Inside the global fertilizer crunch

Summary

---

Catalyst with Shayle Kann: “Inside the Global Fertilizer Crunch”

Release Date: May 14, 2026
Guest: Josh Linville, VP Fertilizer, Stonex

---

Brief Overview

This episode dives deep into the ongoing global fertilizer crisis triggered by a confluence of geopolitical shocks. Host Shayle Kann speaks with fertilizer market expert Josh Linville to unravel the factors behind skyrocketing fertilizer prices, the structural vulnerability of global supply chains, and the critical impacts on food security. The conversation explains why the fertilizer crunch is arguably more consequential than recent energy shocks and explores possible ways forward.

---

Key Discussion Points & Insights

1. A Stacking Shock, Not a One-Off Event

[00:07–04:05]

• The global fertilizer market has entered unprecedented supply tightness due to the Strait of Hormuz closure, following US and Israeli airstrikes in Iran.
• Other compounding factors:
  • Ongoing Chinese export bans
  • Reduced European fertilizer production due to high gas prices (Russia/Ukraine war)
  • Absence of a global strategic fertilizer reserve

Quote:
“This isn't a single shock story. It's a stacking shock story… There’s no strategic fertilizer reserve. So the global system was, to borrow a phrase from my guest today, already living on a razor’s edge.”
— Shayle Kann [01:35]

---

2. How Global Fertilizer Markets Differ From Oil/Gas

[05:10–07:21]

• Fertilizer is harder to store long-term than oil; it degrades quickly.
• No government-controlled reserves exist, but large stocks are held in retail and farmer networks.
• North America is relatively insulated:
  • Self-sufficient in potash and phosphate
  • Produces much of its own nitrogen (UAN, anhydrous), except for urea, which is largely imported.

Quote:
“We as a market have experienced a supply tightness that we've never seen in the history of our markets... The straight of Hormuz was just that shot of adrenaline that nobody really needed.”
— Josh Linville [04:16]

---

3. Manifestations: Pricing, Shortages, Regional Effects

[07:21–09:29]

• India as a case study: Farmers don’t feel global price shocks due to heavy government subsidies, but recent buy-ins at over $900/ton (up to $950) illustrate extreme prices.
• Some regions, like Australia, have seen reduced demand due to drought—delaying visible shortages.
• Asia and Eastern Europe flagged as likely soon to experience acute scarcity.

Quote:
“Fortunately, through all of this, we've not heard anybody really jumping up and down saying, I cannot get my hands on product at the right price... The longer this goes on, the more likely that is to happen.”
— Josh Linville [09:10]

---

4. Pre-Hormuz Structural Supply Risks

China’s Export Decisions
[10:07–11:47]

• China: historically #1 phosphate, #2–3 urea exporter.
• Current export bans, designed in part to secure domestic food production and political stability, have drastically tightened global supply.
• China has indicated exports may resume in August—but it’s highly uncertain.

Quote:
“Why not stop those exports? In doing so, you're keeping domestic supplies tight when the rest of the world is struggling. And you’re keeping your domestic price low...”
— Josh Linville [10:50]

Europe’s Production Cuts
[12:12–14:41]

• Natural gas supply disruptions (post-Nordstream) and very high prices reduced fertilizer plant output to ~75% of pre-crisis levels.
• Some plants may never come back online due to economics and climate policy.

Quote:
“The European political engine… is very dirty. It's outdated. We don’t want to have anything to do with it.”
— Josh Linville [14:24]

---

5. Strait of Hormuz: The Epicenter

[15:00–18:58]

• About one-third of global traded urea (as well as major quantities of anhydrous ammonia and sulfur) moves through Hormuz.
• Closure means not just missed shipments, but actual plant shutdowns, as storage fills up.
• Ripple effects: Nitrogen plants in dependent regions (e.g., India) cut output by up to 50%, leading to far-reaching shortages.

Quote:
“About a third of the world’s tradable urea gets exported through that waterway… With that body of water still closed to normal traffic, that means all those tons are locked away and just missing.”
— Josh Linville [15:00]

• Product switching is only possible within nutrient “silos” (nitrogen, phosphate, potash)—not between them.

---

6. Market Dynamics & Potential Scenarios

[21:10–28:02]

• The market is in a relative lull after spring application; but looming shortages in fall/winter as demand picks up.
• Hypothetically, if Hormuz reopened now, a flood of late cargoes might crash prices temporarily, but wouldn’t compensate for lost or delayed supply through critical planting seasons.
• Quality also degrades the longer urea sits on ships: “You’re not talking years, you’re probably talking months.” ([27:27])

Memorable Moment:
“That’s such an odd dynamic in the market where you've got this extreme supply tightness. And at the same time, if that supply were to show up tomorrow, there would be no demand for it.”
— Shayle Kann [26:35]

---

7. If Closure Persists: “It Becomes eBay”

[28:02–31:40]

• If the strait remains closed into summer/fall, real shortages loom:
  “It becomes eBay… Who’s willing to pay the most?” ([28:20])
• Fertilizer production expansion is slow, capital intensive, and often focused on the “wrong” nutrients (e.g., anhydrous not urea).
• Green/blue ammonia facilities are in the works but risky and years from operation.
• Building a new world-scale plant: 3–5 years, $3–5 billion investment ([29:46–31:40]).

