The EU will temporarily lift customs duties on key nitrogen-based fertilizers such as urea and ammonia for one year to mitigate the knock-on effects of the Iran war, the Council of the EU said on Friday.

Global fertiliser prices have jumped following the near total closure of the Strait of Hormuz, a narrow shipping route along Iran's coast through which around one-third of global fertiliser trade passes.

While the EU does not depend on the nitrogen-based fertilisers, namely urea, ⁠produced in the Middle East, prices for all types of fertilizers have risen as countries race to source alternatives.

The U.N. Food and Agriculture Organization warned last month that a prolonged blockade could trigger an agrifood catastrophe.

The suspension will not apply to fertilizer products imported from Russia or Belarus, the Council statement said.

The EU imports a significant volume duty-free from countries with preferential access, but a "large volume" still arrives with tariff rates of between 5.5% to 6.5%, the statement said.

"To balance the interests of EU producers, the measure is limited to a quota of goods equal to the volume of MFN (most favoured nation) imports in 2024 plus 20% of the volumes imported from Russia and Belarus in the same year," it said. The measures will come into force in a few days once they are published in the EU's Official Journal.

Regions where the planting season is already underway are showing early signs of stress.

Farmers in Australia - the third largest wheat exporter - are planting less this year, risking a harvest that is up to 40% smaller. Across Asia, rice supply is expected to fall this year due to the Iran war and an emerging El Nino.

The EU imported 2 million tonnes of ammonia and 5.9 million tonnes of urea in 2024, the statement said, and 6.7 million tonnes of nitrogen-based fertilisers and mixtures containing nitrogen.

The Middle East accounts for a small share of this volume. According to the European Commission, the EU's direct dependence on the Middle East is about 3% for ammonia and 1-2% for nitrogen fertilizers.

(Reuters)