On July 17, 2026, Norwegian fertilizer producer Yara International reported second-quarter EBITDA excluding special items of $906 million, up 39% year on year. Supply disruption linked to the Middle East conflict and risks surrounding Gulf trade routes lifted urea and nitrogen fertilizer prices, improving Yara’s margins; however, the higher prices also encouraged farmers to postpone purchases, causing deliveries to fall 17% and leaving earnings below market expectations.
The results look strong at first glance, but they reveal one of the fertilizer industry’s central contradictions: higher prices can rapidly increase producer margins, while simultaneously weakening the demand that supports those margins.
The Middle East is a major center for natural gas, ammonia and urea production. As conflict and transport risks intensified, markets began pricing in the possibility of production interruptions, restricted shipping and tighter supply during the next agricultural season. Rising urea prices created a more favorable margin environment for Yara.
Higher prices and margins contributed approximately $520 million to the year-on-year EBITDA improvement. Lower deliveries and a weaker product mix, however, reduced earnings by around $240 million.
In other words, Yara did not make more money because it sold substantially more fertilizer into a booming market. It made more money in a market where each tonne was more profitable, but customers were increasingly reluctant to buy it.
Chief Executive Svein Tore Holsether said many farmers had no immediate need to apply fertilizer when prices peaked and therefore delayed their purchasing decisions. Yara reported that buying activity had already begun to recover in several core markets in July, but analysts were still debating whether second-quarter purchases had merely shifted into later periods or whether the market was experiencing more persistent demand destruction.
That distinction matters greatly.
Fertilizer purchases are shaped by crop calendars, agricultural commodity prices, farm cash flow and access to credit. When farmers are simply waiting for lower prices, delayed buying can later produce a sharp restocking cycle. When high prices persist, however, farmers may reduce application rates, switch crops or plant less land.
For fertilizer companies, the distance between delayed demand and destroyed demand can be only one planting season.
Yara’s operating cash flow fell to $682 million from $878 million a year earlier, partly because inventories increased. Although margins improved, more unsold product remained on the balance sheet, showing that higher prices did not translate cleanly into cash generation.
Investors responded cautiously. Yara’s EBITDA increased sharply but was around 20% below the $1.13 billion analysts had expected. Its shares initially fell 5.7% before recovering part of the decline, suggesting the market was paying close attention to volumes, inventories and future demand—not simply the headline EBITDA growth.
The company also faces pressure from natural gas costs.
Natural gas is both an energy source and the principal feedstock for ammonia production. Yara expects gas costs to be approximately $75 million higher in the third quarter and $115 million higher in the fourth quarter than during the same periods last year.
The Middle East crisis therefore affects Yara in two opposing ways. Supply risk raises global ammonia and urea prices, improving selling margins. At the same time, higher gas prices increase Yara’s own manufacturing costs. The earnings benefit will last only as long as fertilizer prices rise faster than feedstock costs.
The quarter also demonstrates how concentrated the global fertilizer chain remains. Natural gas, ammonia, urea, maritime transport and agricultural seasons are tightly connected. A geopolitical crisis in one region can simultaneously change production costs, export availability, shipping insurance and farmers’ willingness to purchase.
For import-dependent markets such as India, Brazil, Europe and large parts of Africa, disruption around Gulf supply routes affects more than fertilizer trading. It can eventually influence planting costs, crop yields, food prices and inflation.
Yara warned that renewed geopolitical tension could tighten supply in the coming season. That creates a difficult possibility: farmers may delay buying while prices are high, only to enter the market together later when supply is even tighter.
