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UBS Trending Extra: Fertilizer & the Strait of Hormuz · UBS Trending

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  You know that old saying April showers bring May flowers?
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  Well, but not if there's no fertilizer.
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  And that's what we're here to talk about.
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  Specifically, the third consecutive supply chain crisis
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  that fertilizer markets have experienced in just six years.
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  And this time, it's from the Strait of Hormuz.
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  While best known for oil and gas,
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  the Strait of Hormuz is a vital artery for global agriculture.
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  Roughly one
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  third of fertilizer inputs pass through the narrow strait,
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  and that includes
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  natural gas, the backbone of nitrogen fertilizers,
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  as well as urea, ammonia and sulfur coming from the Gulf.
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  Now the impact is global, but not uniform.
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  For example, the U.S.
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  does actually produce
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  domestically a lot of the fertilizer it uses.
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  And yet fertilizers like sulfur
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  really have an impact here as well, because 50% of global
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  sulfur exports come through the Strait of Hormuz.
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  And local associations here in the U.S.
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  are saying that farmers are stretching
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  to really afford
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  all of the fertilizer they need for this planting season.
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  In other countries
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  globally, like India, Australia, parts of Africa
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  where there's high
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  dependance on imports, we may see bigger domestic implications.
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  And to look at one example for urea, one of these fertilizers,
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  we saw that the prices coming through the Middle East
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  have really skyrocketed since the start of the crisis.
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  But even the prices of the urea coming through the US Gulf
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  Coast in the red have seen a significant increase.
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  So what does this mean for investors?
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  Geopolitical shocks
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  can drive broad market moves with portfolio level implications,
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  even if countries like the US are less directly impacted.
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  Knock on inflation effects can shift rate,
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  cut expectations
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  and pressure assets that are sensitive to interest rates, as well
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  as increasing pressure on certain emerging market geographies.
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  Longer term,
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  continued pressure could accelerate investment in food security,
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  nutrition efficiency, and agricultural innovation.
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  But for now, it's a reminder that without fertilizer,
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  even May flowers are far from guaranteed.
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  For more,
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  please reach out to your UBS
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  advisor or visit ubs.com/sustainable.