Fertilizer Prices Up 50 per Cent, Food Prices Firm Up on Middle East Crisis

Chennai: After the strike on Qatar Energy's natural gas facility, the company has extended force majeure for five years. The crisis has hit fertilizer prices, which have already increased by 50 per cent. Around 30 to 40 per cent of $11.8 agricultural exports are expected to be lost due to the crisis.

“Fertilizer shock due to the Qatar strike will impact India’s Kharif crop. The missile strike on Qatar’s Ras Laffan hub, disrupting nearly 17 per cent of global LNG capacity, has created a sharp ripple effect across global fertilizer markets. Since natural gas is the key feedstock for urea and ammonia, prices have surged — urea rising 50 per cent to $720/t and ammonia to $600 per tonne, reflecting tight global supply,” said Ajay Kedia, MD, Kedia Commodities.

For India, strong inventory levels — 17.73 MMT fertilizer stocks, 2.51 MMT DAP, and 1.7 MMT urea imports lined up—provide a buffer for the upcoming Kharif season. This ensures that immediate sowing requirements are unlikely to face disruption.

However, the cost side remains a concern. Domestic plants are operating at 70% gas supply and rising global prices have already pushed urea costs up 15% in March. This could increase subsidy burden and compress farmer margins.

If the crisis prolongs, India may face higher input costs, elevated food inflation, and pressure on Kharif profitability, making energy markets a key determinant of agricultural stability in 2026.

According to Abhijit Banerjee, Senior Research Analyst, Religare Broking, the effects are already visible in the agricultural sector. Prices of staple grains such as rice and maize, along with vegetables, have risen by 10–16 per cent. Edible oils like soybean and palm oil have also seen a 5–7 per cent increase. Supply constraints are being exacerbated by global shifts, such as Indonesia diverting palm oil supplies, further tightening availability. As a result, both production and consumption are likely to be affected in this price-sensitive market, with consumption projected to decline by 5–10 per cent.

To mitigate shortages, India may need to diversify its sourcing of natural gas, LPG, and fertilizers by turning to alternative suppliers such as Russia, the United States, Nigeria, and other African nations. However, such adjustments take time and may not immediately offset the disruptions.

Export logistics have also taken a hit. Approximately 20% of India’s agricultural trade has been affected, with about 4 lakh tonnes of basmati rice stuck at ports or in transit. This has led to a 5–7% decline in basmati prices due to supply bottlenecks. Additionally, exporters are being forced to sell premium-quality goods in domestic markets at discounted rates, which is dragging down prices across other grades by 10–12%. If the crisis persists for six to eight months, overall agricultural exports could fall by 30–40% from $11.8 billion levels.

To navigate the crisis, both government and industry must act swiftly. Diversifying export markets, including countries like China, Mozambique, and Nigeria, should be prioritized. Additionally, government support through relief schemes aimed at exporters amid geopolitical tensions—backed by an allocation of Rs 497 crore—could help cushion the impact and stabilize the sector, he said.