【Turning Stone to Gold】Since the Middle East upheaval, how much price transmission has the energy market exerted on the global agricultural industry chain?

Hot Topics

Selected Stocks Data Center Market Center Capital Flows Simulated Trading

Client

China Investment Futures Research Institute

Since the Middle East upheaval, how much has the energy market transmitted price signals to the global agricultural supply chain?

Since late February 2026, U.S.-Israel military actions against Iran and disruptions in Strait of Hormuz shipping have caused intense shocks to global energy and agricultural input supplies. Affected by the war, WTI crude oil prices once surged past $119 per barrel, and Brent crude approached $119.50 per barrel in early March, reaching a new high since mid-2022. Coupled with rising global natural gas prices, transportation and agricultural production costs have been directly pushed higher. The value of biofuels has become more prominent, with planting and transportation costs increasing, transmitting through multiple channels to the agricultural product markets. Rising global input costs and supply chain uncertainties are putting pressure on spring planting, warranting close attention.

Biofuel Value Emerges

The gap between biodiesel and petro-diesel prices has narrowed, highlighting the economic advantage of biodiesel and indirectly boosting vegetable oil prices. From the international diesel market, from February 28, 2026, to March 17, 2026, Singapore 10PPM diesel FOB prices rose from $92.9 to $198.22 per barrel, an increase of 113.3%. The U.S. diesel average price increased from $3.76 to $5.04 per gallon, up 34.04%. Rotterdam FOB diesel prices rose from $99.86 to $164.26 per barrel, up 64.49%. The largest increase was observed in Asia. During the same period, Singapore diesel crack spreads for 10ppm diesel increased from $21.9 to $48.46 per barrel, a rise of 121.28%. The spread between U.S. soybean oil and fuel oil recently fell from $2.06 to $1.21 per gallon, a decrease of 41.26%, favoring the competitiveness of U.S. soybean oil as biodiesel feedstock. Due to the strong Asian diesel market, the narrowing of the palm oil and Singapore diesel spread is more pronounced, with the near-month contract spread dropping sharply from $333 to $24.7 per ton, a decline of 92.58%. Additionally, under tense energy conditions, resource-rich Indonesia has released policy expectations that may restrict palm oil exports due to energy supply tensions. Therefore, in the context of increased risks in the global energy supply chain, resource countries may prioritize domestic needs, potentially impacting palm oil exports.

Increased Costs and Risks in Agricultural Fertilizer Supply Chains

The Middle East situation has driven a sharp surge in global natural gas prices. From February 28, 2026, to March 17, 2026, U.S. Henry Hub natural gas prices rose from $2.859 to $3.033, up 6.09%. Asia-Pacific JKM prices increased from $10.725 to $19.41, up 80.98%. European TTF prices rose from $11.0571 to $17.534, up 58.58%. The price increases are more significant in Asia and Europe. Since Middle Eastern fertilizers mainly rely on natural gas (production pathway: natural gas – synthesis ammonia – urea; ammonia + phosphate rock + sulfuric acid produce phosphate fertilizers), the Middle Eastern market’s large export share of urea and phosphate fertilizers poses risks of supply disruptions and cost increases for the upcoming crop season. For example, U.S. urea spot FOB prices exceeded $600 per ton as of March 17, a 27.4% increase since the start of the war. Urea and phosphate fertilizer consumption in the U.S., Brazil, and India is heavily concentrated in corn and wheat. U.S. and Brazilian soybeans also use significant amounts of phosphate and potash fertilizers. Malaysia and Indonesia’s palm oil require potassium, phosphate, and nitrogen fertilizers. Future crop planning must consider both rising costs and potential fertilizer shortages affecting yields.

According to Reuters, the blockade has directly cut off key global fertilizer trade routes. About one-third of global urea (nitrogen fertilizer) and 44% of sulfur (phosphate fertilizer) exports pass through this strait. CGTN citing the U.S. Fertilizer Association reports that countries affected by the conflict (including Iran, Qatar, Saudi Arabia, etc.) account for approximately 49% of global urea exports and about 30% of ammonia exports. This has caused a sudden supply crunch in the global urea market, prompting international buyers to scramble for alternative sources and pushing prices higher.

