War in the Middle East has delivered a generational shock to energy prices, meaning BC farmers can expect a prolonged period of higher costs not just for fuel but also for fertilizer.
While much of western North America’s nitrogen fertilizers are produced locally rather than imported, Okanagan Fertilizer Ltd. president and CEO Ken Clancy says various factors have complicated the outlook.
‘They were already predicting shortages in Western Canada and the Pacific Northwest before this all happened,” he says. “Since December-January, the price of nitrogen fertilizer in particular has been going up a lot, and this whole situation with the war breaking out in Iran has exacerbated that.”
Clancy says farmers, and in turn local suppliers, scaled back fertilizer purchases last summer due to the outlook for commodity prices.
“Companies like us weren’t buying like they normally did. There was a lot of fertilizer that simply wasn’t placed for the upcoming season like it normally would be,” he says.
This resulted in lower nitrogen imports into Western Canada, where stocks reached a record high of more than 300,000 metric tonnes. But as the price outlook improved, buyers rushed in, and prices began rising.
Some producers now believe the market could be short hundreds of thousands of tonnes.
Clancy is optimistic on supplies but dour on pricing.
“I’m confident that we’re going to get the tonnes we need to get through the season, but there will be some logistics challenges and price challenges,” he says. “In Western Canada, the only way [we’re] going to see adequate supply is prices going up so imports will be attracted into the market.”
Statistics Canada reports that nitrogen-based fertilizer prices more than doubled in BC following Russia’s invasion of Ukraine in 2022. Prices eased in 2023 but never dropped back to previous levels, and last year they began rising again. By September, they were about 60% above pre-pandemic levels.
The cost of fuel has been relatively more stable since 2022, but that could be ending. The first week of US attacks on Iran saw crude prices surge past US$100 a barrel before falling back on hopes of a shorter conflict. But the price at the pumps has not eased, as oil shipments through the Strait of Hormuz remain stalled.
Higher input costs will squeeze producer margins unless they’re able to pass along the increases. This is what happened in 2022, when an overall surge in inflation permitted some price-taking.
However, an analysis by Farm Credit Canada on March 9 indicates that at this early stage in the conflict, the outlook is anything but certain.
“Unlike 2022, when rising input costs were offset by strong commodity prices, 2026 is shaping up very differently,” FCC says. “Unless the war is resolved quickly, expect global fertilizer supplies to tighten further and put additional pressure on global food production and prices.”
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