Defer the wrong nutrient

• This is not a broad fertiliser crisis. Anhydrous ammonia is +22% year on year at $945 per ton while potash is +2% at $495 S. The shock is concentrated in nitrogen and in the sulphur that phosphate production depends on. Potash is absent from it, and the reason is a policy change rather than a market one.
• A ton of anhydrous now costs 197 bushels of corn at the USDA season-average price of $4.80 KR. The nitrogen-to-corn price ratio is 0.121, in the upper third of the range agronomic rate tables are built across, which mechanically pulls economically optimal nitrogen rates down by roughly 15 to 25 pounds an acre against a normal year KR.
• The rational grower response and the profitable one point in opposite directions. Nitrogen is the expensive nutrient and the one that cannot be skipped without an immediate yield penalty. Phosphate and potash are bankable in the soil. The correct deferral is P and K, not N, and we expect widespread single-season skipping of P and K maintenance across the coming application window.
• The most telling number of the quarter is a producer's income statement. The world's largest phosphate exporter reported first-half 2026 revenue down 7.3% year on year through the sharpest phosphate price spike in four years, with second-quarter capital expenditure down 36% S. Volume loss and the sulphur cost squeeze more than offset price, and the capex signal is bearish for any 2027 and 2028 supply response.
• The Strait of Hormuz is widely described as closed continuously since 28 February 2026. It has not been. There was a documented partial reopening in April, a reopening under a June memorandum, and a re-closure on 22 June S. The distinction matters because the sulphur move usually attributed to the closure is measured from a base that predates it.

Sulphur is the cost that moved, and most published accounts of it are imprecise in the same two ways. This section fixes the timeline and the base before the rest of the note builds on them, because the affordability arithmetic that follows is only as good as these two numbers are.

The strait has not been continuously closed. The 28 February 2026 start date holds. What does not hold is continuous closure. The sequence on the public record is closure on 28 February, restricted escorted passage in early March, a US reopening operation from 19 March, partial operation under a ceasefire in April, a memorandum in mid-June under which the waterway was to reopen, a renewed shutdown on 22 June, collapse of the interim ceasefire on 8 July, and reinstatement of a naval blockade in mid-July, with mine clearance from the traffic separation scheme confirmed in late August S.

We will not print a transit count. Two commercial trackers disagree materially on current throughput, and one of them is internally inconsistent within a single page. Neither is a primary maritime authority. We will report the direction, the war-risk insurance multiple and the crude price as a market-verifiable proxy, and we will not print a vessel count we cannot source.

The sulphur base is widely misstated, and the precise version is a better claim. The move is commonly given as roughly $400 to $1,000 or $1,200 a ton. The $400 level is end-2025, before the closure: sulphur had already doubled from below $100 in January 2024 before the strait shut S. The Hormuz-attributable move is more precisely $525 to $1,150 per tonne CFR Brazil between late February and early May 2026, a 119% rise, alongside sulphuric acid CFR US Gulf moving from $155 to $400, up 158% S. That is the tighter and more defensible statement, and it is the one the rest of this note uses.

At DTN's retail prices for the survey week of 14 to 18 September 2026 and the USDA season-average corn price of $4.80 a bushel from the 11 September WASDE, a ton of anhydrous costs 197 bushels, DAP 193, urea 137 and potash 103 KR. On the $5.00 corn assumption used in the 2027 Illinois budgets those fall to 189, 185, 132 and 99.

Affordability improved slightly, and it is worth being precise about why.

Anhydrous rose 2.4% over the three weeks to 18 September while the WASDE lifted the season-average corn price 6.7%, from $4.50 to $4.80, on a yield cut to 178.5 bushels an acre and ending stocks down to 1.567 billion bushels P. Corn outran ammonia. The bushel cost of a ton of anhydrous therefore fell from 205 to 197 even though the dollar price rose KR. This does not change the deferral argument below, which is about which nutrients can be skipped rather than about absolute affordability, but anyone modelling a worsening squeeze through the autumn should note that the squeeze eased marginally.

Nitrogen unit cost is $0.58 per pound of N in anhydrous, against $0.72 in urea and $0.75 in UAN28 KR. Divided by $4.80 corn, the nitrogen-to-corn price ratio is 0.121, and at $5.00 corn it is 0.116. Agronomic rate tables typically span 0.05 to 0.15, so 0.12 sits in the upper third. That pulls economically optimal nitrogen rates down by roughly 15 to 25 pounds an acre against a 0.07 to 0.08 ratio year KR. Across 96.7 million planted corn acres that is a demand signal of the order of 0.7 to 1.2 million tons of nitrogen, and we would state it as an order of magnitude rather than a point estimate.

