The Food and Agriculture Organization (FAO) of the United Nations has emphasized the urgent need for vessels transporting essential agricultural supplies to navigate the Strait of Hormuz promptly to prevent a surge in food price inflation later this year. FAO Chief Economist Máximo Torero highlighted that since the ceasefire began, there has been an expectation for ships to resume operations, yet many remain inactive.
In a recent podcast, FAO’s Director of Agrifood Economics, David Laborde, stated that the Strait of Hormuz serves as a crucial passage for not only oil and fertilizers but also food supplies destined for Gulf nations, making its accessibility vital.
The FAO reported that exports of critical agrifood inputs depend on this maritime route, with estimates ranging from 20 to 45 percent reliant on the Strait of Hormuz. The blockade poses significant risks for food security and economic stability in the region.
Torero warned that if vessels do not begin their journeys soon, the essential inputs required for the agrifood sector and the broader economy could be severely disrupted. He noted that agricultural production is closely tied to the planting calendar, and delays in receiving inputs could hinder crop yields and affect the upcoming growing season.
Furthermore, Torero pointed out that energy costs, including those for oil and diesel, are critical for the agrifood systems, as they are necessary for operating machinery used in planting and processing throughout the supply chain.
In an interview with Reuters, Pamela Coke-Hamilton, Executive Director of the International Trade Centre, echoed concerns regarding fertilizer shortages, particularly in developing nations. She indicated that while rising oil and gas prices may offer temporary benefits, the immediate challenge lies with fertilizer availability, which is essential for maintaining food security and stability.
Coke-Hamilton noted that a significant gap exists in fertilizer supply timelines, crucial for the next harvest, and cautioned that alternative sources for oil and gas would not alleviate the fertilizer crisis.
As of Monday, the United Nations has initiated diplomatic efforts to ensure the safe passage of fertilizer shipments through the Strait of Hormuz. The International Trade Centre has identified a high dependency on nitrogen fertilizers from Gulf producers among several developing countries in Asia and Africa, including Kenya, Uganda, South Africa, Thailand, and Sri Lanka.
According to the ITC, shortages usually lead to reduced fertilizer application and lower crop yields rather than altering harvesting schedules, with these impacts being more severe in regions like Sub-Saharan Africa and South Asia, where agricultural practices are heavily reliant on rain and planting windows are limited.
Torero specified that countries currently facing fertilizer shortages include Bangladesh and Sri Lanka, while nations like Sudan and Kenya also require access to these crucial supplies. Meanwhile, Professor Marit Kragt from the University of Western Australia stated that Australia currently has sufficient food and fertilizer supplies for the upcoming months, with no immediate impact anticipated for Australian consumers. However, she cautioned that risks may arise in the coming months if farmers need to secure additional fertilizer mid-year.
Torero further articulated that an increase in food inflation would likely contribute to overall inflation globally. He warned that countries may need to implement measures similar to those during the COVID-19 pandemic to manage rising prices, which could lead to higher interest rates and widespread economic repercussions. Laborde noted that some nations are beginning to impose restrictions on the export of fertilizers and energy products.
As May approaches, Torero stressed the importance of maintaining the ceasefire, urging that it be followed by the mobilization of vessels to prevent future inflationary challenges. He emphasized that the timely movement of ships is essential for avoiding potential food crises.
