Middle East crisis threatens to make a lot of things other than gas expensive for Americans

Economists are waiting for next month’s consumer spending data to reveal the true impact of the rise in oil prices due to the Iran conflict, but they might be in for another shock. The Strait of Hormuz is not only a key artery for oil and gas shipments but also for fertilizers critical to global agriculture. Disruption of agricultural chemical shipments through the Strait is shaping up to be a slow-brewing inflation story that has not gotten nearly enough attention, according to industry leaders.

Veronica Nigh, chief economist at The Fertilizer Institute, said that the impact will eventually reach consumers. “This is a global impact on fertilizer costs,” Nigh told CNBC, adding that higher costs are likely to be passed on to consumers if disruptions persist. According to UN Trade and Development, around one-third of global seaborne fertilizer trade passes through the Strait, raising concerns about fertilizer access throughout the world.

Prices have already started to climb, and CNBC reported that the price of urea imports into the U.S. jumped about 30% around the time the conflict started. The Fertilizer Institute reported that nearly 50% of global urea exports originate from countries west of the Strait and transit through this critical waterway. It's not just urea but large volumes of ammonia, phosphates, sulfur and petroleum products produced in Gulf countries also move through the strait.

The timing could not have been worse as farmers across America head into the spring sowing season. It is during this time that demand for fertilizers and other crop inputs peaks. Any meaningful delay or shortage at this stage is sure to work its way up the ladder and eventually reach supermarket shelves.

Food price inflation has been a persistent problem for consumers in recent years. When Russia invaded Ukraine and disrupted supplies of potash, ammonia and urea, prices spiked across the world. Wheat, corn and sunflower oil all surged. Countries dependent on imported fertilizers were hit hardest, with ripple effects taking around two years to settle. A fertilizer crunch combined with existing cost pressures could reignite it. Unlike an oil price spike, which consumers feel immediately at the pump, this one would take months to show up, making it harder for central banks to respond in time and harder for consumers to see it coming.

The Fertilizer Institute said that the full extent of impacts on the U.S. fertilizer market will depend on a number of factors, with time being chief among them.

Against the backdrop of this situation, farm groups are urging White House to act before disruptions translate into supply shortages. The American Farm Bureau Federation (AFBF) president, Zippy Duvall, called for intervention from President Donald Trump. “Without strategically prioritizing the delivery of critical farm inputs such as urea, ammonia, nitrogen, phosphate and sulfur-based products, the U.S. risks a shortfall in crops. Not only is this a threat to our food security—and by extension our national security, such a production shock could contribute to inflationary pressures across the U.S. economy," he wrote in a letter.

More on Market Realist:

Oil price hike sparked off by the war could make life more expensive for Americans

Trump's latest move has led to a surge in gas prices — but his administration says don't panic

American taxpayers will have to foot the bill for the Iran war — it's a massive price to pay