KUALA LUMPUR, March 25 — The risk of reduced application rates for 2026/2027 grain crops across Southeast Asia is increasing, particularly as key application windows approach, posing downside risks to production, according to BMI, a unit of Fitch Solutions.
In a statement today, it said Malaysia is among the most insulated from nitrogenous fertiliser supply constraints, given its strong domestic production capacity, which should help limit downside risks to application rates, along with Indonesia and Vietnam.
“The effectiveness of this insulation will depend on policy efforts to prioritise domestic supply amid attractive export opportunities.
“We believe the region is more uniformly exposed to constraints in phosphatic fertiliser supplies due to its reliance on imported inputs,” said BMI.
It added that since the escalation of the war launched by the United States and Israel on Iran on February 28, global urea prices have risen sharply.
The US Gulf New Orleans granular urea spot index increased by 40.4 per cent from February 27 to close at US$660/tonne on March 20, reflecting expectations of significantly tighter global fertiliser supply amid constrained exports from the Gulf Cooperation Council (GCC) region, BMI said.
The region accounted for around 20 per cent of global nitrogenous fertiliser exports by value in 2024 and supplies a significant share of the natural gas used in fertiliser production.
“With grain planting seasons approaching across Southeast Asia, sustained high prices for nitrogen-based fertilisers, including urea, on which grain production is highly reliant, could prompt under application, raising downside risks to 2026/27 crop yields,” it said.
BMI expects impacts to be uneven across markets, reflecting differing production structures, policy responses and exposure to imports.
Beyond nitrogenous fertilisers, it expects Southeast Asia to face heightened risks from the phosphatic fertiliser supply chain.
Thailand and Malaysia rely more heavily on alternative suppliers, including Egypt, which accounts for about 90 per cent and 50 per cent of their phosphatic fertiliser imports, respectively.
“Though this reduces exposure to China‑specific supply risks, both markets remain vulnerable to higher prices stemming from tightening global supply conditions and elevated logistical and transport costs,” said BMI.
Beyond fertiliser‑related challenges, it highlights increasing downside risks to grain output across Southeast Asia stemming from expected El Nino conditions.
“As of March 2026, the Climate Prediction Centre assigns a greater than 60 per cent probability of El Nino conditions emerging from June, with 48 per cent chance of at least moderate intensity by August, signalling increasing weather risks amid the crop development period broadly across the region,” said BMI.
