Escalating global fertilizer prices driven by geopolitical tensions in the Middle East could further squeeze farm profitability across Canada, according to a Farm Credit Canada (FCC) analysis.
A sharp increase in nitrogen prices could quickly erode already thin margins, the analysis warns. A 40% rise in nitrogen costs, for example, could cut average Saskatchewan crop margins in half — from roughly $50 per acre to about $25 per acre — for a typical wheat and canola rotation.
The impact would be less severe but still noticeable in eastern Canada. For an average Ontario corn and soybean rotation, the same increase in nitrogen prices would reduce margins from about $365/acre to roughly $345. While margins remain higher in Ontario, land costs are significantly greater and are not included in the estimates, meaning many farms could still feel meaningful financial pressure, the analysis said.
The estimates also only reflect the direct effect of nitrogen prices. They do not account for the possibility of reduced fertilizer application, which could lower crop yields, or additional cost increases from higher fuel or other input prices.
The Middle East accounts for about 12% of global nitrogen production and nearly 25% of global fertilizer trade, meaning disruptions in the region can quickly ripple through international markets. Following recent military strikes involving Iran, U.S. urea futures surged roughly $130/tonne, or nearly 30%, within two days. (Urea, ammonium nitrate, and anhydrous ammonia are the three most common nitrogen fertilizers produced globally).
Canadian prices mirror the trends in the U.S. futures market. Complicating matters for farmers, Canada still has a tariff on Russian fertilizer imports. These tariffs are adding approximately $100/tonne for Canadian producers compared to their U.S. counterparts.
For Canadian producers, the timing of these price increases is particularly sensitive. Fertilizer demand typically peaks in April and May during seeding, while eastern farmers also apply nitrogen as a spring top-dress on winter wheat and later for corn production.
Although Canada is a net exporter of nitrogen fertilizer, supply is unevenly distributed across the country. Prairie farmers tend to hold more fertilizer on farm, while producers in eastern Canada rely more heavily on just-in-time deliveries. Past surveys have suggested that by late March more than half of Prairie farmers had fertilizer already stored, compared with only about 10% of Ontario producers and 17% in Quebec.
Recent Statistics Canada data also show a regional imbalance in inventories. Western Canada currently holds the highest urea stocks in a decade, while eastern inventories are at their lowest levels since 2017, the FCC analysis said.
The full analysis can be seen here:
https://www.fcc-fac.ca/en/knowledge/economics/fertilizer-availability-amid-turmoil-middle-east
