When the global energy hub is paralyzed, a systemic inflation driven by the triad of &#34;gas prices - fertilizer prices - grain prices&#34; is lurking in the lagging pricing logic of the agricultural product market.
According to news from the Chasing Wind Trading Desk, on March 17, Bank of America released a global agricultural strategy report indicating that as the conflict in Iran escalates, the Strait of Hormuz &#34;has effectively ceased commercial passage&#34; since early March, with multiple incidents of vessel attacks occurring in the region.
The importance of Hormuz is self-evident. About one-fifth of the world's oil transportation relies on this waterway. This conflict has caused a supply disruption of over 20 million barrels per day, marking the largest energy disturbance in decades.
However, the market quickly realized that the problem extends beyond oil prices. The energy shock is just the starting point, and deeper impacts are spreading along the agricultural supply chain. The report shows that the global agricultural supply chain is entering a period of turmoil more severe than the 2022 Russia-Ukraine conflict.
Currently, the shock in the energy market has first erupted at the fertilizer end. Urea prices have surged by 30-40% in various regions, while the price increase of bulk agricultural products is generally within 5%. Bank of America strategist Daryna Kovalska stated:
<blockquote>
&#34;The agricultural product market has not fully priced in the impact of the Iran war. In our baseline scenario, the conflict will extend to the second quarter of 2026, indicating that the agricultural market will face substantial upward risks.&#34;
</blockquote>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c894abc7-7e96-4a5e-a5c8-d1c506697a03.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/c894abc7-7e96-4a5e-a5c8-d1c506697a03.png"/>
(Figure: Since the outbreak of the Iran war, the price increase in the agricultural product market has varied)
<h2>Why is the market starting to reprice agricultural products?</h2>
Intuitively, the impact of Hormuz on food transportation is limited. The report shows that about 9% of global food maritime trade passes through this strait. This means that from the perspective of &#34;transportation disruption,&#34; it is difficult to explain the significant fluctuations in agricultural product prices.
However, what the market trades is never the &#34;direct impact,&#34; but rather the &#34;transmission chain.&#34;
This chain can be broken down into three steps: First, energy prices rise. Second, agricultural costs such as fertilizers and transportation increase. Third, supply contraction at the planting end ultimately drives up grain prices.
The current market has completed the first two steps, and the third step is brewing.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f215c536-a6df-4f26-b29c-52ac3ff348f4.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f215c536-a6df-4f26-b29c-52ac3ff348f4.png"/>
(Figure: About 9% of global food maritime trade passes through the Strait of Hormuz)
<h2>How was the agricultural product bull market of 2022 formed?</h2>
To understand &#34;whether it will be more severe,&#34; we must return to 2022—after the outbreak of the Russia-Ukraine conflict.
In 2022, the epicenter of the fertilizer crisis was in Europe and the Commonwealth of Independent States (CIS). At that time, Russia's ammonia exports through Ukraine's Yuzhnyy port were interrupted, affecting about 23% of global ammonia flow. The natural gas crisis in Europe led to reduced local fertilizer production, but at that time, Europe's and Eastern Europe's production capacity accounted for only 17% and 11% of the global market, respectively. There were three main logical reasons for the rapid rise in global agricultural product prices that year:
First, energy shock. The surge in European natural gas prices has directly driven up fertilizer costs.
Second, reduction in fertilizer production. Due to excessively high gas prices, many fertilizer companies in Europe have reduced or even halted production. Reports indicate that at that time, Europe and the CIS regions accounted for approximately 17% and 11% of global fertilizer production capacity, respectively.
Third, decline in agricultural inputs. After fertilizer prices skyrocketed, farmers reduced fertilization, directly affecting crop yields. The report pointed out that in 2022, the global usage of nitrogen fertilizer decreased in several regions, becoming an important reason for the rise in grain prices.
The combination of these three factors has created a typical &#34;cost-push + supply contraction&#34; market. The final result is: wheat and corn prices have surged, global food inflation has soared, and several emerging markets are facing food security pressures.
However, the report emphasizes that the impact in 2022 was relatively localized—Europe and the CIS (&#34;a much smaller market&#34;), whereas today's fertilizer crisis is more global in scale and breadth, laying the groundwork for a subsequent bull market in agricultural products.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9c37291b-94b3-4ddb-8fb3-3848cdebf95a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9c37291b-94b3-4ddb-8fb3-3848cdebf95a.png"/>
<h2>Why might this time be more severe?</h2>
On the surface, the two conflicts have similarities: both are geopolitical conflicts → rising energy prices → rising agricultural products.
But the structures are completely different. The core issue in 2022 was in Europe and the CIS, and Europe is not the absolute core of the global fertilizer system. This time, the shock is directly hitting the &#34;global supply chain center.&#34;
