Research — October 5, 2026

Navigating Converging Risks in Agriculture: How Geopolitics and Climate Are Reshaping Fertilizer Markets

Global agriculture and fertilizer markets are at a critical juncture, facing a dual shock from escalating geopolitical conflicts and a strong El Niño event. These converging forces are creating significant volatility, disrupting established supply chains for critical raw materials, and introducing new layers of financial and operational risk for producers, traders, and agribusinesses.

Insights from the S&P Global webinar, "Capital at Risk: Forces Reshaping Agriculture & Fertilizer Markets," reveal a complex landscape where supply-side constraints in phosphates contrast with demand-driven dynamics in nitrogen, while commodity futures markets may be under-pricing the near-term risks. This analysis explores the five key takeaways from our experts on the forces set to define market outcomes for the remainder of 2026 and into 2027.

Key Highlights

Geopolitical disruptions are severely constraining fertilizer raw material supply. The blockade of the Strait of Hormuz has created a critical bottleneck for global sulfur trade, directly impacting phosphate fertilizer production.
A strong El Niño event is creating divergent climate risks across key growing regions. While areas like Brazil face drought and heat stress, Argentina may see improved moisture, leading to a complex and regionally varied impact on crop yields.
Nitrogen markets show resilience due to product substitution and shifting trade flows. Increased urea exports from China and the use of ammonium sulfate have helped buffer the nitrogen sector from the severe disruptions seen in phosphates.
Commodity futures may be under-pricing near-term geopolitical and production risks. Analysis suggests that wheat and corn markets, in particular, have not fully factored in the potential for further supply disruptions from the Black Sea region and production cuts in key exporting nations.
Agricultural carbon markets are emerging as a viable channel for risk mitigation and value creation. Growing private-sector investment and long-term offtake agreements signal increasing confidence in carbon finance as a tool to support the agricultural transition and resilience

1. How is geopolitical conflict disrupting the global sulfur supply chain?

Geopolitical tensions have moved from a theoretical risk to a direct driver of market disruption, most notably through the blockade of the Strait of Hormuz. This has severely impacted the global supply of sulfur, a critical raw material for producing phosphate fertilizers. Persian Gulf producers account for nearly half of the global sulfur trade, and the region’s dominance means that supply losses cannot be easily offset by other exporters. The impact is already visible in trade data, with China’s sulfur imports declining by nearly 60% year-over-year and Brazil’s falling by 50%. This has forced major phosphate producers in Morocco and Brazil to reduce operating rates or idle capacity, keeping phosphate and DAP prices firm even as other fertilizer prices have softened.

2. What is the impact of the 2026 El Niño on global agriculture?

The confirmed strong-to-very-strong El Niño event in 2026 is not a uniform global shock but a highly differentiated risk. Its financial and operational impact varies significantly by commodity, region, and the timing of weather anomalies relative to critical crop growth stages. For example, Central and Northern Brazil experience lower rainfall and higher temperatures, which could delay soybean planting and, in turn, compress the planting window for the second-season safrinha corn crop. In contrast, Argentina may experience enhanced rainfall, potentially supporting crop development but also introducing risks of harvest delays if rainfall is excessive. In Asia and Australia, drier tendencies expose rice, palm oil, wheat, and barley to increased drought and heat stress.

3. Are commodity futures markets accurately pricing current risks?

Analysis suggests that exchange-traded grains and oilseeds markets are broadly under-pricing both production and geopolitical risks. For wheat, global production in 2026/27 is forecast to fall by 19 million metric tons (mmt), and ongoing shipping disruptions in the Black Sea could reduce global trade by a further 15 mmt. Despite this, futures have not fully priced in the near-term risk. Similarly, the corn futures curve appears to undervalue upside risks from potential Brazilian production shortfalls and prolonged Black Sea export limitations. Soybean futures show potential for near-term downside as the U.S. new crop arrives, but deferred contracts from Q1 2027 are supported by the prospect of lower Brazilian output.

4. Why are nitrogen markets behaving differently than phosphate markets?

While the phosphate market is defined by a raw material supply crisis, the nitrogen market has been shaped more by demand, seasonality, and product substitution. The initial conflict in the Strait of Hormuz began after many Northern Hemisphere farmers had already procured fertilizers for spring application. Furthermore, the EU’s Carbon Border Adjustment Mechanism (CBAM) prompted buyers to front-load nitrogen imports in late 2025. A key factor has been China’s return to the export market, with 2026 urea exports expected to reach 7.0–7.5 mmt, up from 4.5 mmt in 2025. This, combined with increased use of ammonium sulfate as a lower-cost nitrogen alternative in markets like Brazil, has helped soften global urea prices.

5. What role can carbon markets play in mitigating agricultural risk?

Amid the market volatility, agricultural carbon markets are maturing and presenting new opportunities for risk mitigation and value creation. Rather than functioning as simple offset transactions, agricultural "insetting" is developing into an interconnected value chain linking corporate buyers, project developers, and farmers. In 2026, activity is concentrated in the U.S., South America, India, and Africa, with land-based removals as the principal driver. The growing use of structured, long-term offtake agreements—such as a 12-year, 2.8-million-metric-ton deal between Indigo Ag and Microsoft—signals stronger buyer confidence and helps address the financing challenges for farmers transitioning to more resilient practices.

How S&P Capital IQ Pro Supports Agricultural Market Analysis

In an environment of converging risks, access to timely data, predictive analytics, and regional expertise is critical for navigating market volatility. Our Agricultural Intelligence on Capital IQ Pro platform equips clients with the tools to assess these complex challenges. With S&P Global Energy research on the platform, our agriculture and fertilizer market insights provide granular data on global fertilizer trade flows, including real-time tracking of sulfur and urea shipments, to quantify supply chain disruptions. With comprehensive commodity price data, supply-and-demand balances, and forward-looking analysis, decision-makers can better understand market fundamentals and identify underpriced risks across the agricultural value chain.

What the data shows about agricultural market risks

What is the main impact of the Strait of Hormuz closure on fertilizers?

The closure has severely disrupted the global sulfur supply chain, as nearly half of the world's traded sulfur originates in the Persian Gulf. This has led to production cuts for phosphate fertilizers, which depend on sulfur, causing phosphate prices to remain firm.

How will the 2026 El Niño affect global agriculture?

The strong El Niño is creating varied regional impacts rather than a single global event. It is causing drier, hotter conditions in key areas like Brazil, Southeast Asia, and Australia, threatening crops like soybeans and wheat, while bringing potentially beneficial moisture to other regions like Argentina.

Why are nitrogen fertilizer prices soft while phosphate prices are firm?

Phosphate prices are firm due to the severe shortage of their key raw material, sulfur. In contrast, nitrogen (urea) prices have softened due to a combination of factors, including weaker seasonal demand, increased exports from China, and product substitution with ammonium sulfate.

Are commodity markets accurately pricing current geopolitical risks?

Our analysis suggests that futures markets for commodities like wheat and corn are under-pricing the significant near-term risks. This includes the potential for escalating shipping disruptions in the Black Sea and weather-related production cuts in major exporting countries.

What are agricultural carbon markets?

Agricultural carbon markets are an emerging financial mechanism where farmers can receive payments for adopting practices that reduce emissions or sequester carbon in the soil. These markets are evolving from simple credit sales to integrated value chain partnerships, supported by long-term corporate offtake agreements.

How is China influencing the global fertilizer market?

China plays a crucial role, particularly in the nitrogen sector. By increasing its export quotas for urea in 2026, China has added a significant supply to the global market, helping to moderate prices. It is also a key exporter of ammonium sulfate, which has been used as a substitute for urea.

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