Supply shocks, not monetary policy, are driving price pressure from oil through fertilizer to food, and the practical fix is a supply-side push to expand domestic fertilizer production rather than leaning on the Fed to cut rates.
Grocery prices are jumping in visible ways: beef is up 5.5% this year and sugar and sweets are up 6.7%. Coffee is noticeably pricier than it was in January, and the USDA projects food prices will rise 3.1% in 2026. Gas recently hit $3.70 a gallon, up from roughly $3 before the Iran strikes, and that volatility draws attention away from a quieter, deeper shock.
Oil headlines fast and loud, but fertilizer moves through the food system more slowly and with longer-lasting effects. Brent crude surged 35% in a single week after the Iran strikes began, an extraordinary move, yet the fertilizer channel is the place to watch for sustained pain. When a chokepoint like the Strait of Hormuz closes, it disrupts seaborne urea and ammonia shipments and threatens the seasonal rhythm of planting and fertilization.
Forty-three percent of the world’s seaborne urea exports transit the Strait of Hormuz, and thirty percent of global ammonia shipments use the same route. That strait has been effectively closed since February 28, and urea prices have spiked roughly 35% since the war started. Farmers are already rethinking spring planting because input costs are rising right when they need to buy, and planting season does not pause for diplomacy.
Natural gas is the primary feedstock for ammonia production, which becomes nitrogen fertilizer and then food. When that feedstock or the shipping routes are disrupted, the chain snaps and food prices follow months later. We lived through a similar mechanism in 2022 when Russia’s fertilizer export restrictions pushed the Bloomberg fertilizer index to an all-time high and European plants shuttered because gas made production uneconomical.
China produces about 75% of its own fertilizer and managed a record 76.5 million tons of urea this year, yet it remains vulnerable through trade ties. Brazil supplies 73.6% of China’s soybean imports, and those soybeans feed livestock for 1.4 billion people. Brazil depends heavily on Middle Eastern urea and recently classified its fertilizer outlook as “extremely high risk” for the 2026-27 harvest, warning that the Iran war and export curbs are converging at the worst possible moment.
That global exposure matters to U.S. policymakers because a country that cannot reliably feed its population faces stability risks beyond economics. China also imports millions of metric tons of sulfur from the Gulf each year for phosphate production, which ties global agricultural stability to Gulf shipping lanes. Those are geopolitical pressure points Washington should factor into strategy, not ignore while staring only at oil.
The United States avoided a 1970s-style energy crisis because domestic production kept markets supplied, proving that “Drill baby drill” was the right supply-side instinct on oil. The same logic applies to fertilizer: the U.S. is one of the largest ammonia producers in the world, tied with Russia and behind only China, and American plants already enjoy a feedstock advantage thanks to cheap domestic natural gas. U.S. ammonia plants are operating at roughly 80% of rated capacity, and capacity is set to increase 11% over the next five years.
The infrastructure and feedstock exist for a purposeful push to boost domestic fertilizer output, but the policy will is missing. Accelerating ammonia capacity, fast-tracking permits for new plants, and reducing agricultural exposure to foreign chokepoints would apply the successful oil-era playbook to fertilizer. That is a supply-side solution that reduces dependence on unstable shipping lanes and foreign suppliers.
The Fed faces a dilemma because monetary tools do not mend supply lines. The December dot plot projected a median fed funds rate of 3.4% by year-end, implying only 25 basis points of cuts from the current 3.50-3.75% range, and multiple Fed officials have warned inflation remains too high to ease. At the same time, political pressure is real—Trump posted on Truth Social demanding the Fed cut rates “IMMEDIATELY”—but cutting into a supply-driven shock risks stoking demand without fixing the root cause.
February CPI came in at 2.4%, payrolls showed weakness with a net loss in February, and the fertilizer shock typically has a three to six month lag before it shows up in grocery aisles. A Fed that cuts prematurely would be stimulating demand while supply constraints tighten, which is the wrong response to this type of inflation. The right mix is to hold policy steady long enough for supply-side fixes to take hold while ramping domestic production where possible.
The grocery receipt is a map of these failures and opportunities: price increases trace back to energy, then fertilizer, then food. We fixed the first link with domestic energy production. The remaining links still run through the same foreign chokepoints that triggered the 2022 shock. Until those vulnerabilities are addressed through concrete supply-side steps, inflation will remain exposed and ready to flare again.
