Surging fertilizer prices weigh heavily on Southeast Asia’s palm oil industry

Escalating Middle East tensions and constraints in the Strait of Hormuz have pushed up oil and gas prices. Since natural gas is the key feedstock for nitrogen fertilizers, the cost chain has been rapidly amplified. In the past two weeks, some fertilizer inputs have surged 100%–150%, with suppliers halting new orders—effectively creating a “priced but unavailable” market.

The impact is especially severe for plantations in Malaysia and Indonesia, where fertilizers can account for up to 60% of production costs. Margins are being squeezed, forcing producers to cut application rates or shift partially to organic alternatives, though these are unlikely to offset yield losses in the short term.

Looking ahead, if the conflict persists, under-fertilization will drag yields lower. Combined with strong cost support, palm oil prices have a clear upside bias. Put simply: energy prices rise first, but food ultimately pays the bill.