Logically, rising international natural gas and sulfur prices will increase fertilizer costs. As fertilizers are essential for farming, prolonged high prices will inevitably raise costs for the upcoming soybean planting season, influencing planting decisions and crop structure adjustments. Since corn requires more fertilizer than soybeans, and USDA cost forecasts show that fertilizer costs for corn are three times higher than for soybeans, sustained high fertilizer prices may lead some U.S. farmers to switch from corn to soybeans, affecting the supply outlook for the new season.

Rising Freight Costs, Brazil Soy Premiums, and Import Costs

Meanwhile, the blockade of the Strait of Hormuz has driven up international shipping rates, and rising diesel prices have increased domestic trucking costs in Brazil, leading to higher soybean premiums and import costs. Steel Union data shows that as of March 18, Brazil’s May shipment premium to China was 155 cents per bushel, up 30 cents from February 28, before the war started. Last year, the premium was 188 cents per bushel. Higher import soybean costs and weaker domestic soybean crush margins have supported higher prices for soybean meal and oil downstream.

Brazilian Soybean Quarantine Issues

In addition to the US-Iran geopolitical tensions, recent focus has been on Brazil’s export inspection issues. Last week, Brazil restructured its inspection procedures to address soybean export quality concerns, but the move backfired, causing export delays and a tense situation. However, this week, Brazilian officials stated they will meet with China soon to resolve the export crisis. The situation is now trending toward a healthier direction, and impacts are expected to diminish gradually.

Weather Risks and Crop Impacts

Weather-wise, El Niño may reoccur in the second half of the year. NOAA’s March 12 report indicates that after transitioning from La Niña to ENSO-neutral in Q1, there is a 55% chance it will persist through May-July. However, the probability of El Niño forming in June-August is 65%, and this likelihood will continue to rise into late 2026. Typically, during El Niño years, the U.S. Midwest’s summer (a critical period for soybean growth) tends to see more rainfall and suitable temperatures, reducing drought risk. Our early-year soybean and meal reports noted that over the past seven El Niño seasons, U.S. soybean yields increased five times, decreased twice, with a 71.4% chance of yield gains. El Niño generally tends to boost U.S. soybean yields. If, as previously discussed, U.S. farmers plant more soybeans due to high fertilizer costs, the outlook for increased soybean production is strengthened. However, El Niño can also cause significant drought in major palm oil-producing regions like Indonesia and Malaysia, risking lower yields and higher palm oil prices, with effects lagging behind.

Summary

Recent geopolitical events have evolved from a simple energy crisis into a global supply chain crisis affecting agriculture. For international soybean and fertilizer markets, the current situation features several key characteristics. First, cost-driven inflation is deepening in agriculture, with energy, fertilizer, and shipping costs rising in tandem, significantly increasing the baseline costs of global food production in the medium term. Second, supply chain issues for fertilizers increase uncertainty about yields for the upcoming season. Third, planting structures and weather patterns are expected to cause divergence in crop performance. Fourth, high petro-diesel prices highlight the value of biodiesel. Additionally, resource-exporting countries may tighten export controls. Under the backdrop of normalized geopolitical risks, the influence of trading expectations in soybean and vegetable oil markets is strengthening, with rising costs and increased volatility. Market participants should closely monitor the Strait of Hormuz situation, input costs, biodiesel policies, Brazil’s quarantine policies, resource country policies, and El Niño weather patterns to navigate the challenges of supply chain restructuring caused by international developments.

China Investment Futures

Chief Analyst Wu Xiaoming Futures Investment Consulting License: Z0015853

Senior Analyst Song Teng Futures Investment Consulting License: Z0021166

Sina Major Platform for Futures Account Opening — Safe, Fast, Reliable

Massive Information, Precise Analysis, All on Sina Finance APP

Editor: Li Tiemin