---

8. North America’s Position & Policy Dilemmas

[32:31–35:12]

• US and Canada are largely buffered—except for urea, which is still imported.
• US could limit exports “to replicate what China has done,” but free market dynamics mean such steps are fraught and risk backlash.
• Higher prices would most acutely impact non-soy crops:
  • Corn (largest US nitrogen demand), plus wheat, cotton, rice, etc.

Quote:
“Good intentions don’t always equal good results.”
— Josh Linville [34:22]

---

Noteworthy Quotes

• “You can’t eat or drink oil and gas… This is why I think fertilizer becomes such an important topic. It grows the food that we need to eat. It impacts the grocery store.”
  — Josh Linville [36:44]

• “The entire structure of this marketplace stays higher priced than average, probably through at least spring of '27.”
  — Josh Linville [24:23]

---

Timestamps for Important Segments

• Global context & initial shock: [00:07–04:05]
• How the fertilizer market works: [05:10–07:21]
• Pricing & shortage dynamics (India, Australia): [07:43–09:29]
• China’s export ban explained: [10:07–11:47]
• Europe's production reduction caused by energy crisis: [12:12–14:41]
• Strait of Hormuz’s pivotal role: [15:00–18:58]
• Supply chain rigidity & switching constraints: [18:01–18:58]
• Seasonal demand and inventory dynamics: [21:10–26:00]
• Potential for true shortages, global “eBay” scenario: [28:02–29:46]
• Production expansion obstacles & timeline: [29:46–31:51]
• North American market insulation vs. global impacts: [32:31–35:12]
• Biggest crop risks: [35:12–36:17]
• Closing reflections on why fertilizer matters most: [36:44–37:03]

---

Tone & Takeaways

The conversation is urgent and sobering, laced with real-world expertise and practical realism. The speakers use accessible language and clear analogies to make technical issues clear, but at every turn, the underlying message is clear: the global food system is now highly vulnerable to supply shocks far outside the awareness and control of most markets and governments. While North America is comparatively insulated, the rest of the world faces a very real risk of scarcity and knock-on effects for food inflation, with developing countries most exposed.

---

For listeners: Even if energy markets are dominating headlines, the fertilizer crunch may be the “more economically consequential” story—one with direct stakes for food security worldwide.

---

Transcript

[Latitude Media Host]

Latitude Media, covering the new frontiers of the energy transition.

[Shayl Khan]

I'm Shayl Khan. I lead the early stage venture strategy at Energy Impact Partners. Welcome to Catalyst. So it's been, as of this recording, a little over 10 weeks since US and Israeli airstrikes hit Iran and a little over 10 weeks since the Strait of Hormuz effectively shut down. Most of the energy world has been focused on what that means for oil prices and LNG flows and all of that matters, obviously, but. But there's another story unfolding in parallel that for a lot of people both in the United States and globally, might actually end up being the more economically consequential one is what's happening to the global fertilizer market. Up to a third of the world's seaborn fertilizer trade transits the same choke point as the oil. Three of the top 10 global urea exporters, Qatar, Saudi Arabia and Iran, sit behind the straight. Roughly half of the world's tradable sulfur supply originates in the Persian Gulf and. And by some accounts, a million tons of finished urea is sitting on vessels right now, unable to get out. A barge of urea at New Orleans was trading in the high four hundreds the day before the war started. The high trade since then has been about 700. At first glance, this kind of seems like a textbook commodity shock. The straight closes, prices spike, prices settle and shipping reopens, life moves on. But I'm actually not sure that's the right frame. This isn't a single shock story. It's a stacking shock story. China has been almost entirely absent from the urea and phosphate export market for months now because of their own export ban that technically runs through August, though we'll see Europe is still running nitrogen at around 75% of capacity because of gas costs that have been high tracing back to 2022 and the Russian invasion of Ukraine. The world's largest producers were basically already walking into this Hormuz crisis with almost no shock absorption to give, and there's no strategic fertilizer reserve. So the global system was, to borrow a phrase from my guest today, already living on a razor's edge. It's a little bit scary. So to walk through where all this goes from here, I was joined today by Jocelyn Ville. He's the Vice President Fertilizer at Stonex, and as you will soon see, a deep expert in these markets. That's all coming up after the break.

[Energy Hub Announcer]

When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility. Built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid, planning on coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale, predictive, verifiable, and designed to perform when it counts. Learn [e-mail] trillions of dollars are flowing

[Alfred Johnson]

into clean and critical infrastructure. But those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux and host of a brand new podcast, Critical Capital. Each episode I talk with people deploying capital, shaping policy and building the clean economy. Tune in as we unpack how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts.

