Will the Iran war lead to food inflation?

Rabi comfort

It isn’t opening stocks alone.

The production prospects from the rabi crops, now in various stages of harvesting, also look good. The driver for it has been the surplus monsoon rainfall in 2025, leading farmers to plant more area under wheat, mustard, maize, chana (chickpea), masoor (red lentil) and even potato and onion. The higher acreages have been combined with reasonably favourable weather conditions.

“The rains triggered by successive western disturbances this month has brought down temperatures. It has been beneficial for wheat, as the crop gets more time for grain-filling. It translates into higher grain size and weight, and ultimately yields,” said Rajbir Yadav, principal scientist at the Indian Agricultural Research Institute in New Delhi. Wheat harvesting is already underway in central India, while it would pick up in the north and northwestern states towards mid-April.

Mustard harvesting is generally from late-February to mid-March. “We had unseasonal rains and hailstorms after mid-March, but the siliqua (pod) development and grain (seed) formation was completed by then,” noted Bhagirath Choudhary, director of the South Asia Biotechnology Centre at Jodhpur (Rajasthan).

He expected production setbacks mainly in seed spices such as jeera (cumin) and isabgol (psyllium husk): “These crops need a longer and colder growing season than wheat and mustard. We didn’t really have that this time”.

Doongar Singh, a potato grower-cum-cold store owner in Khandauli near Agra (Uttar Pradesh), estimated yields of the tuber crop at around last year’s levels: “Production is 8-10% higher because of increased acreage”.

Harvesting of rabi maize in Bihar, a major growing state, will commence after mid-April. “Farmers have planted more area and the weather too has been good so far. Last year, grain yields were 4-4.5 tonnes per acre. They will average the same, if not more, this time,” according to Anil Kishorepuria, chairman of Regaal Resources Ltd, a leading corn wet-milling company with operations in Bihar’s Kishanganj district.

The big picture is that India has entered this crisis from the Iran War – just as with the pandemic six years ago – with plentiful food stocks and a bumper rabi harvest in the offing. Even in sugar, where closing stocks for 2025-26 (October-September) are projected lower (see table), both all-India average ex-factory and modal (most-quoted) retail prices are virtually unchanged at Rs 38.5 and Rs 45 per kg respectively relative to a year ago.

Simply put, there are no food supply or inflation pressures – for now.

Looming threat from supply shock in fertilisers…

In fertilisers, too, the stocks of urea and di-ammonium phosphate (DAP), at 6.1 mt and 2.4 mt respectively on March 19 as per government data, were higher than their corresponding year-ago levels of 5.5 mt and 1.2 mt.

So were the stocks of complex fertilisers containing nitrogen, phosphorous, potassium and sulphur in different ratios (5.7 mt versus 3.4 mt) and single super phosphate or SSP (2.5 mt versus 2.3 mt), while marginally lower for muriate of potash (1.3 mt versus 1.4 mt).

The problem, though, is in their availability for the upcoming kharif (monsoon) planting season from June. The war has disrupted imports from the Gulf Cooperation Council countries that are the largest suppliers of urea and DAP as well as inputs – especially liquid natural gas, ammonia and sulphur – for manufacture of fertilisers in India.

Since the war broke out, landed prices of ammonia imported into India have shot up from $450-470 to $725-750 per tonne. Sulphur prices have, over the last one year, soared from below $200 to $700-plus per tonne, and from $640-650 to about $825 for imported DAP.

India annually consumes roughly 40 mt of urea, 10 mt of DAP, 14 mt complex fertilisers and 5 mt of SSP. “The existing stocks can barely meet the requirement for the first half of the kharif season. The government must ensure that we continue to produce and import. It would necessitate recalibration of nutrient-based subsidy rates to fully reflect both rising international prices and a weakening rupee,” a senior industry executive told The Indian Express.

The focus should be to maximise domestic production of complex fertilisers and SSP, and push farmers to apply more of these instead of urea and DAP. “With one tonne of phosphoric acid, you can produce only two tonnes of DAP, as against 4-5 tonnes of complexes such as 20:20:0:13 having more balanced nutrient composition. This crisis should be turned into an opportunity to promote nutrient use efficiency and balanced fertilisation,” he added.

…and pesticides

Crops need fertilisers to deliver nutrients for growth. They also require chemicals – insecticides, fungicides and herbicides – to protect against pests, diseases and weeds that cause yield losses.

Crop protection chemicals are no less exposed to the raw material supply chain disruptions from the war. Some 55% of the global supply of naphtha – a primary feedstock for agrochemicals – originates from crude petroleum oil refineries in West Asia or passes through the Strait of Hormuz.

Naphtha is both “cracked” into ethylene, propylene and butadiene and “reformed” into benzene, toluene and xylene. These, in turn, are the building blocks for intermediate chemicals used in the manufacture of active ingredients and also their emulsifiers and solvents for various crop protection formulations. For instance, the herbicide glyphosate is formulated using isopropylamine that is derived from isopropanol and which further comes from propylene.

“When naphtha and propylene supplies from Middle East are hit, Chinese manufacturers raise their prices of isopropylamine. It, then, increases our production cost of glyphosate formulation,” explained Sohit Satyawali, chief business officer at the New Delhi-based Crystal Crop Protection Ltd.

Base chemicals apart – these also include sulphur and methanol – there has been an escalation in the cost of packaging materials, be it HDPE and PET bottles, flexible pouches, master carton boxes or even labels. “Packaging material costs itself are up 30-40%. It’s all linked to petrochemicals and the war,” he pointed out.

How these costs will play out in farmers’ fields, and eventually food prices, remain to be seen.