Global fertilizer markets closed the first quarter of 2026 under significant pressure, with supply tightening, prices rising sharply, and volatility increasing across key nutrients, according to a new study by RaboResearch. There is growing concern that persistently high prices could lead to lower fertilizer application rates in 2027, ultimately reducing crop yields.
Escalating geopolitical disruptions and the effective closure of the Strait of Hormuz have taken a significant volume of fertilizers and key inputs out of global trade, creating a sudden gap that cannot be easily replaced.
Fertilizer affordability has declined rapidly. Prices for nitrogen and phosphates have increased much faster than those of agricultural commodities, putting pressure on farm margins and intensifying cost challenges. “Our fertilizer affordability index has moved decisively into negative territory and is expected to remain constrained throughout 2026, with only limited recovery in the second half of the year,” notes Bruno Fonseca, Senior Analyst – Farm Inputs at RaboResearch. “This raises the risk of widespread demand destruction as farmers reduce application rates, delay purchases, or shift crop choices,” warns Fonseca.
MARKET NORMALIZATION EXPECTED TO REMAIN SLOW EVEN IF TENSIONS EASE
Nitrogen markets are the most exposed and are expected to record one of the sharpest demand declines in 2026. Phosphate markets are facing similar pressure. Ongoing supply disruptions and significantly higher input costs have deepened structural tightness, with high price levels likely to persist into 2027. Potash remains relatively more balanced, although weaker affordability in other nutrients is expected to have a modest negative impact on demand in 2026.
At the same time, alternative sourcing options are becoming more limited as countries adopt stronger protectionist policies. “Overall, the fertilizer market faces a prolonged period of tight supply, weak affordability, and heightened price risk. Even if geopolitical tensions ease, normalization will be slow,” advises Bruno Fonseca. “Demand destruction is becoming unavoidable: Farmers are expected to trim application volumes in the current season and likely the next crop cycle as well.”
FUNDAMENTAL SUPPLY PRESSURES CONTINUE TO DOMINATE AGRICULTURAL COMMODITIES MARKETS
Agricultural commodity futures are currently trading at a significant premium compared with underlying fundamentals. Although prices have rallied following the airstrikes on Iran on February 28, the bearish fundamentals of an already oversupplied market, established before the strikes, remain in place.
While rising fertilizer costs are a concern, the impact on Northern Hemisphere crops in 2026 is expected to be limited, as most fertilizer volumes had already been contracted and priced before the war began. Brazil is expected to harvest another record soybean crop and a near-record corn crop, while U.S. farmers are likely to plant sufficiently large corn and soybean areas to maintain ample stocks. However, uncertainty remains for the 2026 wheat crop due to dry conditions in Canada and the U.S. Great Plains, parts of Argentina, heat stress in India, and mixed conditions in the Black Sea region. In addition, higher fertilizer costs are prompting Australian farmers to consider alternatives to wheat.
Looking ahead, while 2026 is expected to broadly resemble 2025, concerns are increasing that 2027 could see reduced fertilizer application rates due to persistently high prices, ultimately leading to lower yields. The duration of the conflict will influence both the level and persistence of fertilizer price increases, although disruptions to energy production and logistics infrastructure will take time to recover. Under normal weather conditions, 2026 is still expected to deliver large harvests, resulting in elevated grain and oilseed inventories and continued downward pressure on prices and farm economics. Overall, the market remains fundamentally supply-driven, which is likely to cap upside in agricultural commodity prices.