The closure of the Strait of Hormuz cut off more than oil; the Gulf region accounts for as much as a third of global fertilizer supply and key inputs such as urea, sulfur and ammonia.
Prices for synthetic fertilizers, which derive from natural gas, have skyrocketed in the past couple of weeks, just as the spring planting season gets underway in the Northern Hemisphere.
“We are more dependent, in percentage terms, on fertilizer coming through the Strait than we are oil coming through the Strait,” Generation Investment Management’s Justin Gillis told ImpactAlpha.
The shortage is expected to reduce yields and drive up food prices. A prolonged closure could spark a global food crisis.
The Strait, says author and strategist Shanaka Anslem Perera, is “one of the most concentrated nutrient chokepoints in the global food system.”
The looming crisis has sparked new interest in bio-based fertilizers made without petroleum-derived inputs shipped from halfway around the world. The startups are looking to shake up the $142 billion market for synthetic fertilizer, which is derived from natural gas and also uses the fossil fuel in the production process.
“Recent global disruptions have further underscored the need for more reliable, domestically produced solutions,” said Christopher Abbott of Pivot Bio, a Berkeley, Calif. company that uses microbes to convert atmospheric nitrogen into a usable form for crops. The company says its product has replaced an average of 33 pounds of synthetic nitrogen per acre in field trials, and boosted yields compared to conventional practices.
Pivot Bio has seen a surge in demand from growers looking for affordable and reliable alternatives. In response, it has boosted output at its facility in St. Louis, Missouri, and lowered prices.
“Our focus is on working alongside growers to provide greater price and supply certainty in the years ahead,” said Abbott, who expects the supply disruptions to extend into next year. Pivot Bio raised $430 million from Generation as well as venture capital firm DCVC, Singapore’s Temasek and other investors in 2021.
Earlier this month, Solugen Global, a Quebec-based company that converts hog manure into organic nitrogen fertilizer, raised $50 million from growth equity firm Idealist Capital and the Canada Growth Fund. The funding will help Solugen scale production of Azogen, its fast-release liquid nitrogen fertilizer, which uses hog manure as its main input.
Modern synthetic fertilizers were made possible by the Haber-Bosch process, a method invented in 1913 that synthesizes ammonia from air using natural gas. The advance has helped to feed a growing planet, but has also driven crop-related greenhouse gas emissions, depleted soil, and contributed to “dead zones” in coastal waters.
Food security
In California’s Central Valley, Nitricity is ramping up production at a first-of-a-kind plant that produces fertilizers from air, water, renewable energy and agricultural waste such as almond shells. The facility was financed with $10 million last year from Elemental Impact and Prime Coalition’s Trellis Climate, which specialize in such hard-to-fund early commercial plants.
The Delhi, Calif. plant will be operating at near full capacity by July. Its inventory is sold out through 2028 with offtake agreements from organic growers in the region. Nitricity also operates a factory in Fremont that runs around the clock.
“The shutdown of global shipping corridors for urea and other fertilizer products could have a dire impact on global food insecurity,” Nicolas Pinkowski of Nitricity told ImpactAlpha.
At the World Agri-Tech Summit in San Francisco last week, the buzz was about securing supply chains, Pinkowski said. He field inquiries from large fertilizer companies, farmers and government representatives.
The San Francisco-based company last year raised a $50 million Series B funding round co-led by Khosla Ventures and World Fund, one of Europe’s largest climate tech funds. Unlike the US, Europe does not have its own supply of natural gas, which makes domestic fertilizer production difficult. Nitricity is working with World Fund, which closed its €300 million debut fund in 2024, to bring its model to the continent, tapping into wood and waste from olive oil manufacturing.
“The closure of the Strait of Hormuz is certainly going to catalyze our efforts in that EU expansion,” says Pinkowski.
US and European farmers may see their costs rise. But many smaller farmers in emerging markets may not be able to secure fertilizer at all.
“The sad reality,” says Pinkowski, “is that the areas where fertilizers are needed the most to support food security are the ones that will have the biggest challenges.”
Nitricity’s local production model, which leverages clean energy and local agricultural inputs, brings fertilizer production closer to the farmers that need it. Nitricity’s walnut shells and ag waste, for example, are sourced from some of the growers that buy the end product. The model, Pinkowski says, can be replicated anywhere.
That could help create a more resilient food system, he says, and “a supply chain where hundreds of millions of people won’t go hungry when there’s a war on the other side of the world from them.”