One further detail belongs in the fall application conversation, and it has turned since our last survey. Nutrient prices stopped falling: six of eight products rose month on month in the 14 to 18 September DTN survey, none of them by the 5% DTN treats as a sizeable move S. The case for waiting on a further decline has weakened. Meanwhile the fuel line has moved violently. US on-highway diesel averaged $6.529 a gallon in the week ending 21 September 2026, up $2.780 year on year, a rise of 74% P. The nutrient has flattened and the tractor pass has repriced. Application timing advice that ignores the fuel line is incomplete this autumn, and on these numbers the fuel is now the faster-moving half of the applied cost.

DAP is roughly 46% P₂O₅ and requires both ammonia and sulphuric acid. Producing a tonne of P₂O₅ consumes on the order of 2.5 to 3 tonnes of sulphur as acid. At $1,040 to $1,150 a tonne against a sub-$150 historical norm, the sulphur input alone can approach or exceed the historical total production cost of DAP.

Three shocks arrived at once, each independently documented. Saudi Arabia and the UAE produced 13,500 thousand tons of world sulphur in 2025, essentially all byproduct from sour gas processing and refining, and essentially all shipped through the Hormuz corridor P. China announced a de facto export ban on smelter byproduct sulphuric acid on 10 April 2026, effective from May, removing 4.65 million tonnes of 2025 exports from the market S. And Kazakhstan and Iraq, at 5% and 4% of US elemental sulphur imports respectively, are exposed to the same corridor P.

The most informative response came from the producer, not the price.

OCP cut output by approximately 30% in the second quarter of 2026 and pivoted its product mix toward TSP, which requires far less sulphur and no ammonia. TSP is now 65% of its crop nutrition volumes S. Then, on 2 September 2026, it reported first-half revenue of MAD 48.37 billion against MAD 52.17 billion a year earlier, down 7.3%, with second-quarter capex down 36% S.

Read those two together. The world's dominant phosphate producer posted falling revenue through the sharpest phosphate price spike in four years, and is conserving cash rather than expanding into the shortage. The product pivot is a producer telling us through capital allocation, rather than through a press release, that it does not expect sulphur to normalise soon. We would expect the DAP to TSP spread to compress structurally and TSP availability to improve relative to DAP, which is a concrete procurement recommendation for any phosphate buyer who can agronomically substitute.

Henry Hub is forecast at $2.87 per MMBtu for the third quarter of 2026, cut fifty cents from the prior month's outlook on reduced LNG feedgas demand and strong domestic production P. European TTF has moved above €80 per MWh in late September 2026, against €71.96 on 4 September, on low storage into winter S, which converts to roughly $27 to $28 per MMBtu.

At the industry convention of approximately 34 MMBtu of gas per tonne of ammonia, that is a gas cost of about $98 a tonne in the United States against $930 to $950 in Europe, a spread of roughly $830 to $850 KR. Against a US anhydrous retail price of $945 a ton, the entire European gas bill for making a tonne of ammonia now roughly equals what a US farmer pays at retail for the finished product. The curve was already the widest on record at our last cutoff; three weeks of European gas took it wider.

Four consequences follow, and they compound rather than offset. US nitrogen producers are running the widest feedstock advantage on record, so US anhydrous at +21% is a margin story as much as a cost story. European curtailment removes supply from the Atlantic basin, supporting US and Middle East netbacks, so the Hormuz shock and the European gas shock reinforce each other. The EU's escalating nitrogen tariff sits on top of that, leaving European growers with the world's highest gas-based production cost and a tariff wall against the imports that would relieve it. And the LNG channel runs the other way: EIA explicitly cut its US gas forecast on reduced LNG feedgas demand, so the disruption is subsidising US nitrogen producers by trapping gas domestically.

The Federal Register carries a phosphate duty story that has not reached the trade press. On 24 July 2026 Commerce preliminarily found that revoking the countervailing duty order on Moroccan phosphate fertiliser would likely lead to continued subsidy, with a rate likely to prevail of 20.04% ad valorem P. On 17 April 2026 the final results of the 2023 administrative review set the Russian producer's cash deposit rate at 12.71% P. Then, on 19 August 2026, following a Court of International Trade judgment, the amended final results for the 2020 to 2021 period raised that producer's rate to 22.86% P.

The operative forward rate is 12.71%, while a court decision has just pushed the historical rate up to 22.86%. Importers with unliquidated entries from the 2020 to 2021 period face retroactive exposure, and we have seen this discussed nowhere. Separately, the ITC elected on 17 June 2026 to conduct full rather than expedited five-year reviews for both Morocco and Russia P, which pushes the injury determination into 2027 and creates a second catalyst.

Potash, finally, explains itself. The United States eased sanctions on Belaruskali and the Belarusian Potash Company on 19 March 2026 S. EU sanctions remain fully in force and the Klaipėda rail route stays shut, so tonnes must route through Russian rail. The market largely shrugged. But it is why potash is +2% while everything around it moved, and it is why potash is the nutrient a buyer can afford to be relaxed about this season.