The conflict in the Middle East is having a negative impact on input costs.
farmdoc daily recently reported significant price increases for various inputs, ranging from sulfate and DAP to diesel.
These rising costs are further stressing profit margins that were already tight or even negative. Unfortunately, the recent improvement in corn prices is not enough to offset the increases.
Higher Energy and Fertilizer Prices
The war involving Iran has closed the Strait of Hormuz. This has subsequently spiked many input costs for U.S. farmers as spring planting ramps up.
farmdoc daily reports a significant spike in on-farm diesel fuel. Prices are now working toward the record levels seen in March 2022, according to Nick Paulson, professor of agricultural and consumer economics at the University of Illinois.
“If we look at diesel relative to last year, we’re looking at more than a $1 increase relative to where we were at,” Paulson says. “An even bigger increase relative to some of the lows we were at prior to the conflict breaking out this year, closer to the $1.50 range in terms of that increase.”
Urea Hit the Hardest
Significant price hikes have also hit the fertilizer market. Currently, a quarter of global supplies pass through the Strait of Hormuz.
Urea is the category most impacted, Paulson says, with prices up 39% in that class alone.
“There will be cases where there’s 20%, 30%, 40% of the fertilizer needs that maybe were unpriced on individual operations; and so, you know, looking at cost increases for urea and the 25% to 30% range. Some of the other nitrogen sources and phosphorus products that farmers use increasing by five to ten percent.”
Paulson says even though some fertilizer products, such as anhydrous ammonia, do not come primarily from the Middle East, they are still impacted. This is because they are energy-based commodities.
“We’re seeing increases in many of the other common forms of nitrogen that farmers apply: anhydrous ammonia, liquid nitrogen. You know, the primary sources of phosphate and nitrogen in the DAP and MAP products that farmers use, and even seeing a tick-up in potash,” he explains.
Fertilizer in Place
The good news is a majority of farmers have fertilizer in place for 2026.
“One of the relative silver linings here is that a lot of the fertilizers that were intended for the 2026 crop may have already been applied in the fall; for those that are being spring-applied were booked ahead of time.”
Paulson doesn’t anticipate a significant cut in corn acreage for this spring. Instead, he believes it could be more of a 2027 story, depending on the duration of the war.
