Impact of Iranian Conflict on Fertilizer Prices and U.S. Farming

A worker applies fertilizer after planting potatoes at Bluff View Farms in West Jefferson, North Carolina. The scene reflects a global issue stemming from high fertilizer costs influenced by the conflict in Iran. Farms face compounded challenges, including severe weather, tariffs, and increased fuel and labor expenses. The image captured by Allison Joyce/Getty Images highlights the seriousness of the situation.

Fertilizer Bottleneck Due to Iranian Conflict

The war with Iran initially raised global concerns about oil shipment slowdowns. Yet, fertilizer exports also became entangled in the conflict. Before the situation erupted, roughly one-third of the world’s fertilizer moved through the Strait of Hormuz, a vital passage now constrained. According to UN Trade and Development, this bottleneck forced fertilizer prices up, affecting import-dependent countries worldwide.

A shortage of natural gas further complicated fertilizer production, causing challenges for U.S. farmers. Despite this, food system experts argue that higher fertilizer prices don’t directly lead to increased retail fruit and vegetable costs.

Minimal Consumer Impact Expected

Chris Barrett, an agricultural economics professor at Cornell University, predicts higher food prices will emerge from September to January. Yet, he notes these are unlikely due to fertilizer issues alone. Other factors like labor shortages and fuel costs significantly influence food inflation across the supply chain.

U.S. Farmers Rethink Crop Strategies

The Fertilizer Institute reports that one-third of U.S. fertilizer is imported, though little travels through the Strait of Hormuz. Despite this, the global market dynamics ensure price swings affect U.S. farmers. Christopher Glen of TFI explains that removed Middle Eastern supplies still pressure market prices.

A survey by the American Farm Bureau Federation revealed 70% of farmers couldn’t afford sufficient fertilizer. Corn and wheat producers, who truly rely on fertilizer, can see it consume up to a third of their operational expenses. As costs rise, some farmers decrease fertilizer use on their crops.

Many farmers lock in fertilizer supplies well before seasons start, mitigating immediate impacts. However, long-term concerns grow. Data from the USDA shows a small reduction in planned corn planting from 98.8 to 95.3 million acres. Meanwhile, soybean acreage is expected to rise as farmers explore less nitrogen-dependent crops.

Fertilizer Costs vs. Retail Prices

Higher fertilizer expenses could lead to smaller yields, impacting store prices. A TD Economics report suggests a 2-5% North American production drop might add 0.1-0.5 percentage points to food inflation by 2027. Yet, experts believe that farmers will largely absorb these costs.

Only 12 cents of each dollar spent on food returns to farms, with the rest flowing to other supply chain players. Fertilizer accounted for about 7% of farm expenditures in 2024, though corn relies more heavily on fertilizers. Farmers face tough negotiation positions against wholesalers, who often choose cheaper suppliers, elaborates Rob Vos from the International Food Policy Research Institute.

Fertilizer Market Recovery

Recent weeks show some relief as fertilizer prices decrease after a U.S.-Iran agreement to reopen the Strait. The Trump administration also temporarily removed certain phosphate import duties to help American farmers. Recovering the fertilizer industry to prior production levels will take time, potentially affecting future planting seasons.

Farmers are motivated to explore alternatives like manure, compost, and cover crops to reduce reliance on traditional fertilizers. Barrett highlights a growing interest, much like the rising appeal of electric vehicles due to fuel price hikes.