Grain expectations

Agricultural commodities offer a potentially asymmetric geopolitical hedge because fertiliser supply has been disrupted even though crop prices have not yet reflected the shock.

• Brent crude was around 30% above its level at the end of 2025 before the Iran conflict, while agricultural commodities had lagged; the comparison uses prices rebased to the end of last year and data from Bloomberg as at May 2026.
• The Strait of Hormuz closure removed 35% of traded urea supply, 27% of ammonia, 22% of phosphate and 45% of sulphur, according to Morgan Stanley; these inputs influence corn and wheat yields, planting decisions and ultimately grain prices.
• The muted reaction reflects agriculture's seasonal calendar: Northern Hemisphere farmers had already bought much of their spring inventory, while the next major Southern Hemisphere nitrogen-purchasing window begins over the summer.
• Sugar and soybeans are less directly exposed to fertiliser costs but can benefit from higher oil prices because sugar is used for ethanol and soybeans for biodiesel; agricultural commodities have also delivered positive real returns in most historical high-inflation episodes.
• Ruffer holds a 2% exposure to agricultural commodities, but China could ease the pressure by returning to the urea market after restricting exports since late 2025, while a reopened Strait, weather effects and a likely return of El Niño in 2026 could offset or amplify the shock.

Takeaway: Investors need not predict the conflict's path: agricultural exposure may protect against a prolonged or renewed disruption from a less demanding starting valuation than oil, although a rapid resolution, Chinese supply or adverse seasonal and weather developments could weaken the thesis.