I thank the committee for the opportunity to address it on the cost of fertiliser and the impact it is having on the whole agricultural sector. It is more than 50 days and counting since the start of the Iran war and the closure of the Strait of Hormuz. The crisis in the Middle East threatens the global economy and energy security. Equally, it threatens global food security. This is because the Middle East region is a key player in the global fertiliser trade, accounting for almost 30% of exports of all major fertilisers. Over one third of urea, one fifth of ammonia and ammoniated phosphate, and half of the sulphur produced globally are exported through the strait.
The implications for fertiliser cost and availability are even more pronounced due to higher energy prices, with consequences for all major producers of fertilisers, including those in Europe. Furthermore, in recent weeks, we have seen some countries respond to tightening supply conditions. China, Russia and Türkiye have introduced or expanded export restrictions to safeguard domestic availability. Meanwhile, India has launched several major tenders to secure its fertiliser supply. Consequently, in Ireland, we have seen significant pressure on fertiliser cost in recent weeks, with average urea costs increasing by 43% and other fertilisers, such as calcium ammonium nitrate, CAN, increasing by 24%.
Excessive input cost inflation experienced since 2022 remains a significant challenge for the agrifood sector. Against the backdrop of downward pressure on output prices, further increases in farm level costs are deeply concerning and unsustainable. High output prices in 2022, particularly in the dairy and tillage sectors, cushioned the impact of excessive cost inflation. In contrast, today, there is simply no capacity to absorb any more cost shocks.
Over 90% of Irish dairy and meat output is exported, underscoring how deeply Irish farming is linked to international markets. Ireland’s grass-based production system provides a clear and direct competitive advantage in global agrifood markets. This system reduces dependence on imported feed, lowers input costs and allows Irish producers to maintain strong margin competitiveness, particularly in export markets. Teagasc research has demonstrated that for every 1 kg reduction in chemical nitrogen per hectare, farm profitability reduces by more than €4 per hectare due to the requirement to replace the forage we do not grow with purchased feeds. That is why maintaining access to fertiliser at competitive prices is so important.
Relatively speaking, Ireland is a small market in respect of overall fertiliser sales and usage. In 2025, we imported 1.7 million tonnes of fertiliser. We have no domestic production of fertiliser, apart from the lime we spread on land. Therefore, we are dependent on global demand and supply. In this context, the International Fertilizer Association has warned that “If disruptions to energy and fertilizer trade routes persist, the impacts will be felt most strongly in countries that depend on imported fertilizers."
One silver lining arising from the introduction of the carbon border adjustment mechanism, CBAM, which we strongly opposed over the past 12 months, is that significant advance buying of fertiliser occurred in the fourth quarter of 2025 in preparation for the introduction of that tax. The challenging spring weather conditions have also meant that overall usage is lower in comparison with previous years. This has helped maintain availability, although costs have increased.
Every conceivable effort will be made to secure sufficient supplies for this year. The co-ops are actively working on securing supplies to meet the needs of their farmer members for the remainder of the year. We estimate that 75% of fertiliser requirements for this season are already in the country, and product is still arriving. The outlook for next year remains very uncertain. Every day the Strait of Hormuz remains closed is a major worry. We believe the impact of the crisis will hit even harder in 2027 unless preparations are made by the Government to reduce the risks facing the fertiliser industry, the co-ops and farmers.
The massive uncertainty and elevated costs bring significant risks. The EU and national authorities need to support and help mitigate these risk; otherwise the crisis will deepen further from a cost and supply perspective. One immediate action that would help alleviate the situation is the suspension of CBAM. The latter is having a huge impact on cost and availability. For example, the cost of CBAM on non-EU calcium ammonium nitrate, CAN, is approximately €115 per tonne, which is prohibitive. ICOS has consistently warned against the introduction of CBAM in respect of fertiliser. What is not fully understood is that the cost of the CBAM tax will increase incrementally every year. There is little awareness of the true cost of CBAM regarding food production and food security.
An analysis by Copa-Cogeca, the European farmer and co-operative body, estimates that CBAM will cost over €800 million in 2026 alone, with the total cost rising to €12 billion within the next seven years. As the cost of fertiliser produced in Europe has risen to match the CBAM levy, Copa-Cogeca believes the true cost of CBAM could exceed €39 billion by 2034, which is equivalent to 10% of the current CAP budget. At the beginning of this year, EU agriculture ministers discussed the situation with the European Commission and agreed to reduce the most favoured nation duties on imported fertilisers into Europe in an effort to offset the cost of CBAM. However, it is widely accepted that this measure will have little or no impact. The European Commission also amended the CBAM regulation to allow the temporary suspension of CBAM. This process is now before the European Parliament and Council of Ministers.
ICOS calls on all Irish MEPs to support the introduction of Article 27a of the CBAM regulation and to work to ensure the procedure is expedited and enacted at EU level as quickly as possible. In addition, ICOS calls on the Government to actively engage with all stakeholders in the fertiliser supply chain ahead of the coming season and the back end of this season.
There is an enormous financial challenge associated with ensuring that enough fertiliser will be secured for the 2027 season. In order to lock in supplies, co-ops and others in the supply chain will have to take a position and risk financial exposure against what looks likely to be a very high price. There is a role for the Minister and his Department to help de-risk this investment and share this exposure in the national interest and in the interests of our food producers.
We need to take advantage of the opportunity provided by the EU in terms of temporary state aid rules that will support measures designed to alleviate the excessive cost of fertiliser. The EU is bringing forward a new fertiliser action plan. It will be published shortly. This must include both short-and long-term solutions for farmers and the agrifood sector.
We wish to make a broader point on the extremely high cost of doing business and particularly those costs linked to the current crisis, whether that be energy and fuel. Notwithstanding our appreciation for the significant package that has been introduced already, which we really appreciate, the reality is that the package has limited impact on the cost base for our co-op members. For instance, there are co-ops that operate their own transport fleets for milk collection and agri-deliveries, which initially were not able to avail of the enhanced supports. A recent announcement clarified that further. Hopefully, they will be able to avail of some of those supports.
Right across the chain from AI to milk recording and all farm services, our various co-ops are incurring enormous cost increases, and with current milk prices at approximately 37 c per litre, the system cannot absorb these extra costs. Our real concern, notwithstanding the fact that this year we have suffered high-end costs, relates to the availability of fertiliser and the price at which it will be available in the coming year. I thank the committee members for their time and attention.