[Latitude Media Host]

Catalyst is supported by Fishtank pr, an award winning PR firm focused on climate and energy tech, renewables and sustainability. Fish Tank is known for generating prominent and effective media coverage for the brands they work with. If you want a PR partner that's thoughtful, shoots straight and gets results, you'll like, Phishtank Print. To learn more about Fish Tank's approach, visit fishtankpr.com that's F I S C H fishtankpr.com

[Shayl Khan]

Josh Welcome.

[Josh Linville]

Hey, thanks for having me on. It's a fertilizer market's got a few things to talk about.

[Shayl Khan]

That's that's how I understand it to be. Let's do it. Start with what's been going on over the past 10 weeks since the US invaded Iran. Like what's happening in the fertilizer market at the high level.

[Josh Linville]

We as a market have experienced a supply tightness that we've never seen in the history of our markets. Now we've had periods where supplies have gotten snug, we've seen situation where prices have gotten high, but nothing ever to this extent. And it's all surrounding the Strait of Hormuz, or so the market likes to think. The problem is, if you go back to January 1, nitrogen markets and phosphate markets were already dealing with supply tightness because of European production rates, because of a lack of Chinese exports, because the ongoing Russia Ukraine war. The straight of horror moves was just that shot of adrenaline that nobody really needed. So it's just, it's a period that we've never seen in this marketplace. We've always theorized, but it's always one of those tongue in cheek like who in the world would ever think the straight horror moves was going to shut down for 10, 11 weeks. But here we are and we're just trying to get through it and trying to kind of transition from the spring season to the summer season and figure out how's all this going to play out.

[Shayl Khan]

So there's a lot to unpack there because I think you made one key point which is this is this is about the straight of Hormuz. But certainly Jennifer Moose was maybe like a straw that broke the camel's back kind of situation and the market was already tight before that. If I could take a big step back, I think I as well as many of our listeners are pretty familiar with energy markets and less so with fertilizer markets. Is the fertilizer market similar to the energy market in that, you know, individual countries may have stockpiles and there's, you know, a pretty dynamic trade that you'll have countries that are net importers, others that are next net exporters. Some are self sufficient, some are not. Like orient me in how the global fertilizer market actually works.

[Josh Linville]

I would say they mirror in a lot of the ways you just mentioned, except there's not strategic reserves. That's one of the things that actually has been talked about quite a bit. Since all this is broken loose from a US Perspective, people are like, well, we need to have a fertilizer strategic reserve like we have with oil. The problem is when you look at oil, it's a much, much easier product to store for years, for decades for assuming you do it correctly. Fertilizer just does not store that well. It breaks down very quickly. And there's always a question like, well, where does it go to? If you ever need to call on gets it at what price and how does it get there? And so it's just not something that really makes sense. Now a lot of countries around the world, us included, have a tremendous amount of storage already built in through their retail network and a growing farmer network. So it may not be something that's government controlled, but there is a lot of storage that's out there. And that's the one thing that helped out North America. We are self sufficient on potash. From a Canadian standpoint, they are the biggest producer and exporter in the world. We are mostly self sufficient on phosphate as the spring season has shown. UAN and anhydrous, both nitrogen products. We produce almost all that we need here in the North American marketplace. Urea is the one that we need the most Imported, we are nowhere near self sufficient. Fortunately, when all this broke loose, we already had a tremendous amount of that import on its way or already here in storage. So the North American marketplace has been able to kind of get away from this whole situation, has been able to weather the storm. It's other parts of the world that we're much more concerned about.

[Shayl Khan]

So it's also kind of true in oil and gas world as well, where we've been a little bit more resilient because we're a net exporter in that space than you see in other countries. So give me a sense, I mean, you said we've experienced diversion of supply tightness that we have never seen before in the history of these markets. How has that manifested? Give me an example of pricing or shortages. What has happened as a result?

[Josh Linville]

The best thing to show as far as talk about that's actually living proof of it, is India. Now, India is a little bit of a different beast. A lot of the world farmers have to ebb and flow their demand based on where prices are. Because their price is a direct correlation reflection of what the world market is. Indian farmers, they don't care what's going on around the world. Their price stays low and steady. And that's dictated by the government. And what the government does is they subsidize the price difference between that farmer and the rest of the world. So their demand doesn't move because they just don't care. They paid one of the highest prices we've seen in a very, very long time here recently to buy 2 1/2 million tons, over $900 a ton. I think the West coast prices were $935 a ton. East coast prices were 950 plus an incredibly high price. But they were still able to find the product. What we've been watching very, very closely is countries like Australia. Now, again, I'm not gonna say. I was about ready to say, fortunately for their drought. Cause that's not the right way to say it. Right. Their drought has been terrible. But from a strict fertilizer standpoint, their demand has been much lower because the farmer's saying, I'm not getting rain, I'm not gonna invest in the fertilizer. If that rain were to come, they are gonna experience shortages because that product just isn't in place. We're watching for Asia. We think that's gonna be an area that's gonna be very, very snug. Eastern Europe, an area gonna be very, very snug. The longer this continues, now it starts to manifest. Itself in places like Africa, like in South America, because they'll be the next ones up to start buying this product. So fortunately, through all of this, we've not heard anybody really jumping up and down saying, I cannot get my hands on product at the right price. You can find it. We've not heard true shortages. The longer this goes on, the more likely that is to happen.

