Middle East conflict: A new cost threat for Irish farmers?
An escalating conflict in the Middle East could lead to rising costs for Irish farmers, a leading professor of economics has warned today (Tuesday, March 3).
Professor Edgar Morgenroth from Dublin City University (DCU) said the specific impact on farm families will depend on what happens next in the Middle East.
Prof. Morgenroth told Agriland: "There is a lot of conflict in the region and there is a question as to what exactly might transpire if it continues into the longer term.
"If transport routes are stopped or blocked then that is going to create shortages and drive up energy prices - both oil and gas - and that also matters to a whole range of products, not least fertiliser".
He said the knock on effect of potential prices rises would also have a direct impact on agricultural inputs.
"If the price of fuel goes up that also means the price of drying grain goes up and that means feedstuffs go up and so on," Prof. Morgenroth added.
He said one of the immediate issues is the current uncertainty surrounding key shipping routes in the region, with Iranian authorities warning that a key shipping channel - the Strait of Hormuz - is now closed.
According to the DCU professor if cargo ships are blocked then this could quickly result in shortages and one key issue in this respect for farmers is around the global fertiliser supply chain.
Fertiliser
The International Fertiliser Association has highlighted that the Middle East region accounts for "almost 30% of global export supply of major nitrogen, phosphate, and potash fertilisers".
According to the association, which has around 500 members across 80 countries, recent events around the Strait of Hormuz "underline the risk to global fertilizer markets, particularly for significant volumes of nitrogen and phosphate fertilizers".
The International Fertiliser Association said that five major fertiliser exporting countries - Iran, Qatar, Saudi Arabia, United Arab Emirates, and Bahrain - "rely" on the strait to export to international markets.
It has warned that urea "remains the most exposed fertiliser product".
"In 2024, 18.5 megatonne (Mt) of urea were exported via the Strait of Hormuz, and nearly 50% of global urea trade originated in the Middle East during the same period," the association added.
The association has also highlighted that natural gas represents 80-90% of ammonia production costs and Middle East's role in global gas supply is "a critical factor for nitrogen economics".
"Disruption to oil and gas trade flows through the Strait of Hormuz could therefore generate broader ripple effects across the fertilizer supply chain," the International Fertiliser Association.
According to the Irish Creamery Milk Suppliers' Association (ICMSA) any potential spike in fuel or fertiliser bills would feed directly into higher production costs, squeezing profitability at farm level.
ICMSA president Denis Drennan said for many dairy farmers the milk price is already below the cost of production.
"It would be a huge concern if prices for fertiliser or fuel increase because that will make us less viable.
"If costs increase then the government needs to look at what it can do to support farmers - whether that is in relation to the Carbon Border Adjustment Mechanism (CBAM), carbon taxes or on VAT," Drennan said.
He also believes that because of the situation unfolding in the Middle East and the impact this could have on farmers that the European Commission should move to introduce a voluntary milk supply reduction scheme.
Drennan believes the "tried and tested" measure would "put a floor under" declining milk prices and provide direct support to farmers.
