Middle East briefing: Fertiliser shock risk for UK food prices

What’s happening? 

War in the Middle East has caused global prices for oil and gas to rise sharply. This has multiple impacts for UK businesses and the consumers they serve. 

For food and drink businesses, the most immediate transmission mechanism is fertiliser.  

IMF economists have also highlighted the inflation risk from higher fertiliser costs feeding into food prices. IMF Chief Economist Pierre-Olivier Gourinchas estimates a significant lagged pass-through: “Our estimate is that about half of the increase in fertiliser prices becomes an increase in food prices 12 months later.” 

Against this backdrop, fertiliser prices have risen significantly, for both domestic and imported supplies. 

Gas is a key input in production of nitrogen fertiliser. It makes up about 90% of the variable cost of this process so, as gas prices rise, the cost of fertiliser rises in concert. Fertiliser is a major route by which energy prices communicate to food prices. 

In addition, the Persian Gulf is a centre for production of fertiliser, taking advantage of abundant local gas supplies and allowing Gulf States to develop value added industrial activity. Shipping out of the Gulf is currently closed, in effect, so this source is blocked. 

Similar market effects were observed following the Russian attack on Ukraine and, presumably, any future geopolitical event that impacts energy production and trade, will see similar changes in the cost of fertiliser. 

Why fertiliser matters 

Modern food production depends on artificial fertiliser – without its global crop yields would be far below what is needed to feed the population, and the quality of production may also be affected.  

Tough choices ahead 

The UK is exposed to changes in the global market. Each year, the UK produces around 371,000 tonnes of fertiliser, but imports  a further 1,287,000 tonnes (source: OECD). 

Import exposure is only part of the story. Even UK-produced nitrogen fertiliser remains highly exposed because its main cost driver is gas, and UK gas supply is substantially imported and priced in global markets. That further accentuates the UK’s exposure to geopolitical disruption. 

Fertiliser is used most heavily in Spring. Purchasing patterns for Spring 2026 appear mixed: some UK farmers secured supplies well in advance. 

However, others have been caught short as prices rose and supply tightened following the outbreak of fighting in the Middle East. As a result, the immediate impact on food production may be uneven across farms and sectors. 

However, the cost of fertiliser for later applications is still uncertain. A quick end to the war and a restoration of “normal” market conditions would help enormously, but disruption of markets for gas and fertiliser could still linger for some time, even in the best case. 

It is highly likely that UK farmers will face higher than normal fertiliser costs in later 2026 and maybe into 2027. If so, tough decisions may be needed – there are several possible responses, none of them very attractive: 

• Use less fertiliser – accept lower yields / quality 

• Use the same amount fertilisers – accept higher costs 

• Use fertiliser more precisely – technically difficult 

• Change crop mix (e.g. plant feed wheat instead of milling wheat) 

The decision needs to be made based on imperfect information and therefore represents a financial risk. 

All of these choices involve uncomfortable compromise, likely affecting availability and farm gate prices. Ultimately, all are likely to mean higher food prices for UK consumers. 

Fertiliser prices are set in a global market, so disruption rarely stays local. Higher fertiliser costs can lead farmers in key exporting regions to apply less, switch crop mix, or accept lower yields, tightening global supply of grains and oilseeds.  

That can lift international benchmark prices and increase volatility, which then filters through to the UK via higher costs for imported ingredients and animal feed, and ultimately higher prices for consumers. 

 Beyond nitrogen: wider fertiliser constraints 

The conflict in the Middle East focuses attention on nitrogen fertiliser (including urea, one of the most widely traded nitrogen fertilisers), but nitrogen is just one of the key nutrients required to grow crops. Others include phosphate and potassium – most fertilizers contain a combination of all three. 

Phosphate and potassium are mineral resources with highly concentrated reserves, for example, Morocco holds around two‑thirds of global phosphate rock reserves. 

Potassium reserves are also concentrated (e.g., Canada holds roughly ~30% of global potash reserves), so supply cannot be rapidly diversified or expanded in the short term. 

Exploring further, global production of fertiliser is highly concentrated. Although many countries have some production, access to resources and export activity are highly concentrated, nationally. 

Countries with an exportable surplus are not necessarily friendly to the UK and other Western European countries. Big exporters like China and Russia are, at best, ambivalent and will not see supplying the UK as a high priority. At the very least, they will reserve supplies for their own use in the event of shortage. 

Fertiliser is also highly concentrated in terms of business ownership, which may mean imperfect competition. 

Further - as with many goods – global shipments often pass through logistical bottlenecks (e.g. the Suez Canal), making them vulnerable. 

Bulk transport itself is also dominated by a small number of major companies and the decisions that they make will determine the routes used and the prices charged. 

Hoping for the best is not a plan 

The events of 2022 and now 2026 have shown that fertiliser is a resilience risk for the UK food and drinks system and – ultimately – for consumers. 

Until quite recently, the UK has been able to rely on global production and free trade to supply the bulk of its needs. 

In times of global stability, this may make sense – this is a low effort approach and there is no point in producing locally what can be imported at lower cost. 

However, this position may no longer be viable. Global trade turmoil has been ongoing since at least 2018, when trade conflict broke out between the US and China.  

There is no immediate prospect of a return to peace and long-term stability, certainly not on the same terms as previously.  

It may now be time for the UK to have a National Fertiliser Strategy, relying on planning and preparation rather than trusting to the open market – which, arguably, means trusting to luck.  

Part of this may involve developing greater local production for artificial fertilisers, reducing reliance on global supplies. 

Fertiliser production is a capital-intensive business requiring major investment. Building the necessary infrastructure will need financing and - critically – long term certainty for investors. 

It may also involve increased use of natural fertilisers, including manures, digestate and other recycled organic nutrients from food waste and agricultural by products, supporting a more circular approach to nutrient management. This approach is expected to be a central feature in the governments anticipated circular economy strategy.  

Strategic stockpiling is another option to consider, particularly given that the UK currently has no publicly owned fertiliser reserves to act as a buffer against supply shocks. Both of these solutions will enhance resilience and therefore food security in the light of geopolitical instability and supply disruptions.  

Conclusion 

Fertiliser has re-emerged as a clear resilience risk for the UK food and drink system: Middle East disruption can drive higher costs both directly (through globally priced gas) and indirectly (through fertiliser supply constraints and wider commodity-price volatility). The lesson from 2022 and now 2026 is that relying on open markets alone is increasingly a matter of luck, so the case for a National Fertiliser Strategy, alongside improved nutrient efficiency, greater circular nutrient use, and credible contingency planning, is strengthening.