Couldn't the Germans have switched from building surface vessels like cruisers etc., which they still did after the outbreak of war to building merchant subs, alongside having them built in neutral countries like the USA ? Also cancel any combat subs and build merchant ones instead. That should bring the numbers up nicely. I'm guessing they would start this after an "eureka" moment in late 1914, when they would realize the war is there to stay.
Secondly, instead of importing food, wouldn't it have made more sense to import critical materials like nitrates etc, which they severly lacked ?
Yes, you could switch to building more subs. If you look at my TL, I give my best estimate of what happens if you cancel most of the BB construction and switch to U-boat production. I chose ocean going, combat U-boats with a few merchant subs. I would say a absolute max case would be 100 merchant U-boats for year, and this is a bit of stretch. These ships only have 700 tons of capacity per ship, and they are slow. Now 70,000 tons sounds like a lot per cycle. But the British were using around 14,000,000 per cycle. There is just too many missing zeros.
Now all this being said, I think Merchant subs made sense for many powers, and Germany would have benefit from having a few 3-7 in the inventory at the start of the war, but then, there is the Catch-22. Change the war mindset the war plan changes. The doctrinal shift of "we need to prepare for a long war" has a much bigger impact than anything that can be done during the war that was not done. Lets do Nitrogen.
The had a process for making Nitrogen before the war, and built at least a second plant during the war. If there is a need for secure food production, used as a justification for merchant subs, then they obviously look at food. Fertilizer would come up, so why just not order enough nitrogen factories to be self sufficient in 1912, instead of this gimmick sub that is a partial solution. On the P & K fertilizer, one is available in Ma'an, Jordan near a rail road. Why not improve the track, and then make securing the transportation route. In 1912, why not sign a treaty with Romania/Bulgaria that food/fertilizer shipments will not interfered with. Now the little guys will want something, but that is international relations. Ok, we get to 1914, and did not do this for whatever reason. Why not build more nitrogen plants? What was the limiting resource? I bet I can increase nitrogen production by just ordering the 3rd plant in September 1914. And the blockade was looser, so I can probably bring in the item through Holland, Scandinavia, Italy or Greece. Also on food, it is important to understand what happened, and why Germany reacted slowly. As soon as they advance into Belgium and France, the Germans looted the cattle/pig herds. Food prices were lower than they had been in years. It was only heading into the late winter of 1915 that Germany begins to take food security seriously and starts on rationing. A step as simple as a food plan section of the war plan probably adds 20%-50% to the calories available in 1915.
As to the other one P/K and trace farming elements, why not just build a warehouse? Why not keep a famine food reserve of say 25% of the grain harvest?
And for the Eureka moment, it took over 12 months on most sub builds, some near 24 months. So if the Eureka was say June 1915, lets build 100 merchant subs, the 100 sub is not completed to June 1916, and the 200 sub somewhere in 1917, and this assume it is very near the #1 priority of the Reich.
Side note: Now how would I justify them prewar? Blockade running of high value items and what we would now call special operations. A steady supply of weapons to say the Irish or Zulu could make a lot of sense. As would raids to cut the communication network of the British. As would just raids along the coast of the British Islands to tie up forces. They did do some special operation type things, even with submarines, but they did not have the full special operation mindset. For example, the used sub to move supplies to Libya, with a much larger merchant sub, each trip could carry 10 times more gear/men. Who knows, maybe with better weapons and a few more Arab speaking officers, maybe the Arab revolt against the British goes better. I find them invaluable in an ATL, and I think the GHQ would have found them the same. Such as running supplies to German East Africa. A 1000 tons of guns/ammo per month would help them a lot down there.