[Shayl Khan]

Right. So we're in the situation where, like, fertilizer prices and then assuming that gets passed through, food prices ultimately are inflationary because fertilizer prices are higher. We haven't yet reached the food shortage phase that we, we might see if things continue. I do want to go back and talk through all those dynamics that you listed out. So let's, let's do this. Let's talk about the pre Hormuz list of things that was causing supply tightness. And then I want to talk about Hormuz and the impact that it has had. So pre Hormuz, you mentioned one, which is China. So what's China's role in the global fertilizer supply chain and what changed there recently?

[Josh Linville]

Historically speaking, China is the world's largest phosphate exporter, and it's not even a close second from a nitrogen standpoint. From a urea standpoint, they are typically the world's second or third biggest exporter. And from my vantage point now, I do think that there are some domestic production situations they're going through, right? They're trying to clean up their environment, they're dealing with some input supply problems, things like that. But I think China has figured something out. Now, this is my very naive, elementary viewpoint of the world, but everybody always talks about, oh, the biggest danger is to communism, right? It's the US invading them. It's this, it's that. My point of view is it's none of those things. Communism's biggest fear is an uprising by their own people. Well, according to Google, about a quarter of their population is tied to aggressive. So if they're a net exporter of urea, if they're a net exporter of phosphate, why not stop those exports? In doing so, you're keeping domestic supplies tight when the rest of the world is struggling. And you're keeping your domestic price low because you've basically flooded your own marketplace. You've just made a quarter of your marketplace thrilled beyond any measure of a doubt, because they are some of the most competitive farmers in the world because of those low prices. And I think the government has seen that. They've just continued to sit there and say, we're going to keep these exports at bay. Yeah, we could make more money if we exported. The income flow would be great, but it's a rounding error in the China gdp. It's more important to keep a quarter of your people happy. So they've continued to keep them. The last time they had talked about they said they were going to export. They're going to start allowing it in August. Whether they're going to keep at that timeline or not, we don't know. It's China. You never know until it's too late.

[Shayl Khan]

So just to clarify, historically, China was the number one phosphate exporter, the number two urea exporter and then they basically stopped exports. And as of now they've stated they're going to start exports again this summer. But tbd, if that actually happened. So that's thing one that was already contributing to global supply tightness. Then there's Europe and the Ukraine, Russia situation. What impact did that have?

[Josh Linville]

This goes all the way back to 2021 and during that time, that is when you saw Europe basically sit there and tell Russia we're not interested in inflows from your Nordstrom 2 pipeline that you just spent all this money building. And they got into a tiff and eventually Russia shut off the flows and then somebody, I still don't think we actually know who did it. Plenty of theories, but we don't know actually blew up the pipelines under the water. Well, from Russia's standpoint, why would I go repair them? Europe doesn't want the gas. I'm not going to go spend the time and the money and the effort to repair those pipelines. European gas value skyrocketed. Right. That Dutch TTF went from whatever the normal was, 3, 4, $5 in MMBtu to I think it was August 2021, $103 in MBtu. Now since then we've normalized the market and they're finally Back to like 10, 15 is kind of their normal range. But that means their production, their nitrogen production in Europe is only sitting about 75% of normal. And that's for all of Europe. And when you start to break that down, that's about three and a half million tons of urea that's not being produced a year. That's a couple million tons of UAN not being produced a year. And that hurts. Their farmers aren't going to just sit there and say, well darn, I guess if we're not producing it, I just won't use it. That means all of a sudden those tons that aren't being produced now get shoved on the world market as an unnatural buyer and start competing with everybody else trying to buy those tons to replace them. So it's less supply and it's more demand that's helped boost prices. And that's something that's been ongoing for a while. And unfortunately, at this point in time, we're sitting in 2026. I don't know that we will ever see 100% in Europe again. I think we've got to really look at them and say, how many of these plants that have been offline now for years, how many of these will actually come back online in the future?

[Shayl Khan]

Is it in that case because they have insufficient supply of gas to feed those projects, or is it that gas prices are too high and so they'd be losing money on producing more?

[Josh Linville]

Its gas price is too high. When you look at the economics of it, it just doesn't make sense with where global nitrogen values are. And I also think there's the political aspect of it, right? The European political engine has been really charging towards green energy. And frankly, this old school, old technology nitrogen production from their viewpoint, is very dirty. It's outdated. We don't want to have anything to do with it. So you've already got bad economics for the plant and then you've got a political outlook that basically sits there and says, don't put any money in these plants because you're probably not long for this world. We're not going to support it. We're doing everything we can to shut you down.

[Shayl Khan]

Okay, so we have China stopping exports. Then we also have Europe producing less as a result of high gas prices, as a result of the Russia Ukraine war. Then the US invades Iran. Talk to me about the role the Strait of Hormuz plays in the global fertilizer trade.

