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Strait of Hormuz threatens Southern Hemisphere crops
A prolonged closure of the Strait of Hormuz poses a severe threat to the Southern Hemisphere's upcoming planting cycle, whereas the Northern Hemisphere is largely insulated for the current season.
The argument
The guest argued that while the Northern Hemisphere had already secured its fertilizer before the disruption, a continuation of the closure for another month or two will directly hit the Southern Hemisphere's next planting cycle. Brazil is particularly vulnerable, importing 95% of its nitrogen and 72% of its phosphate.
The thesis, stress-tested
✓ What validates it
- ✓Strait of Hormuz remains closed past the next 60 days
- ✓Brazil reports fertilizer import shortfalls for the upcoming planting season
▸ Risks discussed
- ▸Rerouting of global fertilizer shipments could mitigate physical shortages
- ▸Ad-hoc government subsidies may cushion farmer losses
Hear it yourself
"And, you know, the economists would say prices and quantities are the same thing. They're related in a way that you can't ask the question completely, but you're in fact quite right to ask that question. There may just be no price at which you can get enough quantity of something moved. I think the the expectations at this point are that, you can ration a bit. In The US, it's it's viewed that we generally tend to oversupply nitrogen in case the year is perfect. Soybeans have a lot less need for certain inputs and don't need much nitrogen being in nitrogen fixing lagoon. So I think you'll have some rationing and some adjustment in crops and the the mix a little bit."