Thailand: Soaring Fertilizer Prices Reveal Weaknesses in the Agricultural Model

Since the escalation of tensions in the Persian Gulf in the Spring of 2026, global energy markets have been under severe pressure. Within a single month, the price of Brent crude oil surged by nearly 46%, while global supply dropped by approximately 9%, according to the International Energy Agency (IEA). While this situation directly impacts energy-importing nations, its repercussions are also rippling through agriculture. In Thailand, rising energy prices are driving up the cost of fertilizer, leaving many rice farmers in a difficult position.

From Oil to Fertilizer: a Chain Reaction

The link between energy and agriculture is particularly visible in the fertilizer sector. The most widely used fertilizers in Thailand notably urea and NPK (nitrogen, phosphorus, and potassium) fertilizers heavily depend on natural gas for their manufacturing. When oil and gas prices rise, fertilizer production costs naturally follow suit.

Compounding this are transport costs, which are also influenced by energy prices. Current geopolitical tensions are further disrupting international supply chains, exacerbating the price hikes. According to the World Bank, a 10% increase in oil prices can lead to a greater than 5% jump in fertilizer prices. These effects can persist long after energy markets stabilize.

An Import-Dependent Agricultural Sector

This situation exposes a structural weakness in Thai agriculture. The country imports roughly two-thirds of the raw materials required to manufacture fertilizers, as well as a significant portion of finished products. This dependency leaves farmers directly exposed to the fluctuations of international markets.

Rice farming, a cornerstone of Thailand's agricultural economy, alone accounts for more than half of the country's chemical fertilizer consumption. The high yields achieved in major producing regions rely heavily on the regular use of industrial fertilizers. While alternatives like organic fertilizers or compost exist, they remain limited in scope and cannot entirely replace chemical inputs in the short term.

Producers Caught in a Vice

Faced with rising costs, many farmers are attempting to cut expenses by reducing the amount of fertilizer they use. While this strategy limits immediate outlays, it carries a major risk: a decline in crop yields and, consequently, a drop in future income.

At the same time, producers have very little leeway to pass these additional costs onto the price of rice. Prices are largely dictated by international markets and supply chain intermediaries. As a result, farmers find themselves facing a "price scissors" effect: their costs are rising rapidly while their income remains highly uncertain.

This financial pressure is particularly hard on small-scale family farms, which often have limited cash reserves and are more vulnerable to price fluctuations.

A Strategic Challenge for the Future

This fertilizer crisis serves as a wake-up call. It highlights the extent to which Thailand's agri-food chain remains exposed to global energy shocks, far beyond the agricultural sector alone. For farmers and businesses alike who rely on this industry, diversifying supplies, developing local solutions, and adopting more sustainable practices are no longer just optional strategies they are essential levers for resilience.

This is exactly the kind of issue we monitor at STPI: understanding how global economic shocks play out on the ground in Asia, and supporting our European partners in getting a precise read of these dynamics. To talk about this topic or your projects in Thailand, get in touch with us.

Publication date: June 2026

Fertilizers