The report provides key data: India, the Middle East, and Asian countries collectively account for 65%-70% of global urea supply, all of which are closely related to Gulf natural gas.
<blockquote>
<ul>
<li>
Highly concentrated supply: A certain Asian country (35%), India (16%), and the Middle East (13%) are the stabilizing forces in global fertilizer supply. The Middle East's exports directly depend on the Strait, and the production in these countries is highly reliant on LNG natural gas from the Strait.
</li>
<li>
Energy link disruption: Natural gas accounts for 60-80% of nitrogen fertilizer production costs. In 2022, it was &#34;available but expensive,&#34; while in 2026, due to damage to LNG infrastructure in Qatar and other places and the blockade of the Strait, it will turn into &#34;no gas.&#34;
</li>
<li>
Chain reaction of production stoppages: The Qatar Energy Company faced attacks and halted production in early March, which has already led to significant reductions in fertilizer production lines in India and Pakistan due to gas shortages. Fertilizer giants in Turkey and Europe, such as Agrofert, have also begun to cut production capacity.
</li>
</ul>
</blockquote>
To put it bluntly, Gulf countries are both important global fertilizer exporters and core suppliers of natural gas, with natural gas being a key raw material for nitrogen fertilizer production.
This forms a &#34;supply hub.&#34; Once interrupted, the impact is not linear but amplified. A crucial statement in the report is: &#34;The systemic risk of the current fertilizer crisis is higher than in 2022.&#34;
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/645382ee-de82-461e-b2df-302a1e1fa652.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/645382ee-de82-461e-b2df-302a1e1fa652.png"/>
<h2>The Impact Has Begun: Fertilizers Become the First Domino</h2>
The most sensitive market reaction is in fertilizer prices. Data shows that since the conflict began: urea prices have risen by 30%-40%, significantly outpacing agricultural products.
This is not surprising. Fertilizers are the &#34;front-end variable&#34; of agricultural production. More concerning are the changes on the supply side:
<ul>
<li>
India and Pakistan have begun to reduce production due to insufficient gas supply.
</li>
<li>
Europe has cut ammonia production due to rising gas prices.
</li>
<li>
Turkey has restricted exports to ensure domestic supply.
</li>
</ul>
These signals indicate that the market has shifted from &#34;price shock&#34; to &#34;supply contraction.&#34;
Once fertilizer supply is insufficient, farmers face two choices: either reduce fertilization or increase costs. Either way, grain prices will rise.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/82202cc8-1f1a-4e6c-a87b-40c1b558a279.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/82202cc8-1f1a-4e6c-a87b-40c1b558a279.png"/>
<h2>Energy and Transportation: The Second Amplifier of Costs</h2>
In addition to fertilizers, energy prices further amplify the impact through transportation. Data shows: U.S. trucking costs have risen nearly 30%, and shipping costs have increased by 6%-8%. Inland freight in Brazil accounts for 10-15% of export prices. Due to Brazil's heavy reliance on road transport, diesel constitutes 50% of trucking operating costs.
Transportation costs themselves account for 20%-25% of grain prices. This means that even without considering supply contraction, the rise in costs alone is enough to push prices higher.
More importantly, the sensitivity varies by country. For example, in Ukraine, due to post-war reliance on trucking, its cost share is as high as 30%-40%. The rise in energy prices has a greater impact on its grain prices. This will change the direction of global trade and price structure.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/52ae7144-4835-46a6-bd15-8fb042c5231c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/52ae7144-4835-46a6-bd15-8fb042c5231c.png"/>
(Chart: Trucking costs in Brazil are already very high)
Agricultural product prices are influenced not only by supply but also by energy demand. Taking soybean oil as an example: as a biodiesel raw material, its price is highly correlated with energy.
Data shows: soybean oil has risen by about 10%, and diesel has increased by about 50%. Although the magnitudes differ, the direction is consistent. This means that when energy prices rise, agricultural products are not only subject to &#34;cost increases&#34; but are also &#34;driven by demand.&#34;
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3b7eaab6-8dfb-4671-ade4-ff65080ed45a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3b7eaab6-8dfb-4671-ade4-ff65080ed45a.png"/>
(Chart: The rise in the energy market has solidified the strong prices of biofuel raw materials, especially soybean oil)
<h2>Grain Logic: Corn is the &#34;Number One Player&#34; in This Bull Market</h2>
In the trading logic of agricultural products, the transfer of fertilizer costs is uneven. The degree of dependence on nitrogen fertilizer for different crops determines their price elasticity.
Corn is a typical &#34;high nitrogen-consuming&#34; crop. According to research from South Dakota State University, each acre of corn requires 100-240 pounds of nitrogen fertilizer, while soybeans require virtually none. This means that when urea prices soar, corn's production costs and planting area are the first to be impacted.
Bank of America has provided a tiered forecast for agricultural prices in 2026:
<ul>
<li>
Corn: If the conflict continues until Q2 2026, prices are expected to rise by 20-30%.
</li>
<li>
Wheat: A food security hedge tool, expected to rise by 15-20%.
</li>
<li>
Soybean Oil: Due to its high correlation with the energy market, expected to rise by 5-10%.
