Fertilizer Crisis Looms: Hormuz Strait Closure Shakes Thailand as Chemical Fertilizer Shortage and Soaring Costs Threaten Producers
Thailand faces critical chemical fertilizer shortages by May as the Strait of Hormuz closure since March disrupts supplies, with urea prices surging 40 percent and threatening rice and cassava production worth billions in losses.
On April 28, 2025, Krungthai COMPASS, the economic and business research center of Krung Thai Bank, revealed that escalating tensions between the United States and Iran, culminating in the closure of the Strait of Hormuz since March 2, 2025, have severely disrupted Thailand's chemical fertilizer supply chain. Thailand imports 95 percent of its chemical fertilizers, with 34 percent sourcing from the Middle East—particularly urea, 71 percent of which comes from that region.
Krungthai COMPASS researcher Sukunthip Chaisayan warned that if the Strait of Hormuz closure extends three months (March-May 2025) and Thailand cannot secure alternative import sources, the country will face critical chemical fertilizer shortages in May. This directly threatens rice cultivation season, along with cassava, rubber, and palm oil production.
Urea import prices are forecast to average $605 per ton (approximately 19,360 baht) in 2025—a 40 percent increase year-over-year. However, domestic fertilizer prices are government-controlled, preventing producers from passing costs to buyers. Under the baseline scenario, if producers only recover 40 percent of cost increases, they face a negative profit margin of 619 baht per ton, compared to average spreads of around 3,000 baht during 2022-2023.
Higher fertilizer costs may push farmers to reduce chemical fertilizer use, ultimately lowering crop yields. Rice production is expected to decline by approximately 700,000 tons—2 percent of total annual output—representing damage valued at 5.9 billion baht.
Policy Recommendations:
For farmers: Short-term strategy should adopt precision fertilizer application tailored to crop and soil types, combined with organic fertilizer use. Long-term, the government should promote agricultural technology (AgriTech) to reduce costs and increase yields.
For chemical fertilizer producers: Implement risk management through forward contracts, secure long-term raw material sources, diversify import origins to mitigate supply chain disruptions, and increase specialized and organic-chemical blend products to reduce price competition.
For agricultural processors: Diversify raw material sourcing domestically and internationally, use forward purchase agreements, implement automation and artificial intelligence to minimize waste, and develop higher-value products to boost competitiveness.
Krungthai COMPASS noted that actual crop yield declines depend on additional factors including soil conditions, climate, rainfall, and disease outbreaks.
