The humanitarian risks of a fertilizer shock
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What is the main topic discussed in this episode?
Hello, everyone. I'm Kimberly Adams. Welcome back to Make Me Smart, where none of us is as smart as all of us. The ongoing war with Iran is having all sorts of humanitarian and economic repercussions in the region and globally. And while Iran has reportedly said ships not connected to the U.S. or Israel can go ahead and go through the Strait of Hormuz, most international shippers just don't want to take that risk. And as you've also probably heard, this trade route is crucial to global energy markets. And it also plays a critical role in global food supply chains. And it's that food side of things that we're going to talk about today. And here to make us smart about this is Michael Wurst. He's a senior fellow at the Council on Foreign Relations, where his work focuses on the intersection of food security, climate change, migration, and emerging countries.
Michael, welcome to the show.
What humanitarian and economic repercussions are caused by the war with Iran?
It's a great pleasure to be on. Thank you so much.
Big picture, what's been the impact so far of this war on global food supply chains?
The impact is complex, to say the least, because as you've mentioned, there is an impact on global fertilizer market. About one third of fertilizer that is used globally is going through the Strait of Hormuz with countries like Iran, Qatar, Saudi Arabia and Oman being important producers. This is relevant because about half of the food that is produced worldwide depends on fertilizer use. Secondly, the energy prices are skyrocketing. fertilizer production is extremely energy intensive so that increases the volatility of fertilizer prices even more and something that is not often looked at the countries that are more exposed to those increased food and fertilizer prices especially in africa and southeast asia are also countries that have a lot of labor migrants in the gulf regions millions of them and their remittances will go down the moment energy prices skyrocket the economic situation is more difficult
So it's a complex layered system that is interconnected where people all over the world within a few weeks will be impacted by the war in Iran.
So many threads to unpack there. And I want to lock in on what you just said about within a few weeks, because each of those different things that you just mentioned kind of has a different timeline for how it shows up in the global food supply chain. So energy costs. Walk us through that timeline and how that shows up in food costs, and then we'll get to the fertilizer question.
The energy cost is more indirect. As I mentioned, fertilizer is extremely energy intensive, but also energy prices are relevant because they impact agricultural supply chains because the cost for, for example, farm operations, irrigation, transport costs. storage, food processing is all increasing. And that's particularly important for a region like the Gulf and Northern Africa, where people are consuming very high levels of wheat produced carbohydrates, about 200 pounds a year per capita. So that reason is extremely import dependent. And so the increasing energy prices have cascading effects that will result in higher bread prices this is particularly important for countries in northern africa egypt is exhibit a here where about half the population covers between 30 and 40 percent of their daily carbohydrate input their calorie input through bread and we remember still that during the arab spring uprising skyrocketing bread prices were a contributing factor to the political unrest
Right. I remember people saying bread is life in some of their chants in Tatar Square. When it comes to the fertilizer side of it, I think for a lot of folks who aren't familiar with the agriculture industry, they might have been surprised to find that so much fertilizer was coming from these oil-producing regions. Can you talk about that connection?
How does the closure of the Strait of Hormuz affect global food supply chains?
Yes, so the region produces a lot of the organic ingredients of fertilizer, especially for nitrogen fertilizers, which is mostly ammonia and urea. That region is an important exporter, but also a lot of fertilizer transits through the region.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:06–0:58
2
What humanitarian and economic repercussions are caused by the war with Iran?
0:58–4:08
3
How does the closure of the Strait of Hormuz affect global food supply chains?
4:08–11:42
4
What is the relationship between energy prices and fertilizer production?
11:42–14:51