</li>
</ul>
Bank of America emphasizes that the corn market is facing an &#34;extremely sensitive balance sheet.&#34; Even before the conflict broke out, American farmers had planned to reduce corn planting area from 98.8 million acres to 95 million acres. If fertilizer shortages lead to further declines in global production, the U.S. stock-to-use ratio for the 2026/27 season will plummet from 13% to 8.7%—a ten-year low.
<blockquote>
&#34;In this low inventory environment, corn prices are highly likely to break through $6 per bushel. If the conflict drags on into the second half of 2026, the possibility of revisiting the historical high of $8 per bushel in 2022 cannot be ruled out.&#34;
</blockquote>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a619ca7c-2ca4-4b9c-8059-dc2d2c222dbf.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a619ca7c-2ca4-4b9c-8059-dc2d2c222dbf.png"/>
<h2>Protein: The Inevitability from Feed Costs to End Prices</h2>
The surge in agricultural prices will ultimately translate into inflation for end protein products (poultry, pork, beef).
The Middle East is a major importer of global animal protein, with 70% of consumption being poultry. Brazil is the largest supplier to the region, holding a 47% market share.
&#34;In Brazil, feed accounts for about 65% of the production costs of chicken and pork.&#34; Bank of America calculates that driven by rising corn prices, the cost of chicken in Brazil will increase by 6.0% in 2026, and pork will rise by 7.8%. In the U.S., this increase is expected to be between 2.4% and 5.8%.
Additionally, the blockade of the strait has extended shipping routes, increasing shipping time from Brazil to the Middle East by 30-35 days, further raising the landed premium.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/68e18b62-8e23-4a53-b253-8decdb7a2abd.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/68e18b62-8e23-4a53-b253-8decdb7a2abd.png"/>
<h2>Why Say &#34;The Market is Not Over Yet&#34;?</h2>
A key judgment currently is that agricultural prices have not fully reflected the risks.
The reason lies in the time lag. Agricultural production has cycles: fertilization has been completed in spring, and current yields are unlikely to be affected in the short term.
However, the future depends on the next planting season. The report provides a key time window: about 6 months. If the conflict continues during this period:
<ul>
<li>
The shortage of fertilizers will affect the planting of the next season.
</li>
<li>
Especially corn (high nitrogen demand).
</li>
</ul>
Therefore, the market may experience a two-phase trend of &#34;first rising costs, then shrinking supply.&#34;
<h2>From a market perspective, what is this round of trends trading?</h2>
CFTC data shows that since the outbreak of the Strait conflict, institutional investors have rapidly flipped from a long-term accumulated net short position to a net long position in agricultural products.
<blockquote>
“Although the current position level is still below the peak levels of past crises, this indicates that the market is re-evaluating the pricing logic of the agricultural sector.”
</blockquote>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/68932b25-bf21-4620-a447-5b090b9649d7.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/68932b25-bf21-4620-a447-5b090b9649d7.png"/>
For Wall Street traders, the logic has closed: the energy shortage has triggered a global reduction in fertilizer production (especially nitrogen fertilizers), which not only increases planting costs but also threatens future yields. Coupled with the rapid transfer of inland logistics costs, agricultural products are replicating, or even surpassing, the bull market narrative of 2022.
Overall, the current market is trading three variables:
First, the duration of the conflict. Short-term shock vs long-term supply contraction.
Second, the recovery of fertilizer supply. This is the core variable determining yield.
Third, the path of energy prices. Determines the dual impact on costs and demand.
If the conflict eases quickly, the trend may stop at cost-driven. But if it continues, it may evolve into a supply-driven bull market. The report concludes: “The agricultural market may enter a new bull market cycle, similar to 2022 or even 2012.”

FTAG

SOYB

CORN

The blockade of the Strait of Hormuz is reshaping the global food market through the "energy-fertilizer-agriculture" chain. Unlike in 2022, this round of impact directly targets 65%-70% of the global urea supply system, coupled with rising transportation and energy costs, agricultural product prices have not yet fully reflected the risks. If the conflict continues into the second half of the year, corn and wheat may see price increases of 20%-30%, and the agricultural market may usher in a more systematic supply-driven bull market. Currently, institutional funds have massively flipped to a net long position, betting on a second outbreak of this agricultural bull market

- A global energy disruption, particularly in the Strait of Hormuz, is influencing agricultural markets, creating systemic inflation driven by the triple interplay of gas, fertilizer, and grain prices.  
- The Bank of America reports that the Iranian conflict has led to significant supply disruptions, particularly affecting fertilizer availability, which in turn impacts agricultural production and food prices.  
- If the conflict continues into 2026, the agricultural market faces substantial upward price risks, potentially triggering a new bull cycle reminiscent of 2022.

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If the blockade of the Strait of Hormuz continues, a "more ferocious than in 2022" bull market for agricultural products is coming?