[Josh Linville]

From a nitrogen standpoint, there is not a more important body of water in the entire world. About a third of the world's tradable urea gets exported through that waterway. And so we always look at the top 10 exporters in the world. That's who you really want to watch. Three of the world's biggest urea and anhydrous exporters sit behind the strait there in the Persian Gulf. It's Iran, it's Qatar and Saudi Arabia. And with that body of water still closed to normal traffic, that means all those tons are locked away and just missing. And because this has gone on for so long, those plants have had to have slowed down dramatically or completely shut down because there's Nowhere to go with that. Finished. Good.

[Shayl Khan]

They're not stockpiling. Yeah, yeah.

[Josh Linville]

There's only so much places to stockpile this stuff. I mean, after a certain point, your covered storage runs out. You've got it filled. And some people have said, well, maybe they're shipping it out into the desert and storing it out there. And listen, anything's possible, but I wouldn't think that's a step that they would want to take. So you've got to believe a lot of this product is just not being produced today because there's nowhere to go with it until the street reopens and vessels start to show up again.

[Shayl Khan]

Okay, so how much of. I mean, I don't know, give me a sense of the magnitude of the shock that has created. How much of global supply then is just has, you know, vanished while the Strait of Hormuz is closed with that body of water?

[Josh Linville]

Closed just in itself. I think we're talking about a third of the world's tradable urea gone and a good chunk of the global anhydrous. I mean, the same thing, these same plants that produce urea also produce a tremendous amount of anhydrous. But that's not even the worst part of it, right? Then all of a sudden, you got to think about, well, what else comes out of that body of water? You've got LNG shipments that are stuck behind there. And that feeds major manufacturers like India. I mean, to give you a scale of it, Europe, we're talking about, you know, their 75% production rate. That's three and a half million tons missing. India is very reliant on those LNG exports from the Persian Gulf. That's how they feed their nitrogen plants. And just to give you a scope of size, they produce over 30 million ton of urea every single year. And at one point, at their worst spot, their production rates were down to 50 or 60% of normal because of high prices, because of the lack of the input. So that's on an annualized basis, that's 15 million tons per year that was missing. That's the equivalent of all of Europe. So that's where this thing is just completely blown out, right? It's no longer just the individual products. Now we're talking about the inputs. And for phosphate, it's the lack of sulfur, the lack of anhydrous, and the high price of those. It's just this thing has just continued to branch out bigger and bigger and bigger every day. And every week as this continues.

[Shayl Khan]

You know, I guess stepping back for one second, you've talked about like, there are different products in fertilizer world. You've talked about urea and hydrous, ammonia and phosphate fertilizer. And they all have somewhat different supply chains, obviously, and the geopolitics are different for each one. How much switching can be done? Like, if the phosphate supply chain totally dries up, can the growers who are currently using phosphate switch to something else? Is that, is that something that happens? Or are you pretty locked into whatever your fertilizer is?

[Josh Linville]

You can switch around in the silos. In the typical, the major products are nitrogen, phosphate, potash. Now there's a lot of other micros out there, right? There's sulfur and everything else out there, but those are the three majors. And take nitrogen, for example. The three major products within that silo are urea, uan, and anhydrous ammonia. You can switch between those products, presuming that you have the equipment and the storage and the technology to put on the fields and things like that, because a unit of nitrogen is interchangeable between all those. Now, there are some that are going to say, listen, I'd rather do liquid, I'd rather do dry, or rather do gas, but it's all nitrogen. You cannot sit there and say there's not enough phosphate to go around, so I'm just going to make it up with nitrogen. They do completely different, separate roles from each other. So what happens in the phosphate market? Unfortunately, you can't get help from potash, you can't get help from nitrogen. It is what it is.

[Energy Hub Announcer]

Virtual power plants are becoming a reliable way for utilities to manage capacity. But enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched and being able to prove it. From the control room to the living room, Energy Hub's platform handles the full picture from near real time. Forecasting, locational dispatch, and the kind of rigorous verification that holds up when regulators, grid operators, or leadership ask, did it deliver? Easy enrollment creates momentum. Proven performance builds trust. That's why more than 170 utilities rely on Energy Hub to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks [e-mail] we're living

[Alfred Johnson]

through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers. But the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital. As I talk with people deploying capital, shaping policy and building projects. Together we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts.

[Latitude Media Host]

Are you tired of overpaying for big name PR firms but not really knowing what they're delivering? Is your comms team wasting time reviewing lengthy messaging briefs and decks instead of engaging journalists or producing content? Are you wondering why your competitors are getting press and you aren't? Fishtank PR is an award winning climate and energy tech, renewables and sustainability focused PR firm dedicated to elevating the work of both early stage and established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, Fishtank can help. Check out fishtankpr.com that's F I S C-H-Fishtankpr.com.

