April 9, 2026
JAKARTA – Indonesian farmers face rising production costs and tighter chemical fertilizer supplies as the United States-Israeli war on Iran intensifies, the Indonesian Farmers Union (SPI) has said.
Kusnan, head of agroecology assessment and application at the SPI, explained that nitrogen-based fertilizers like urea rely heavily on natural gas, making them extremely vulnerable to the current global energy price spike.
The impact was already “deeply felt” by SPI members across the archipelago, Kusnan said, despite the government’s claim of secure domestic stocks.
“Farmers have faced uncertainty since earlier this year. The main concern is not only high prices but also the accessibility of subsidized fertilizers when the planting season arrives,” he told The Jakarta Post on March 30, warning of pressure on farmers’ costs and food price stability.
In response, many farmers are shifting to organic alternatives.
“This is no longer a choice but a survival strategy to reduce dependence on the volatile global chemicals market,” he added.
The Mideast crisis has severely constrained traffic through the Strait of Hormuz, a vital export route particularly for nitrogen-based fertilizers, pushing up prices by 70 percent in some markets.
The war has also triggered a sharp spike in natural gas prices, the primary raw material for urea fertilizer production, including in Indonesia.
Middle Eastern countries including Saudi Arabia, Qatar and Oman have been major contributors, accounting for approximately 25 percent of global urea exports.
PT Pupuk Indonesia produces some 9.4 million tonnes of fertilizer annually using natural gas, but the country remains heavily dependent on imports for other essential agricultural inputs, particularly phosphate and potassium, which are primarily sourced from the Middle East through the Strait of Hormuz.
“At the smallholder level, this is not just a global issue. Farmers feel real economic pressure.”
He explained that already fierce global competition for supplies was intensifying as major economies like China and India are prioritizing domestic food security amid shortage fears.
Urea production in India and Bangladesh is hampered by plant shutdowns and routine maintenance, both linked to limited global natural gas supplies.
Concurrently, authorities in China and Russia have tightened export restrictions to ensure domestic availability within their countries.
The Middle East conflict is likely to directly hit Indonesian fertilizer supply chains, said Bustanul Arifin, a senior economist at the Institute for Development of Economics and Finance (INDEF), as the country imports phosphate and potassium from the Middle East and parts of Ukraine.
“Production costs of nitrogen, phosphorus and potassium (NPK) fertilizers will almost certainly increase,” he told The Jakarta Post on March 30.
Bustanul noted that the impact on urea costs would depend on the purchase agreement between Pupuk Indonesia and gas supplier PGN. If the gas price is fixed at the outset, the impact may be limited, but if it fluctuates, urea production costs rise significantly.
To anticipate potential shortages, Bustanul, who is also an economics professor at the University of Lampung, urged the government not to hesitate to raise subsidized fertilizer prices, at least to 2025 levels.
This year’s state budget sets lower prices for subsidized fertilizer than last year’s.
In 2026, urea, NPK for general use, NPK for cacao, ammonium sulfate (ZA) for sugarcane and organic fertilizer are priced at Rp 1,800 (11 US cents), Rp 1,840, Rp 2,640, Rp 1,360, and Rp 640 per kilogram, respectively; much lower than the 2025 prices of Rp 2,250, Rp 2,300, Rp 3,300, Rp 1,700 and Rp 800.
“The government needs to share the burden with the public, including farmers, to reduce fiscal pressure resulting from the US-Israeli war on Iran.”
He warned that, if the subsidized prices remain too low at the current around Rp 1,800 per kilogram compared to the nonsubsidized market price of around Rp 6,000, the risk increases of smuggling or leakage of subsidized fertilizers from smallholder farmers to large-scale agribusinesses.
Without price adjustments, both fiscal sustainability and targeted distribution remained under threat, Bustanul cautioned.
In 2026, the government allocated 9.55 million tonnes of subsidized fertilizer, consisting of 4.42 million tonnes of urea, 4.47 million tonnes of NPK, 81,179 tonnes of NPK for cacao, 558,273 tonnes of organic fertilizer and 16,449 tonnes of ZA fertilizer.
The state budget earmarks Rp 16.9 trillion for these subsidies, although studies have shown that the economic benefits of fertilizer subsidies are minimal.