The War in Iran Is Making Coffee Production More Expensive

Key Takeaways

• Fertilizer prices up 31% in 2026, urea up 60%
• Urea cost in Colombia jumped from $414 to $750 per ton
• 2026/27 coffee crop faces higher input costs, 2025/26 relatively safe
• Brazil imports 33% of its urea from Middle East, risk exposure
• Smallholders see fertilizer as 18‑20% of coffee production costs

Pulse Analysis

The war in the Middle East has resurfaced as a hidden driver of coffee cost inflation, primarily through disrupted fertilizer supply chains. As the Strait of Hormuz tightens, urea— the most widely used nitrogen fertilizer—has surged 60%, lifting overall fertilizer prices by roughly a third. For coffee growers, especially smallholders who allocate up to one‑fifth of their budget to fertilizer, the spike translates directly into slimmer profit margins and heightened exposure to credit constraints. While the 2025/26 crop remains largely insulated—most inputs were applied before the price shock—the upcoming 2026/27 season faces a markedly more expensive production environment.

Brazil, the world’s largest coffee producer, illustrates the systemic risk. About a third of its 7.7 million tons of imported urea originates from the Middle East, making the nation vulnerable to any shipping or pricing turbulence. Similar pressures are evident in Colombia, where urea prices have leapt from $414 to $750 per metric ton, and in Costa Rica and Honduras, where rising diesel and fertilizer costs compound existing climate and labor challenges. These cost escalations are not easily passed on to consumers because coffee beans are priced in a global market where producers are price takers, squeezing profitability across the supply chain.

Beyond farm‑gate economics, the fertilizer shock feeds into broader macro‑economic concerns. The World Bank warns that 70% of commodity importers and over 60% of exporters could see growth slowdown, feeding inflationary pressures worldwide. For coffee‑dependent economies in Latin America, reduced farmer incomes may trigger rural out‑migration and strain public finances. Stakeholders—from multinational roasters to development banks—must therefore monitor input‑cost volatility and consider financing mechanisms, such as credit guarantees or hedging tools, to shield smallholders and preserve the stability of the global coffee market.