The ongoing conflict involving Iran has triggered a severe global fertiliser shortage, leading to a dramatic increase in costs for UK farmers and projecting a significant impact on worldwide food prices next year. Mark Preston, executive trustee of the 349-year-old Grosvenor Group, a powerful property and farming company controlled by the Duke of Westminster, highlighted that fertiliser prices have surged by 50% to 70% since the Iran war began in late February. This escalation comes after fertiliser was already considered expensive.

The primary cause of this crisis is the effective closure of the Strait of Hormuz, a critical shipping passage. Although Iran’s Islamic Revolutionary Guard Corps suggested a potential reopening, its blockage has severely restricted global supplies of fertiliser, an essential input for cultivating food crops. While UK crops for the current year are largely unaffected due to prior fertiliser usage, Preston warned that the knock-on effects would be felt acutely next year. Farmers are currently hesitant to purchase fertiliser, hoping for price improvements which are unlikely to materialize, creating what has been termed a "food security timebomb".

Preston underscored the severity of the situation, stating, “It’s going to be a very, very dramatic problem for the world, not just the UK in terms of food, just because so much fertiliser comes through those straits.” He noted that while farmers might have some flexibility by engaging in more spring cropping next year instead of winter cropping, the ultimate magnitude of food price increases depends heavily on the reopening of the Strait of Hormuz, where approximately 1,600 vessels are currently stranded. The concern extends beyond oil, as Preston emphasized the scarcity of alternative sources for nitrogen, crucial for fertiliser production, unlike the more diversified options for oil.

The closure of the Strait has specifically cut off flows of liquefied natural gas (LNG), a vital component for nitrogen-based fertilisers like urea. For the Grosvenor Group, which owns a prominent dairy and arable farm in Cheshire, rural estates in Lancashire and Scotland, and vast property holdings in central London's Mayfair and Belgravia, the direct impact is expected to be limited. This is because the organization relies less on external fertilisers, utilizing cow dung where possible for its extensive Eaton estate operations, which produce millions of litres of milk for major customers like Tesco and Müller.

Beyond the agricultural sector, the Grosvenor Group's broader financial and operational landscape was also discussed. The company reported an 18% decrease in underlying profits to £70.5 million last year, primarily impacted by its North American operations. In contrast, its UK property business demonstrated resilience, maintaining a 97% occupancy rate. A significant ongoing project is the revamp of South Molton Street in central London, encompassing offices, shops, a hotel, and 33 homes near Oxford Street, slated for completion next year.

Hugh Grosvenor, 35, the Duke of Westminster and one of Britain’s wealthiest individuals with an estimated £9.56 billion, controls the group. The company is committed to social initiatives, including an ambition to build 700 social homes in north-west England, with 69 already constructed near Chester and Ellesmere Port, and another 120 planned for this year. Financially, the group distributed £53.7 million in dividends to the Duke’s family and trusts, an increase from £52.4 million in the previous year. Total taxes paid surged to £248 million from £107.4 million, largely due to UK property sales that boosted personal taxes on income and gains by £61 million and corporate income tax payments by £71.9 million.

In strategic moves, Grosvenor has increased its investment in flexible office spaces, initiating its first directly managed flexible workspace outside London in Manchester’s Northern Quarter. James Raynor, chief executive of the property arm, noted that about 23% of its London offices are flexible workspaces, with occupancy rates well over 90%, indicating strong performance.

These remarks from Grosvenor coincided with warnings from Yara International, the world’s largest fertiliser company, about potential food shortages and price hikes in vulnerable African communities due to the Middle East conflict. Public concern in the UK is high, with an Opinium survey revealing that 80% of Britons are worried about rising grocery prices, a direct consequence of retailers passing on increased costs to consumers. The crisis underscores broader issues related to supply chain stability, the food and drink industry, farming, and the UK’s cost of living crisis amidst geopolitical tensions and inflation.