The ongoing war involving the United States, Israel and Iran, and the resulting disruption to shipping through the Strait of Hormuz is a harsh reminder of the vulnerabilities in global agriculture: even countries that produce substantial quantities of fertilizer remain exposed to international price shocks. For Canadian farmers, the disruption has increased input-cost uncertainty, particularly for nitrogen fertilizer, with potential consequences for farm profitability, food production and grocery prices.
A Global Fertilizer Bottleneck
The Strait of Hormuz is a critical shipping route for energy and agricultural inputs. Before the conflict began in February 2026, approximately 25% of globally traded nitrogen fertilizer passed through the strait, according to the World Trade Organization. The disruption has restricted exports from a region that supplies major quantities of urea, a widely used nitrogen fertilizer.
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The price impact was immediate. Benchmark commodity data shows spot urea climbing to roughly US$650 a tonne by March 2026 — up from approximately US$400 at the start of January — marking a surge of about 63% in under ten weeks. Data from the World Bank further demonstrates that its broader fertilizer index jumped over 12% quarter-over-quarter in early 2026, reaching a multi-year peak by April that surpassed levels last recorded in late 2022. Prices have since eased in some markets, but ongoing supply chain bottlenecks leave global availability in a precarious position.
Why Canadian Farmers Are Still Exposed
Canada is a major fertilizer producer, but its strengths are not evenly distributed across fertilizer types or regions.
Potash, which supplies potassium, is Canada’s standout advantage. Natural Resources Canada (NRC) reports that the country exported approximately 22.9 million tonnes in 2024, representing 38.7% of global potash exports. However, potash cannot replace nitrogen or phosphorus; crops require these nutrients for different functions.
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Nitrogen presents a different challenge because its production depends heavily on natural gas. Canada is a net exporter of nitrogen fertilizer, and Western Canadian farmers benefit from substantial domestic production. Eastern Canada, however, relies more heavily on imports because transporting fertilizer across the country can be more expensive than sourcing it internationally.
Phosphorus fertilizers are another vulnerability, as Canada relies largely on imports, primarily from the United States. This dependence became particularly apparent during the Canada–U.S. trade dispute in March 2025. Canadian farmers rely heavily on phosphate fertilizer from the United States — particularly from Florida — while U.S. growers remain dependent on Canadian potash. Although the prospect of Canadian retaliatory tariffs on U.S. phosphate fertilizer raised concerns about additional costs, contemporary reporting did not establish that these proposed duties were ultimately imposed on phosphate fertilizer itself. The episode nevertheless demonstrated how quickly trade tensions can threaten the affordability of an essential agricultural input, even when physical supplies remain available.
These types of events affect a range of agricultural inputs, though immediate price pressures have been most acute in nitrogen markets. Because Canada historically relied on cheaper foreign imports — owing to the high capital costs and long lead times needed to mine its own phosphate rock — it remains exposed to external trade shocks. These vulnerabilities should prompt Ottawa to develop a long-term strategy for expanding domestic phosphorus extraction and refining. In the short term, the federal government should evaluate maintaining strategically located regional fertilizer reserves to buffer farmers across the country against sudden price and supply disruptions.
Pressure on Farm Profits and Food Prices
Fertilizer is a major operating expense for crop producers. In March, Farm Credit Canada (FCC) estimated that, before the latest price increases, fertilizer accounted for approximately 20 to 25 percent of the total cost of growing a crop in 2026.
Farmers may respond by reducing fertilizer applications, changing crop rotations or absorbing higher costs. Reduced nutrient application can affect yields, depending on soil conditions and crop requirements.
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For consumers, the connection between fertilizer and grocery prices is indirect but measurable. Fertilizer and fuel are major production costs and can account for more than half the cost of producing an acre of a crop such as corn.
Fuel provides an even more immediate example of the pressure on consumers. Statistics Canada reported that gasoline prices were 22.8% higher in August 2026 than a year earlier, while prices for food purchased from stores rose by 2.8%. The average Canadian price of a 675-gram loaf of white bread reached $3.60 in July, while ground beef and chicken breasts averaged $16.49 and $14.68 per kilogram, respectively. These prices cannot be attributed to the Hormuz disruption alone — weather, labour, transportation, exchange rates, processing and retail margins all contribute — but they illustrate the elevated cost environment into which the fertilizer shock is arriving.
