Seeds of crisis

The closure of the Strait of Hormuz triggered by the US-Israel war with Iran has severely disrupted global supply chains and destabilised energy, fertiliser, and food markets. Escalating demand for biofuels as alternative sources to increasingly expensive fossil fuels threatens to worsen the unfolding food crisis, as key food commodities like vegetable oils, sugar, and corn keep being diverted from food supplies. 

In response to the crisis, countries, especially big agri-food powers like the US, Brazil, India or Indonesia, are ramping up their biofuel targets, at the risk of further increasing prices for agricultural commodities and redirecting resources from plates to fuel tanks. If proposed mandates are fully implemented, we estimate that global biofuel demand could surge 70% by 2030.

According to the Food and Agriculture Organization (FAO), prices for most food commodity groups - especially vegetable oils - have increased for three consecutive months, mainly due to the energy crisis that is unfolding from the strait of Hormuz closure. This is a repeating pattern reminiscent of the Russian invasion of Ukraine back in 2022. Both higher crude oil prices inflate logistics costs and supply chain disruptions, make global movement of staples more expensive; while interest rates increase costs to plant crops and currency depreciation raises the local price of food imports for many nations.

In agricultural economics, end-of-year stocks are the total volume of a crop left over before the next harvest. Rather than just government emergency reserves, these stocks represent the market’s total commercial safety cushion against supply shocks and crop failures. Under a stable market environment, high prices naturally lower demand, allowing stocks to recover. However, basic food needs and biofuel mandates break this cycle. Because daily calorie needs and legislative fuel targets are highly inelastic, they create a rigid floor for demand, even during severe crop shortages. With fossil energy and fertiliser costs surging alongside mandated biofuel targets, this inflexible demand threatens to aggressively eat away the global food stock safety buffer.

Our analysis shows that the volumes of biofuel consumed to fulfil blending mandates correspond to roughly 40% of ending stocks for main staple commodities. Coupled with potential production losses, current policies incentivising biofuels demand risk preventing global reserves from fully replenishing. 

Additionally, major exporters of agricultural feedstocks like Brazil and Indonesia are limiting their exports, as they are diverting part of the feedstock volumes to meet increased domestic demand for biofuels. This trade distortion creates an artificial scarcity in global markets. Combined, these factors could leave the global system unprotected in front of a looming agrifood catastrophe. The threat to feedstock reserves is particularly evident for vegetable oils and sugar, whose global demand for biodiesel and ethanol was already outpacing global rolling stocks before the crisis.

As already observed during COP30, we are witnessing a global push to hasten biofuel production, touted as the golden solution to achieve energy resilience. This global push is now gaining even more momentum, in part due to the Middle East crisis. For instance, the US Environmental Protection Agency recently enforced strong renewable fuel requirements for 2026 and 2027, but is also considering raising its ethanol blend limit to 15%, potentially increasing its total biofuel demand pool by 40% in a very short timeframe.

On the other hand, India and Brazil are accelerating their blending mandate plans, while ASEAN countries like Indonesia, Malaysia, and Thailand are also sharply raising their biofuel targets to decrease their fossil fuel import dependency. If all proposed blending targets are enacted and enforced, we estimate that biofuel demand could rise by 30% as early as 2026, potentially surging by 70% by 2030, considerably higher than the 40% previously expected, based on global mandates analysis.

Increasing biofuel mandates represent a short-sighted solution to current - and future - energy shocks. The energy crisis generates a temporary price divergence where demand competition precedes higher production costs in the agriculture sector. This creates a short-lived economic edge for biofuel over food, an advantage that will vanish when the price lag fades, making biofuel processing increasingly costly. A more efficient solution would be to amend policies and require reduced biofuel uptake during food price shocks. Immediately redirecting land to food production would offset the potential loss of supply caused by geopolitical developments and decouple these events from cost increases.

Global biofuel production remains almost exclusively tied to food and feed commodities grown through large-scale monocultures. Whether it is corn and soy in the United States, sugarcane in Brazil, or palm oil in Indonesia, these industrial systems rely on intensive fertiliser inputs to maintain high output.

By cross-referencing crop-specific nutrient data from the International Fertiliser Association (IFA) with global biofuel feedstock use, we estimate that biofuels currently consume approximately 3.2 Mt of nitrogen, 1.4 Mt of phosphate, and 2.0 Mt of potash. This represents roughly 5% of total global fertiliser nutrients diverted toward fuel production rather than food. This strain is disproportionately concentrated in mandate-heavy nations: Indonesia and the United States now direct 17% and 11% of their respective fertiliser supplies solely to meet biofuel requirements. More on our methodology and assumptions in the Annex.

Furthermore, the global push for higher blending mandates risks a significant expansion of the biofuel-fertiliser footprint. If currently planned mandates are fully enforced, we project a 70% increase in biofuel-related nutrient requirements by 2030. Most critically, in a theoretical scenario where 20% bioethanol and biodiesel blending mandates would be adopted worldwide, biofuels alone would consume close to one-fifth of current global fertiliser volumes, creating a structural conflict with global food production needs.

While large-scale farming nations require tens of millions of tonnes of nutrients to sustain their crop production, supply remains geographically concentrated. Russia, China, and the Middle East dominate nitrogen and phosphate output, while Canada and Morocco remain the primary reserves for the world's potash and phosphate supply. In the Middle East, countries like Saudi Arabia, Qatar, and Oman act as key players for the global market, collectively accounting for 46% of the global urea trade, the world’s most widely used nitrogen fertiliser. Around one-third of global nitrogen fertiliser exports and 20% of liquefied natural gas (LNG) - the primary feedstock for nitrogen production - transit through the Strait of Hormuz, which is currently restricted due to the regional conflict.

Based on the most recent complete trade data from UN Comtrade (2024), we mapped finished fertiliser nutrient flows and found that top biofuel producers source around half of their fertiliser imports from Russia, China and the Middle-East. India, Europe and Brazil, in particular, source close to two-thirds of their fertiliser nutrient from these regions. This creates a paradox: while these nations increase biofuel mandates to achieve energy independence, their ability to grow that fuel remains reliant on foreign chemical inputs. Geopolitical disruptions, from the ongoing invasion of Ukraine to the closure of the Strait of Hormuz, demonstrate that these supply chains are fragile, and risk turning increasing biofuel mandates into a new form of import dependency.

In the current context of the energy crisis and record-high oil prices, biofuels are increasingly proposed by some as a solution to lower import dependency and stabilise domestic fuel markets. Similarly to previous energy and food shocks, the 2026 crisis is also paralysing fertiliser supply chains. Because biofuel mandates create a rigid demand for feedstocks like corn, sugarcane, or palm, increasing mandates effectively "lock in" high demand for chemical inputs at the exact moment global supply is being disrupted. This creates a vicious circle: high energy prices drive nations to mandate more biofuels, which in turn spikes the demand for nitrogen, further depleting the limited fertiliser stocks available for global food production.

As an illustration, based on trade data we have calculated that global biofuel mandates currently require a fertiliser volume equivalent to half of the Middle East’s total exports. This highlights a dangerous competition: while the Strait of Hormuz restrictions have already curtailed global supply, the world is effectively diverting a massive share of its remaining nutrients to meet transport mandates rather than food security.