Most people in the CO₂ industry are not paying attention to urea prices. They should be.
The closure of the Strait of Hormuz has constrained global urea exports. Urea is the primary nitrogen fertilizer used by American corn farmers. Prices have risen roughly 32 percent in the past week. Gulf producers have declared force majeure. The fertilizer market is in shock.
That may sound like someone else's problem. It is not. The chain reaction from the Strait of Hormuz to the American CO₂ market is shorter than you think.
The Chain
It goes like this. Urea prices spike. American farmers who grow feed corn need urea because corn is a net consumer of nitrogen. When fertilizer costs rise, farmers face a choice: absorb the cost and hope commodity prices cover the margin, or switch to a crop that does not need nitrogen inputs.
Soybeans are a net giver of nitrogen into the soil. They do not require urea. The USDA had already projected a decline in corn acreage for 2026, from roughly 90 million acres down to 85 million. This market shock will push that number lower as more farmers rotate into soybeans to avoid the fertilizer cost.
Less Corn Means Less Ethanol
American ethanol production runs on corn. About 40 percent of the U.S. corn crop goes to ethanol plants every year. When corn supply tightens or corn prices rise, ethanol producers face a squeeze. Feedstock becomes unavailable or feedstock costs rise to the point where production economics break down.
Either scenario leads to the same outcome: lower ethanol output.
Less Ethanol Means Less CO₂
This is where it hits our industry. Ethanol fermentation is one of the largest sources of merchant CO₂ in the United States. The fermentation process produces a high purity CO₂ stream that is captured, purified, and sold into the beverage, food, and industrial markets.
When ethanol plants cut production or go offline, that CO₂ supply disappears with them. This is not theoretical. It happened in 2022. Multiple ethanol plant shutdowns contributed directly to the CO₂ shortage that left beverage producers scrambling and distributors rationing product.
The Fragility Problem
The U.S. merchant CO₂ supply chain is built on a handful of large, concentrated sources. Ethanol plants in the Midwest. Ammonia plants along the Gulf Coast. A few natural CO₂ wells. When any one of these sources faces disruption, whether from a mechanical failure, a hurricane, or a geopolitical event on the other side of the world, the downstream impact is immediate.
The 2022 shortage exposed this fragility. The current situation is a reminder that the underlying structure has not changed. The same supply chain that failed in 2022 is still the one we depend on today.
What Needs to Change
The answer is not to predict every geopolitical event that could cascade into a CO₂ shortage. The answer is to build a supply chain that does not depend on predicting them.
Distributed CO₂ production from diverse feedstocks is the resilience strategy. RNG upgraders, landfill gas facilities, and other biogas sources produce CO₂ as a byproduct that is almost always vented. These sources are geographically dispersed. They are not tied to corn prices or Gulf Coast weather or the Strait of Hormuz.
Capturing and purifying this CO₂ to beverage grade adds new domestic supply that is decoupled from the concentrated sources the market currently depends on. It does not replace ethanol or ammonia based CO₂. It supplements it. It provides a buffer that did not exist before.
The Takeaway
A conflict in the Middle East is raising fertilizer prices. Higher fertilizer prices are reducing corn acreage. Less corn means less ethanol. Less ethanol means less CO₂ for the beverage and food industries that depend on it.
Every link in that chain is real. Every link is already moving.
If you are in the CO₂ business and you are not thinking about supply diversification, now would be a good time to start.