[Shayl Khan]

So we're 10 weeks in now to the US post invasion of Iran. I mean, the Strait of Hormuz has been closed for most of that time now. Have we, are we feeling the full effects of that at this point or is it like a delayed reaction because people have worked through whatever stockpiles they had and so on? Where are we in the cycle?

[Josh Linville]

I think we're in a situation where we've gotten past the bulk of the global demand. And what I mean by that, everything for the world from a spring perspective, Northern hemisphere is kind of wrapping up. What you have in place is what it is. That's what you're going to have. Now we're moving to this summer period, which is typically very, very slow, very, very quiet from a demand standpoint. And when you see your typical low prices for the year, the issue is going to be that period is going to be even quieter because the sellers are going to sit there and say, listen, my price needs to be incredibly high for all these reasons. They're absolutely right. And the buyer is going to sit there and say, well, look at the grain price. Look at all this other stuff. This makes no sense for me to buy it. I'm not going to do anything. So I think we turn into a stalemate. And then as we start to move into, let's say, the fall, the winter, the Q3, Q4 period of the year, now all of a sudden we're going to start to See more of the carryover effects from what's going on today. And that assumes this entire situation fixes itself. The strait reopens if it doesn't and it continues, bad goes to worst every single day that it continues. If this thing stays closed for a little while, we do have to start having conversations of who gets it, who's willing to pay the most, who's able to pay the most, get their hands on this product because there's not enough to go around.

[Shayl Khan]

Before we talk about the it doesn't open scenario, just playing through the it does open scenario sometime relatively soon, and shipments start up again, you're saying that even then, that fall period into the winter when demand normally picks up again and prices rise, that's going to be super tight already. People will have been basically frozen through the summer, but they'll need to order again. The demand side will need to pick up in the fall. Suppliers will still be tight, prices will be high. But it may not be a situation where we're effectively rationing fertilizer on a global basis. Is that right?

[Josh Linville]

Yeah, I think so. And listen, this is all theoretical, right? We've never seen anything like this in the marketplaces. I mean, it's stuff you talk about, classes you can theorize and speculate. And that's all we're doing is trying to make as good an educated guest as we possibly can. We don't quite know, but I always look at it from a very fundamental standpoint. The price, the S and D, the buyer and seller. It's all about who has more pressure. When the seller has more pressure, the price falls. When the buyer has more pressure, the price rises. And after we move out of this summer quiet period, we start to move into a situation where that buyer is like, I've got to start getting stuff. I got to start getting some of these supplies. I got farmers walking in the door, they're wanting to apply some stuff, they're wanting to buy ahead. Now all of a sudden that pressure moves back to them. And the supplier side, the sell side, can sit there and say, listen, all of these tons that weren't produced, that weren't exported, et cetera, is still carrying over. And ultimately speaking, we could see some dips here and there. But I think the entire structure of this marketplace stays higher priced than average, probably through at least spring of 27.

[Shayl Khan]

I guess it's not binary, the straight of Hormuz opening or not opening, right? You could see a trickle of ships. You could see something in between selective shipments. Who knows what's going to happen. I'm not, I'm not here to predict geopolitics, but is it kind of a linear thing like the more supply you can get out from behind the straight, the more rational and reasonable the market is going to be, the lower prices are going to be. Is it, is it just direct correlation like that?

[Josh Linville]

Yeah. And in fact, one of the things we did, we, we use a vessel tracking company and we went through and we tried to figure out how many tons of urea are sitting on vessels right now. They got caught behind the strait when it shut down. Our estimates are somewhere between 900 to a million tons are sitting on vessels right now. Literally just sitting in the Persian Gulf waiting, waiting for somebody to give them the go ahead. They can sail through safely without any sort of a fear of attack. So let's say that thing opens right now. As we're talking. All of a sudden all the news stations come out and say the strait is open. The President says, strait's open. Iran says, yeah, it's all clear, go ahead. That's 900,000 to a million tons. That needs to find somewhere to go during a historically low demand period. That's going to create a situation where prices fall, but it doesn't fix all the supplies that were lost throughout this entire 10 plus week period.

[Shayl Khan]

Because that million tons was meant to be delivered in the spring period, you're saying?

[Josh Linville]

Yes.

[Shayl Khan]

This is the interesting dynamic about the fertilizer market because it's so seasonal that you missed the window, basically.

[Josh Linville]

Yep. And that's what we're looking for for a major bearish event. If that thing opens right now, everybody in the world's going to throw their hands up and say, I don't want it. And the ship owner is going to say, well, you bought it, I bought it for spring delivery. I don't need this stuff. You know, take urea for example. Our, the next time we use urea is going to be spring of 27. I don't want to buy that at these prices this far in advance. And I think a lot of the countries around the world will do exactly that. Just sit there and throw their hands in the air and say, I'm reneging on my purchase because I don't need it right now. You find somewhere to deliver on it.

[Shayl Khan]

That's such an odd dynamic in the market where you've got this extreme supply tightness. And at the same time, if that supply were to show up tomorrow, there would be no demand for it.

[Josh Linville]

Yeah.

