BrusselsThe blockade of the Strait of Hormuz due to the war in the Persian Gulf is causing an increase in fertilizer prices, thus endangering the agri-food sector’s value chain and threatening to further increase inflation. For this reason, Brussels presented a plan on Tuesday to alleviate the supply crisis of fertilizers, although the main measures are limited to diverting existing European funds and advancing subsidies already allocated to member states through the common agricultural policy (CAP).

The European Commission has been preparing this plan for weeks, and EU sources claim it to be a set of key measures. However, several entities and industry associations have harshly criticized the package of legal proposals. “The European agricultural community fears that delays in taking action could have serious consequences for consumer prices in Europe and for global food security,” points out the European association Copa-Cogeca in a statement, which describes the measures presented by the European Commission as “insufficient”.

Specifically, Brussels has announced that it will present a legal mechanism to allow governments to access liquidity from subsidies from state plans that they already have allocated from the CAP. In addition, the EU executive will give more flexibility to state administrations so that they can disburse aid in advance and increase incentives for farmers to reduce and optimize the use of fertilizers, whose prices have increased by 70%, according to data provided by the EU executive itself. They also want to promote an increase in the consumption of organic fertilizers produced within the European Union.

200 million more

In the longer term, the European Commission proposes to divert money already allocated to other European funds to the CAP and to subsidize the increased cost of fertilizers caused by the blockade of the Strait of Hormuz. This initiative, which will have to be negotiated and approved by the member states and the European Parliament, plans to mobilize around 200 million euros and aims to offer this financing before the summer. Although this is a fairly ambitious deadline considering the pace of European institutions, Commission sources assure that they will provide this liquidity in the coming months.

It should be remembered that the production of fertilizers consumes a large amount of gas and accounts for around 80% of the final price of chemical fertilizers. Therefore, the closure of the Strait of Hormuz due to the war in the Middle East, which has caused an energy crisis in the European bloc, is also driving up the price of fertilizers.