Ships using the Strait of Hormuz to carry critical agricultural inputs must start moving through it as soon as possible to avoid a spike in food price inflation later this year, the Food and Agriculture Organization of the United Nations (FAO) says.
“Since the ceasefire started the expectation is that vessels will start to move. We have important vessels that are not moving,” FAO chief economist Máximo Torero said in a podcast published on Tuesday.
FAO’S director of agrifood economics David Laborde, who also spoke on the podcast, said the Strait of Hormuz is a “key channel for oil, fertiliser but also to bring food to the Gulf countries so getting it open is critical”.
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The FAO said exports of between 20 and 45 per cent of key agrifood inputs rely on the sea passage through the Strait of Hormuz.
Here’s how the blockade could affect this.
Why could the Strait of Hormuz closure turn into an agrifood crisis?
“If these vessels don’t move out these key inputs for the agrifood system and also for the economic growth and economic day to day of many sectors will be impacted,” Mr Torero said.
In the podcast, Mr Torero explained that every country that relies on the agrifood system is linked to the crop calendar.
“If we don’t follow the crop calendar and we don’t have the inputs in time for planting, that implies producers will have to produce with less inputs, will affect next season and the next half of the year.
“Energy, oil and diesel prices are essential for all the countries that operate an agrifood system because you need it for the tractors, planting machines, processing many parts for whole value chain,” he said.
Lack of fertiliser is an ‘immediate issue’
In an interview with Reuters, International Trade Centre executive director Pamela Coke-Hamilton said fertiliser shortages were a pressing concern for developing countries and gains from rising oil and gas prices for developing world producers were likely to be short-lived.
“The more immediate issue is fertiliser, because that then affects food security and food security is always the basis for stability,” said Ms Coke-Hamilton.
“There are significant issues with respect to availability of fertilisers and also there’s a timeline for agriculture in terms of ensuring you have enough for the next harvest, which is being missed now,” she told Reuters.
She added that oil and gas could be secured from other places so the situation was “not as dire” even if price hikes were a problem.
On Monday, local time, the UN said a diplomatic push was under way on a UN-led proposal to ensure safe passage for fertiliser shipments through the Strait of Hormuz.
The ITC said dependence on nitrogen fertilisers from Gulf producers is highest in several Asian and African developing countries, such as Kenya, Uganda, South Africa, Thailand and Sri Lanka.
Shortages typically lead to reduced fertiliser use and lower yields, rather than changes in harvesting time, with this effect more pronounced in regions such as Sub-Saharan Africa and South Asia, where production is more dependent on rains, planting windows are narrower and farmers more sensitive to input costs, the ITC said.
 “Countries affected right now because of the lack of fertiliser are Bangladesh and Sri Lanka,” Mr Torero said, adding countries like Sudan and Kenya will also need access to fertiliser.
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WA University’s professor of agricultural economics Marit Kragt spoke to News Channel on Wednesday and said Australia has plenty food and fertiliser for the next couple of months.
When asked when consumers in Australia would notice, she said there would not be an immediate effect seen here.
“At the moment, we have enough fertiliser to support planting for this coming season. The risk really occurs in a couple of months’ time, and farmers have to supply additional fertiliser a top-up, in the middle of the year.”
What global impact will this have?
When speaking on the podcast, Mr Torero said “higher food inflation means higher inflation [overall] in the world”.
He said this means countries will have to put policies in place like they did during COVID-19 to try to lower prices and that, interest rates will go higher and it will have an economic impact all around the world.
Mr Laborde said “unfortunately countries are starting to say’ let’s keep what we have even when we produce it’.”
He said this includes restrictions on fertilisers and energy products.
Mr Torero said as we move into May farmers will be making the decision to choose to work with less inputs if the Strait of Hormuz continues not to have mobility.
“It is so essential that this ceasefire continues and that this not just a ceasefire but the vessels start to move so the boats can flow and we avoid this problem of inflation in the future,” Mr Torero said.
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ABC/ Reuters