[Shayl Khan]

How long can it sit on that ship?

[Josh Linville]

It's going to depend on the conditions of the ship and loading and things like that and the quality of when it was produced. So, I mean, if it's good quality coming out of the facility, presume it's a, well, let's say a tight ship. Right. You don't have a bunch of leaks. You don't have humidity getting into the holds. It can last for a while. But the problem is the true nature of it is humidity is a big thing. I mean, you're sailing across the ocean, you're surrounded by water. That water, that humidity seeps its way into it, and that degrades the quality of it. It starts to go down. It starts to kind of break it apart. So I don't know. There's too many variables there. But I would say you're probably talking. You're not talking years, you're probably talking

[Shayl Khan]

months, which means that potentially if they were forced to hold it until spring 27, it would sour before then.

[Josh Linville]

Yeah, I think it'd be something where if you have the market opening sooner than later, you probably have a market that starts to diverge. Because right now it's just, listen, urea ton is uria ton. You have a little bit of a difference if it's open origin or if it's coming from this place or that place. I think you get a new variable in the marketplace where it's like these are tons that were sitting in the Persian Gulf prior to the straight of Hormuz. And I think that trades at a different delta to the rest of what we would call the normal market just because there is that fear of what the quality looks like.

[Shayl Khan]

Okay, so that's the scenario where the strait opens in the near term, and then things are still pretty wonky for a while. I don't want to fear Monger, but in the scenario where the strait stays closed for, who knows, some number of months additionally, what does that look like?

[Josh Linville]

We have to start having a very hard conversation of shortages around the world. I'm trying to think of a nicer way to say it. I don't think I have a way of doing it. If we get to the fourth of July and the straight is still closed, if we start up with my youngest is a freshman high school, be a sophomore in the fall. If he goes back to school in the fall and the strait is still closed, we have lost so much supply out there. It's now a situation of who is willing to buy it. It becomes ebay. If I'm a manufacturer that's not situated in the Persian Gulf and I've got tons. I'm going to sit there and say I have got a vessel ready to load it. I've got the tons at the port. Who's paying me the most? Submit your bids and I'll let you know who wins.

[Shayl Khan]

Is there? I presume so. When Russia invaded Ukraine and gas became tight in Europe, then of course there's been a big conversation in Europe about self sufficiency from an energy perspective. And that has resulted in lots of policy and we see versions of that all over the place. We're seeing that, I don't know with rare earths now in the United States, right. When China shuts off the supply of refined rare earths. Now we're trying to spin up our own domestic refining capacity and so on. I presume that the people are talking about that in fertilizer world right now. The import reliant countries must be thinking this is a pretty precarious and dangerous situation. Maybe we don't want to put ourselves in this position in the future. Two questions. One, is that happening? Do you see that happening? And two, how long does it take to stand up new domestic supply?

[Josh Linville]

I think it's happening to an extent. The problem is it's not happening on the products that we actually need. Like I said earlier, anhydrous is one that we produce almost all that we already need. So we're not that reliant on imports. And that's where a lot of the new nitrogen production is coming from. It's new anhydrous facilities. And a lot of it's backed by this green energy. Whether it's green or blue, it's clean energy technology. And the issue with that. And I'm not sitting there saying I'm opposed to it. I am all for new production that cleans up the environment. Best friend was a boy Scout. Most of my boys were Eagle scouts. And leave the world in a better place than what you got it. I'm all for it. But the problem is we're talking about food supplies. The product actually grows that food. And my fear is these products, the technology may be not there quite like we think it is. We're getting ahead of ourselves and we're leaning too far into it. And all of a sudden in the future we're going to figure out oh no, we went too far down this path. It doesn't quite work. We need to get back to where it was. Which brings you to the second question. Building a new facility takes years. Literally years from the second you say Okay, I want to build this, I have the funding, I want to build it. To go through the engineering, the construction process and everything like that. It's something that takes multiple years for that to actually spit out the first ton. And that's the biggest issue that we have seen with all this going on. If we're going to go through all this pain of high prices and tight supplies, you would think that, okay, to your point, we're going to increase our own production, we're going to reduce our reliance. Yes, it's worked for a long time, but it's a different world today. There's too much at stake. Well, number one, you've got to come up with three, four, five billion US dollars for a world scale nitrogen production facility. They are not cheap and there's no way to guarantee the margin like your investors are going to require. And then even if you do get all those funds, the very first ton that you produce is going to be years in the future. And so it's just from a financial standpoint, it's a very, very hard investment for most parties for who are not already in the space to enter into.

[Shayl Khan]

You mentioned the wrong kind of production is scaling. Setting aside the green part of it, I mean it's, it's anhydrous. You're saying is like most of where the new capacity. I presume you're talking about in North America or do you mean globally?

