Iran War Food Inflation: Why Iran War Food Inflation Risks Are Limited Now but Rising Ahead

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• India currently has strong food security buffers despite the Iran conflict. Government warehouses held 23.6 million tonnes of wheat on March 1—much higher than in the previous two years—and 36.5 million tonnes of rice. 
• Similar to the Covid period, good crop output and ample stocks provide a cushion against immediate food inflation pressures.

Strong Rabi Crop Prospects

• India’s food situation remains comfortable not just due to high stocks, but also because of a promising rabi harvest. 
• Good monsoon rains in 2025 encouraged farmers to increase acreage under crops like wheat, mustard, maize, chana, masoor, potato, and onion. 
• Favorable weather, including cooler temperatures from western disturbances, has supported better grain filling and higher yields, especially for wheat.

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Crop-Wise Performance

• Wheat harvesting has begun in central India and will expand to northern regions by mid-April. 
• Mustard harvest has largely been completed with minimal damage despite unseasonal rains. 
• Potato production is estimated to be 8–10% higher due to increased acreage, while maize yields in Bihar are expected to match or exceed last year’s levels. 
• However, some seed spices like jeera and isabgol may see lower output due to unsuitable weather conditions.
• Despite slightly lower projected sugar stocks for 2025-26, prices remain stable, with no significant increase compared to last year. This indicates a balanced supply-demand situation.

Comfortable Fertiliser Stocks – For Now

• India currently has adequate fertiliser stocks, with higher year-on-year availability of urea (6.1 mt), DAP (2.4 mt), complex fertilisers (5.7 mt), and SSP (2.5 mt). 
• Only potash stocks are slightly lower. These reserves can meet immediate needs.

Emerging Risk for Kharif Season

• The concern lies ahead. The Iran conflict has disrupted imports from Gulf countries, which are key suppliers of fertilisers and inputs like LNG, ammonia, and sulphur. 
• As a result, global prices have surged sharply—ammonia prices have risen to $725–750 per tonne, sulphur to over $700, and DAP to about $825 per tonne.

Supply-Demand Pressure Ahead

• India’s annual fertiliser demand is substantial—about 40 mt urea, 10 mt DAP, 14 mt complex fertilisers, and 5 mt SSP.
• Current stocks may only cover the first half of the kharif season, making timely imports and domestic production critical.
• Experts suggest recalibrating subsidy rates to reflect rising global prices and a weaker rupee. 
• There is also a push to increase domestic production and shift farmers towards complex fertilisers and SSP, which are more nutrient-efficient than urea and DAP.

Turning Crisis into Opportunity

• The situation presents an opportunity to promote balanced fertilisation and nutrient efficiency. 
• For instance, the same raw material can produce more complex fertilisers than DAP, improving both supply management and soil health.

Pesticides Also Face Supply Risks

• Along with fertilisers, crop protection chemicals—such as insecticides, fungicides, and herbicides—are also vulnerable to supply disruptions caused by the West Asia conflict. 
• These chemicals are essential to protect crops from pests, diseases, and weeds.

Dependence on Petrochemical Inputs

• About 55% of global naphtha supply, a key raw material for agrochemicals, comes from or passes through West Asia. 
• Naphtha is processed into base chemicals like ethylene, propylene, and benzene, which are crucial for manufacturing pesticide ingredients and formulations.
• Disruptions in naphtha and propylene supply have led to higher prices of intermediate chemicals. 
• For example, the cost of isopropylamine, used in glyphosate herbicide, has increased due to higher prices from Chinese suppliers. 
• Other base chemicals like sulphur and methanol are also becoming costlier.
• The crisis has also driven up packaging costs by 30–40%, including materials like HDPE and PET bottles, pouches, cartons, and labels—all linked to petrochemical supply chains.

Uncertain Impact on Agriculture and Prices

• While the immediate impact is on production costs, the final effect on farmers and food prices is still uncertain, depending on how long the disruption continues and how costs are passed on.

Source: IE