Iran War Drives Fertilizer and Fuel Costs Higher, Deepening
Crisis for U.S. Farmers
Nearly 75 percent of farmers surveyed
before the war said the crop sector was in a recession. They face bigger
hurdles this planting season.
·
Farm sector already struggling: Nearly 75% of U.S.
farmers surveyed said the crop sector was in recession even before the conflict
with Iran.
·
Input costs surge: The war has sharply increased prices of
key farm inputs like diesel and fertilizers.
·
Diesel price spike: Diesel costs have risen by nearly $1 per
gallon within a week, raising operating expenses for tractors and transport.
·
Fertilizer prices jump: Urea prices increased
from $470 to about $585 per ton due to supply disruptions.
·
Strait of Hormuz disruption: Shipping constraints
in the strait are affecting global fertilizer trade, with about one-third of
the world’s supply passing through the route.
·
Middle East key supplier: Countries such as
Qatar, Iran and Saudi Arabia are major exporters of nitrogen fertilizers.
·
Farm profitability under pressure: Rising input costs
combined with stagnant crop prices have pushed many farmers toward losses for
the third or fourth consecutive year.
·
Early purchasing helps some farmers: Those who locked in
fertilizer prices earlier are less exposed to the latest price surge.
·
Global ripple effects: Reduced natural gas
supply and higher fertilizer demand from countries like India could push global
prices even higher.
·
Policy response sought: Farm groups are urging
the U.S. government to secure fertilizer shipping routes and provide further
support to farmers.
Even
before the war in Iran raised fertilizer and diesel costs, a majority of
American farmers said they were “much worse off” or “somewhat worse off” than
one year ago, and their biggest concern was the high cost of the essentials
needed to plant their crops.
Those
findings are based on a January survey by Farm Journal, the agricultural
publisher. The war in Iran has added to those pressures. With input prices
already high, the attacks have sent prices soaring, as ships carrying materials
to make fertilizer are largely unable to transit the Strait of Hormuz and exit
the Persian Gulf.
The
cost of a gallon of diesel fuel, which powers tractors that plant crops and the
trucks that deliver farming supplies and haul away the harvest, is up almost $1
in just the last week. A ton of urea, a key nitrogen-based fertilizer, is now
selling for $585 at the port in New Orleans, up from $470 before the war.
The
American agricultural economy has been stressed for years, especially for crop
growers. Pandemic disruptions, the war in Ukraine and rising inflation sent the
cost of inputs soaring, while the prices farmers receive for their crops have
remained stagnant. Farm debt and bankruptcies are rising, and for most farmers,
2026 projects to be their third or fourth year of losses.
The
war in Iran is not the sole cause of farmers’ problems, then, but one more
thing added to their list. “Even before any of this happened, we were already
at a break-even or lose proposition on most row crops in South Carolina,” said
Harry Ott, the president of the South Carolina Farm Bureau.
Some
farmers are already out tilling and preparing their fields for spring planting.
But the difference between a small profit or loss for the year could depend on
whether they locked in the price of fertilizer and fuel before the war.
“Luckily
for us, we have made most of our purchases already on the nitrogen products,”
said Andy Jobman, who farms 2,500 acres of corn, soybeans and alfalfa in
central Nebraska. Nitrogen is the most important fertilizer for achieving high
corn yields, and about half of all nitrogen used on corn is applied during
spring planting.
Mr.
Jobman signed a contract for his nitrogen products early last fall, even though
the price was already high. He said his supplier had told him that stocks were
tight, and that the price wasn’t likely to come down over the next six months.
He was slower to buy phosphate-based fertilizers, he added, because prices were
at a high and his supplier thought they would drop.
“We
have been purchasing fertilizer earlier and earlier over the last five years,”
he said.
Not
every farmer signed a contract in advance. When Farm Journal surveyed corn
growers in 2024, just 45 percent reported that they had finished making their
decisions about fertilizer by the beginning of March. That trend has continued
through to this year.
“Because
of the poor farm conditions we were already in, a lot
of people didn’t pre-buy,” said John Newton, the chief economist at the
American Farm Bureau Federation, an agricultural lobbying organization.
Fertilizer
is so important, and the timing of this war is so bad, that the Farm Bureau is
calling for the U.S. Navy to escort ships carrying fertilizer through the
strait.
The
Middle East is key to worldwide fertilizer production. Most nitrogen fertilizer
is made through the Haber-Bosch process, which uses a tremendous amount of
natural gas. Qatar, Iran and Saudi Arabia are all major exporters of nitrogen
fertilizer, and ship their fertilizer through the Strait of Hormuz. And many
countries that produce their own fertilizer do so with natural gas from those
countries.
Sulfur, a key component in the production of
phosphate fertilizers, is also exported worldwide from the Middle East. A third
of the world’s fertilizer trade passes through the strait, according to the
United Nations.
“Like
oil, global fertilizer markets are highly vulnerable to disruptions in maritime
transit routes, especially through the Strait of Hormuz,” Zippy Duvall,
president of the Farm Bureau, wrote in a public letter to President Trump.
“Acting quickly to prevent disruptions in fertilizer supply chains will help
avoid additional financial strain on farmers and ensure that U.S. farmers have
the supplies they need to feed families across America.”
Since
the marketplace for agricultural inputs is global, the war’s cascading effects
could also become a problem. Israel has stopped sending natural gas to Egypt, a
major fertilizer producer. India also cannot get enough natural gas, increasing
the likelihood it will not be able to produce enough fertilizer domestically
and instead will buy it on the world market, driving up prices everywhere else.
“The
longer this goes on, the more the intermediate supply chains break down and it
takes longer to put back together,” said Samuel Taylor, who leads Rabobank’s
farm inputs division.
Mr.
Trump and the Agriculture Department have said they are the most pro-farmer
administration in decades, and blamed former President Joseph R. Biden Jr. for
most of the challenges farmers are facing. But little has turned positive for
farmers in the last 14 months, with the administration adding a trade war and
tariffs.
The
Agriculture Department’s $12 billion bailout for farmers — of which about $6
billion has already been distributed — hasn’t changed their opinion. Few
farmers think their situation has improved. Nearly three-quarters of farmers in
the Farm Journal survey said the crop sector was in a recession, and two-thirds
said the biggest hurdle to profitability was the price of materials.
Those
findings are echoed by Purdue University’s Ag Economy Barometer. While farmer
sentiment rose during the first few months of Mr. Trump’s term, it has fallen
in the last several months, with farmers even more pessimistic about future
expectations than current conditions.
“President
Trump is utilizing all the tools available to ensure farmers have what they
need to continue their farming operations — emphasizing the long-term gains
will far outweigh any short-term disruptions,” an Agriculture Department
spokesperson said in a statement.
A
number of bills that farmers largely support, like a new Farm Bill and the
expansion of ethanol sales, are being debated in Washington. Some senators are
floating the idea of a second aid package for farmers. But it is not clear if
they will ameliorate the structural problems farmers face, if they will become
law or if they will fall victim to other Republican priorities.
Last
month, after the Supreme Court struck down the president’s tariffs, nearly
every major agriculture organization released statements calling on him to
cease his trade war. “We urge the administration not to pursue similar tariffs
under other authorities, and we call on Congress to exercise its oversight role
to ensure trade policy supports — not undermines — America’s family farmers and
ranchers,” said Rob Larew, president of the National Farmers Union.
Hours
later, Mr. Trump announced new worldwide tariffs.