Fertilizer surge threatens rice output; India insulated: sources

Rising fertilizer and fuel costs are beginning to influence farm-level decisions across key rice-exporting regions, market sources said March 31.

Market participants in Thailand and the US are signaling potential acreage cuts and lower input use that could tighten global supply in the next marketing cycle, even as India's strong inventories and government support help shield its domestic market from immediate impact.

This divergence in cost pressures and policy support is expected to widen regional supply imbalances, potentially underpinning global rice prices and increasing reliance on India as a stabilizing supplier in the coming season.

Thailand: Cost pressures hit farm decisions

Market participants in Thailand flagged early signs of behavioral shifts among farmers as fertilizer and fuel costs rose sharply.

"With today's low price, I think more likely they will use less fertilizer per area or will farm less area," said a seller based in Bangkok.

Another Bangkok-based seller said this crop season is extremely challenging, with not only fertilizer costs surging but fuel prices also rising sharply. "Gas costs have increased by around 30%, and shortages are disrupting harvesting activities, leading to crop damage in several areas."

Thailand's rice output in marketing year 2025-26 (January-December) is projected to be 20.4 million metric tons, down from 20.8 million mt in the previous year, according to the latest US Department of Agriculture (USDA) Foreign Agricultural Service (FAS) report. The decline is primarily attributed to lower acreage, which is expected to fall to 10.8 million hectares from 11.08 million ha in the previous year.

US: Costs threaten acreage despite constraints

In the US, fertilizer inflation is expected to have a more pronounced impact on planting decisions, particularly given already weak margins.

"The recent surge in fertilizer prices is poised to significantly impact the US rice market, with industry sources highlighting that around 30% of the fertilizer needed for the current 2026-27 crop is still missing. Most of it had been purchased before the escalation of the conflict in the Middle East," according to a food sector source.

Prior to the war, phosphate fertilizer prices, for example, hovered between $475 to $500/mt but have now surged to about $800/mt or more, the source added.

A US rice market analyst noted a 70%-75% surge in fertilizer costs since the conflict's onset, raising concerns about reduced acreage, although the exact impact remains uncertain.

Regional dynamics vary, however. In California, medium-grain output is expected to remain stable. "Calrose rice plantings are unlikely to decrease due to the lack of viable alternative crops," a US-based producer said.

Producers are also facing mounting cost pressures beyond fertilizers, including freight, chemicals, and packaging, further squeezing margins.

The USDA acreage report, released March 31, confirmed market expectations by indicating a 24% reduction in long-grain rice area. If fully realized, this would result in the smallest long-grain planted area in the US since 1983, representing a structurally significant contraction in productive capacity.

This sharp decline in acreage reinforces the bullish supply narrative that had been forming in the market ahead of the report. Producers were already holding firm on prices prior to the publication, driven by concerns over future supply tightness and the prospect of a more comfortable storage situation later in the year.

India: Government buffers limit impact

In contrast, India appears largely insulated from global fertilizer price volatility, supported by strong inventory levels and proactive government measures ahead of the Kharif sowing season.

"Further, during the ongoing Rabi 2025-26 season [Oct. 1, 2025-March 5, 2026], the availability of Urea, DAP, MOP, and NPKS has also remained adequate to meet agricultural demand, and the country continues to maintain a comfortable stock position," India's Ministry of Chemicals and Fertilizers reported March 10.

"To mitigate supply risks and ensure uninterrupted availability, the government has actively engaged with resource-rich countries and facilitated Long-Term Agreements and MoUs between Indian fertilizer companies and international suppliers. These arrangements include annual quantities of 31 lakh metric tons from Saudi Arabia, 30.10 lakh metric tons from Russia, and 25 lakh metric tons from Morocco, which are expected to strengthen India's fertilizer supply chain during 2025-26," the ministry added.

India has been using tenders to increase its stock position through imports, with a 36.6% year-over-year increase reported as of March 10, the ministry said.

"Fertilizer not yet a concern as per my info, as we have diversified portfolios," a Delhi-based exporter said.

"Regarding our fertilizer situation at this point in time, especially for Kharif 2026, we have adequate stocks; we are comfortable. The Department of Fertilizers has also put out global tenders well in advance in anticipation of the current situation, and these have received very good responses. We expect the bulk of the quantities ordered from a variety of sources to arrive by the end of March," Ministry of External Affairs spokesperson Shri Randhir Jaiswal said during a March 19 Inter-ministerial Press Briefing.

Market participants added that the government is likely to absorb global price shocks.

"As fertilizer global prices are increasing, there might not be an impact on India as the government will absorb the price shock, a similar trend we are seeing in crude oil, where global prices increased, but India's local petrol prices didn't go up," said Udit Maheshwari, director of Jai Giriraj Rice and Agro Mills.

Market participants expect fertilizer-driven cost pressures to increasingly shape planting decisions and yields across key exporting regions.

India's policy support may cushion near-term disruptions, but tightening margins in Thailand and the US could reduce fertilizer usage and lower output, raising the risk of a supply squeeze in the next marketing cycle.