Fertilizer crisis out of control? Goldman Sachs admits underestimation: Nitrogen fertilizers suffer the hardest hit, urea prices soar by 70%

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Goldman Sachs was forced to admit its mistake and sharply raised its forecasts—the severity of this fertilizer crisis has far exceeded Wall Street's initial judgment.

As the blockade of the Strait of Hormuz enters its seventh week, the turmoil in the global fertilizer market is exceeding everyone's expectations—including Goldman Sachs itself. On April 14, Duffy Fischer, an analyst from Goldman Sachs' Americas agricultural equities research team, led the team to release the latest research report, formally admitting their previous judgment was conservative and comprehensively raising earnings forecasts for the fertilizer sector. The core conclusion of the report is straightforward: nitrogen fertilizers are the most impacted chemical industry chain in this conflict. Since the outbreak of the conflict, global urea prices have soared 50% to 70% (varying by region). Fischer himself said the impact of this shock "has exceeded our initial expectations," not only in price fluctuations but also in the concentrated release of a structural supply crisis.

For investors, Goldman Sachs named two clearest beneficiaries: US domestic nitrogen fertilizer producers CF Industries (CF) and Nutrien (NTR). Due to the relatively stable domestic natural gas prices in the US, both companies have unprecedented cost advantages in production.

However, this crisis does not only have winners. Sulfur prices have climbed to historic highs, severely harming phosphate fertilizer producers—Mosaic (MOS) announced on April 8 that it would shut down two phosphate mines in Brazil and expects to record a pre-tax book loss of $350 to $400 million in the first quarter of 2026. Goldman Sachs’ assessment is incisive: the duration of the conflict is the most critical and uncertain variable in all valuation adjustments.

Nitrogen Fertilizer: The Most Impacted Chemical Chain Globally

Goldman Sachs' research team noted that the Middle East possesses the world's cheapest natural gas resources, resulting in a huge base of nitrogen fertilizer production, and the region hardly engages in agricultural production, so almost all products are exported. This structural feature makes nitrogen fertilizer the most affected fertilizer type in this conflict.

Specifically, urea produced by Iran, Qatar, and Saudi Arabia accounts for about 35% of global trade volume, and all these exports must pass through the Strait of Hormuz.

In addition, products from Egypt account for about 5% of the global trade volume, which does not need to pass through the Strait, but relies on natural gas supply from Israel. Currently, Egypt claims to have enough natural gas to maintain industrial production until summer, so this output is not considered at risk for now. For ammonia trade, about 15% to 20% of global traded ammonia is also transported via the Strait of Hormuz.

It has been more than seven weeks since the conflict broke out, and shipping traffic in the Strait of Hormuz has stalled, impacting the production side directly and, because of lengthy shipping cycles from the Middle East to destinations, leading to a real risk of accumulating supply shortages. Fischer particularly noted in the report: Even if the Strait eventually reopens, it will take months for prices to fully normalize, so the timing of conflict resolution will have a major impact on the full-year profits of CF and NTR.

Phosphates & Sulfur: Cost Spiral Forming

Phosphates are the second largest fertilizer type affected by the conflict.

In terms of international benchmark prices, DAP (diammonium phosphate) prices in Brazil and India have risen by about 25%, while US domestic DAP prices have increased about 20%. Previously, US farmers took a wait-and-see attitude toward high phosphate prices, and the rising cost pressures have suppressed demand-side momentum, but the supply tightness has not eased as a result.

Sulfur is a key raw material for phosphate fertilizers; about 40% to 45% of globally traded sulfur must pass through the Strait of Hormuz. Because of previous restrictions on Russian exports and growth in demand from non-fertilizer industries, the sulfur market was already tight before the conflict, and prices are now at historic highs.

Goldman Sachs pointed out that as Q2 sulfur contract prices are determined, US domestic DAP prices will need to be raised further to digest upstream raw material inflation pressures.

Phosphate producer Mosaic (MOS) announced on April 8 the shutdown of two phosphate mines in Brazil and plans to sell the Araxa asset, expecting these moves to have a $350 to $400 million pre-tax impact in 1Q26. Goldman Sachs thus lowered its FY2026 EBITDA estimate for MOS by 9% to $1.95 billion but maintained a buy rating, slightly reducing the 12-month target price from $32 to $31.

Potash: Currently Stable, But Beware of Demand Squeeze Effect

Compared to the volatile nitrogen and phosphate fertilizer markets, the potash market is currently stable.

Potash production in the Middle East (mainly from Israel and Jordan) is exported via the Red Sea, which has not been subjected to any restrictions so far, and North American potash supply remains adequate.

Goldman Sachs believes there is no reason to adjust potash price expectations in the short term. However, the research team warns of a potential demand-side risk: high nitrogen and phosphate prices may force farmers to prioritize limited agricultural budgets for nitrogen fertilizers, thereby reducing their willingness to purchase potash—especially since last year's potash application was relatively sufficient and potash has always ranked third in procurement priority.

Goldman Sachs emphasized that the most critical variable now is the duration of the conflict. As long as the Strait of Hormuz remains closed, fertilizer prices and profit expectations for related companies will face sustained upward pressure.

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