[Josh Linville]

Yes, in North America. When you look around the world, there are some new urea production facilities that are being built. In fact, India has partnered with Russia to do a partnership facility based in Russia. With the tons all flowing to India, they're trying to reduce their reliance on the rest of the world. They're doing exactly what you're talking about. They've sat there and said, listen, I know this global urea marketplace takes advantage of me every time I do one of these purchase tenders and I'm sick of it. We know the demand's going to be there, we know we're going to need to import them. So rather than be relying on the market taking advantage of us, we'll just work with Russia, produce them there, all the tons come to us, we're good. That's something, I think a lot of countries around the world need to be looking at the same thing.

[Shayl Khan]

Okay, and then so back to North America. So we're sort of self sufficient currently on urea. Right. And anhydrous. Wait, sorry, where are we self sufficient? Where do we import?

[Josh Linville]

We import a little bit of anhydrous. Ammonia in uan, but we produce most of what we need. We're self sufficient on phosphate and we're with Canada, we're self sufficient on potash. Urea is the one that we have the most imports on.

[Shayl Khan]

Okay. And I don't know. So back to a North America centric view of things then setting aside the global picture, does that dire scenario or the Strait of Hormuz remains closed for some number of additional months, are we going to see big impacts in North America or is it that we're actually pretty insulated and you know, most of the rest of the world is going to feel the, Besides, I guess China as well are going to feel the pain.

[Josh Linville]

Let's assume that the government is not going to come in and start restricting markets. And what I mean by that is mostly from an export standpoint. If there is no restriction to exports, if the rest of the world's dealing with a situation like phosphate, supplies are incredibly hard to find. Same thing with urea, people cannot find it. And the price just starts to tick higher and higher and higher. Well, if our price doesn't do anything, well, that export opportunity pops up. An arbitrage opportunity pops up and we start losing supply that we can't lose. And so that's why you see our market go with the rest of the world. And people do get a little upset. They're sitting there saying we produce most of this. Why, why is it the Henry hub is dirt cheap but my nitrogen price is sky high like the rest of the world? That shouldn't be the case.

[Shayl Khan]

Because we can export. Yeah, it's kind of the same thing that is starting to happen in the, in the, in the natural gas market because of LNG exports. Right, right. Like now, now we, yeah, okay, but see what you're saying the US would or would need to do to avoid the ramifications of that is essentially replicate what China has done, which is ban or restrict exports.

[Josh Linville]

Yep. And that will work for a lot of the products. But all of a sudden if you start to put that sort of a program on urea, well, if you can't export, how many people are going to be willing to import product to here? And we're so reliant on the imports. And it's, it's one of those things. I, I, I'm a big fan of free markets. It's cold, it's calculated, and it could not care less about your feelings. But at the end of the day it gets the supply where it should be. The more governments start to play a role in these free markets, the worse it gets. We've seen it with India, with the way that they shield their farmers from global prices. We see it with Egypt putting a $90 a ton export duty on their nitrogen products. We're starting to see more governments step in. Well intentioned, I understand why they're doing it, but unfortunately, good intentions don't always equal good results.

[Shayl Khan]

What crops are most reliant on urea? Like what would be, you know, assume this happens. Assume we impose an export ban or restrict exports and as a result we can't import as much urea. And so urea prices in the US go sky high. Like what would be the downstream effect of that?

[Josh Linville]

Basically, the one product that doesn't need nitrogen for the most part is soybeans. When you look at corn, corn is the one in the US marketplace that we look at the most because it's the biggest demand point. It's the one that requires the most fertilizer, the most nitrogen to grow that crop. But it also makes a big difference for wheat, for cotton, for rice, for all these other crops out there. And that's the thing at the end of the day is we focus on corn here in the US that's just. Corn is king. That's what drives our marketplaces. It's when we start to look at the rest of the world and we start talking about some of these places, we're like, hey, they could start having problems. Australia, if they start getting rain and they're short of urea. Wheat's a big market down there, right? They produce a lot of wheat. Eastern Europe is wheat. Look at all the stuff that Asia produces. So now we're talking about actual food stocks that are getting impacted because the lack of the fertilizers out there.

[Shayl Khan]

Well, I think we've, we've done a good tour of the state of the fertilizer market. It is a little scary. I mean, it feels a little safer to be sitting in North America as you and I both are at the moment. But. But you know, I think for all the conversation that I see, at least around the oil market and the impacts that straightforward moves closing has had on that, I see a lot less on fertilizer. It seems like it is equally, if not more impactful. So appreciate you walking me through it.

[Josh Linville]

Yeah, for sure. And that's the thing, everybody focuses on oil and gas and things like that coming from the Persian Gulf. You can't eat or drink those products end of the day. And this is why I think fertilizer becomes such an important topic. It grows the food that we need to eat. It impacts the grocery store. So it's. It's a massive, massive thing. It's nothing we've ever seen before.

[Shayl Khan]

Scary, but super informative. Thanks, Josh.

[Josh Linville]

Anytime.

[Shayl Khan]

Josh Linville is the vice president of fertilizer at Stonex. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. This episode is produced by Max Savage Levinson. Mixing in theme song by Sean Marquand. Ann Bailey edits the video version of the show. Stephen Lacy is our executive editor. I'm Shayl Khan and this is Catalyst.