also threaten to eat away at farmers' margins, El-Hoshy said.
There's been talk but not enough action to be able to deal with the risks of this continuing for a longer period of time, he said.
The time-lag effect makes the situation dangerous given it can take months for supply leaving the region to reach farmers, and missing a key planting season in the Southern Hemisphere risks hitting crop yields months in the future, El-Hoshy said.
Farmers in sub-Sahara Africa, Latin America and India are especially reliant on imports and might have to go without nitrogen fertilizers, he said.
In some lower socioeconomic countries, food production could fall.
"And that, with growing populations, could be extremely problematic," El-Hoshy said.
Write to Adam Whittaker at adam.whittaker@wsj.com