The potential agricultural effect is significant. According to the same FCC report, estimates indicate that a 40 percent increase in nitrogen costs would reduce the average Saskatchewan margin on a wheat-canola rotation from approximately $50 to $25 per acre. In Ontario, the same nitrogen shock was estimated to reduce the average corn-soybean margin from $365 to $345 per acre. If high fertilizer and fuel costs persist, farmers may face a choice between accepting lower margins and reducing fertilizer applications. Where reduced applications lower yields, tighter crop supplies could put additional upward pressure on consumer prices.
Government Response: What Has Been Done?
The federal government has taken several measures intended to cushion both producers and consumers from the cost shock. For farmers, the Advance Payments Program’s interest-free limit was temporarily increased from $100,000 to $250,000 for the 2025 program year, a change Agriculture and Agri-Food Canada estimated would save approximately 13,300 producers a combined $52 million in interest. Farm Credit Canada also expanded its Trade Disruption Customer Support Program in March 2026, offering eligible producers, agribusinesses and food processors additional credit of up to $500,000, new term loans and the ability for existing FCC customers to defer principal payments for up to 12 months.
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For consumers and businesses, the federal government suspended the federal fuel excise tax on gasoline and diesel beginning April 20, 2026, reducing the charge by 10 cents per litre on gasoline and 4 cents on diesel. The original suspension was scheduled to end on September 7. On September 22, however, the government introduced Bill C-38, the Canadian Fuel Affordability Act, proposing to extend the suspension until January 31, 2027, followed by a 50% reduction in the tax through March 31, 2027. Ottawa projects that extending the measure will deliver an additional $2.9 billion in savings at the pump.
Where Government Policy Has Fallen Short
The government’s measures have provided liquidity and temporary cost relief, but they do not eliminate the underlying exposure to international fertilizer markets. One particularly important policy issue is Canada’s 35 percent tariff on most imports from Russia and Belarus, introduced after Russia’s invasion of Ukraine in 2022. The policy applies to fertilizer as well as other goods. Agriculture and Agri-Food Canada acknowledges that Eastern Canada had previously relied heavily on Russian nitrogen fertilizer and that alternative supplies from North Africa, the Caribbean and the United States can come at a higher cost.
This creates a policy trade-off. Maintaining the tariff supports Canada’s sanctions policy against Russia, but it also restricts access to a historically important source of nitrogen fertilizer for Eastern Canadian farmers at a time when global fertilizer markets are under pressure. The financial consequences were tangible: following the imposition of the tariff on Russian and Belorussian goods in March 2022, the region’s largest fertilizer distributor continued with its orders and paid $34.1 million in duties. Government records concerning the subsequent tariff dispute identify Sollio Cooperative Group as one of the key entities seeking relief over duties on Russian fertilizer shipments — an appeal that remains unresolved.
These costs added to the pressure on agricultural input prices, ultimately affecting the economics of fertilizer procurement for Canadian farmers. The federal government has declined to provide tariff relief, stating that doing so would undermine Canada’s response measures against Russia.
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There is therefore a gap between providing farmers with financing to manage higher costs and addressing the structural and policy reasons some Canadian farmers face higher fertilizer costs in the first place.
Canada’s Advantage Is Not Complete Protection
Canada’s potash industry provides an important strategic advantage, while domestic nitrogen production offers additional protection in Western Canada. Neither eliminates exposure to globally traded fertilizer prices, imported phosphorus products or international energy markets.
The duration of the conflict will help determine the eventual impact. For Canadian agriculture, the central concern is not simply whether fertilizer is available, but whether farmers can obtain the right nutrients at prices that leave their operations financially viable. A prolonged disruption could make that balance increasingly difficult to maintain, with consequences extending beyond the farm to food prices, household budgets and the wider Canadian economy.
How should Canada best buffer farmers against international price shocks — by investing in long-term domestic phosphate refining or establishing regional fertilizer reserves?
Sources
- Agriculture And Agri-Food Canada. (2023, August 22). Book 2 – Hot issues: deputy minister’s transition book 2023, AAFC. agriculture.canada.ca. Retrieved September 28, 2026, from https://agriculture.canada.ca/en/department/transparency/briefing-documents/aafc-transition-books/book-2-hot-issues-deputy-ministers-transition-book-2023-aafc
- Agriculture And Agri-Food Canada. (2026, June 11). National Food Security Strategy. agriculture.canada.ca. Retrieved September 28, 2026, from https://agriculture.canada.ca/en/department/initiatives/national-food-security-strategy
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- Government of Canada, Statistics Canada. (2026, September 2). Monthly average retail prices for selected products: Food. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810024502
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- Natural Resources Canada. (2026, January 29). Potash facts. Retrieved September 28, 2026, from https://natural-resources.canada.ca/minerals-mining/mining-data-statistics-analysis/minerals-metals-facts/potash-facts
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