Urea prices in the US have significantly declined, returning to levels seen before the Iran conflict. Granular urea in New Orleans dropped to $453.50 per short ton as of June 7, a 36% decrease from mid-April highs and the lowest price since February 6. This rapid fall is attributed to the receding risk premium from the Iran conflict, which had previously disrupted approximately one-third of globally traded urea supplies due to the effective closure of the Strait of Hormuz.
The decline in fertilizer prices is also influenced by other factors beyond the Middle East. China temporarily removed its export floor price for urea, leading to aggressive short selling and a substantial drop in global values. Weak grain prices, with corn falling below $5 a bushel, have also reduced demand from farmers, offsetting some benefits of lower fertilizer costs. Additionally, planting activities have largely concluded in the Northern Hemisphere, contributing to a seasonal dip in demand.
While the decrease in urea prices could lower production costs for farmers and help curb food inflation, experts caution that energy prices remain elevated, and the fertilizer market is still susceptible to renewed Middle East tensions. The US and Iran are currently in a 60-day negotiation window for a preliminary peace deal, and if a ceasefire holds, prices could stabilize. However, continued geopolitical sensitivity means any new disruptions could drive prices higher again. Almost 600 vessels are still awaiting passage through the Strait of Hormuz, underscoring the ongoing volatility.
