KUALA LUMPUR, April 24 — Fitch Ratings has warned that emerging Asian economies could face rising food cost pressures later this year if fertiliser supply disruptions linked to a prolonged US-Iran conflict persist into the planting season.
In a report released yesterday, Fitch said reduced fertiliser availability and higher input prices would increase production costs across agribusiness and food supply chains, potentially weakening crop yields and pushing up food prices in the second half of 2026.
“Reduced fertiliser availability and higher prices would raise production costs, discourage application rates and weaken crop yields,” the agency said, adding that this would translate into margin pressure for producers and higher downstream food prices.
The ratings agency noted that risks would intensify if fertiliser supply and pricing do not normalise soon, particularly as parts of South and Southeast Asia enter key sowing periods.
The Gulf region accounts for a significant share of global fertiliser production due to its access to natural gas, a key feedstock. Ongoing conflict could keep gas prices elevated and disrupt shipping routes, tightening supply to Asia.
Fitch also expects major exporters like China to maintain fertiliser export restrictions at least through mid-2026, prolonging input cost pressures.
Urea prices – a key nitrogen-based fertiliser – have risen about 50 per cent to around US$700 (RM2,780) per tonne, from roughly US$465 (RM1,846) before the war. Sustained high prices may prompt farmers to reduce fertiliser use or cut planting, increasing the risk of weaker harvests and higher food prices, Fitch said.
While most emerging Asian countries rely primarily on domestic food production, Fitch said reduced fertiliser use could materially affect yields.
Countries with higher dependence on imported food would be more vulnerable if weaker domestic output coincides with elevated global prices and export restrictions.
Malaysia, a net food importer, has relatively lower food import dependence at about 10 per cent, compared with mid-teens levels in countries such as the Philippines, Bangladesh, and Sri Lanka, and higher levels in Mongolia and the Maldives.
Near-term food price pressures remain moderate due to the lag between energy shocks and food inflation.
However, the World Food Programme estimates that if the conflict continues beyond mid-2026 and oil prices stay above US$100 (RM397) per barrel, an additional 9.1 million people in Asia could face acute food insecurity, a 24 per cent increase from pre-war levels.
Some countries, including India, have built up fertiliser stockpiles that could cushion near-term impacts. In contrast, markets with weaker supply buffers may see a more immediate pass-through of higher input costs to both farmgate and retail food prices.
Fitch cautioned that prolonged disruption throughout the planting cycle could significantly affect crop yields, depending on fertiliser use intensity and crop types.
Citing a study by Yara International, the agency noted that yields can fall sharply without nitrogen fertiliser, underscoring the risk of sustained supply shocks.
Beyond production impacts, governments may face increased fiscal pressure if they intervene with subsidies to stabilise fertiliser and food prices, Fitch noted.
Without such support, higher costs are likely to be borne directly by farmers, food producers, and consumers, raising the risk of broader social tensions.
