TD report says food inflation risks from war-induced fertilizer disruptions modest

A seeding rig plants a wheat crop on a farm near Cremona, Alta., Tuesday, May 6, 2025. THE CANADIAN PRESS/Jeff McIntosh

TORONTO — As shipping constraints in the Middle East disrupt global fertilizer supply and drive up prices, a new TD report says Canada is better positioned to face any inflationary pressures on its food production — at least in the short run.

Canada’s fertilizer imports from the Gulf region are less than five per cent, limiting its exposure to the ongoing war in Iran. That’s lower than Mexico and the United States, which import roughly 30-to-40 per cent of their nitrogen-rich urea from that region.

While high global oil prices have been in the spotlight since the effective blockade of the Strait of Hormuz, the war in Iran has choked more than just oil supply. 

Other essential commodities, such as fertilizers and aluminum, are also facing shortages and higher prices as tanker traffic remains halted. Roughly one-third of global seaborne fertilizer shipments of nitrogen and phosphate products pass through the Strait of Hormuz, according to the TD report. Demand for replacement fertilizer from alternative providers has gone up, raising prices globally.

But Canada may not face fertilizer-related inflationary pressures as severe as those in Asian and African countries, wrote Anusha Arif, TD economist and author of the report. 

“Canada’s position is distinct,” Arif wrote in her report. “As the world’s largest potash exporter, it supplies a nutrient that supports drought resistance and overall plant health.”

Potash works differently from nitrogen-based fertilizers, which need to be reapplied every season. Potash, meanwhile, can accumulate in the soil, so farmers may be able to draw down from the previous planting season’s application.

“This provides some relief, and Saskatchewan benchmark potash prices have remained essentially flat since Feb. 28,” Arif said. 

On the nitrogen fertilizer side, access to domestic and U.S. production lower the risk of supply problems, though Arif noted there is no immunity from price increases influenced by global trends.

Meanwhile, Canada entered the year with stronger inventories of canola and corn that offer some short-term stability; however, “the cushion is limited,” Arif said. 

Soybeans remain a weak point, with significantly lower inventory than a year ago. 

Outside of North America, higher food inflation may be looming for many countries that directly rely on fertilizer supplies through the Middle East.

Arif said Sri Lanka, Malawi, South Africa, Thailand and India are likely to pay a high cost for fertilizers, which will likely bleed into food prices.

“Sri Lanka is the clearest example,” she said. “Higher fertilizer-import costs widen trade pressures, weaken currencies and makes replacement supply harder to afford when it is most needed.” 

By Ritika Dubey.