The dual impact of the Iran conflict and trade frictions is pushing the U.S. agricultural sector into its most severe financial predicament in decades, trapping a large number of American farmers in a dilemma of high costs and shrinking incomes, and even facing the risk of bankruptcy.
Since the outbreak of the Iran conflict in February this year, the blockade of the Strait of Hormuz has dealt a heavy blow to the global fertilizer supply chain, leading to a sharp surge in the prices of various agricultural materials. According to data from the American Farm Bureau Federation (AFBF), the price of urea, the most traded nitrogen fertilizer in the world, has increased by 47% cumulatively, setting a record high; the overall price of nitrogen fertilizer has risen by more than 30%; and the price of agricultural diesel has increased by 46% during the same period, further exacerbating the pressure of production costs on farmers.
At the same time, the trade war triggered by the Trump administration's tariff policies has not subsided, and the tense international relations have continued to erode the U.S. soybean export market share, adding insult to injury to the already under-pressure U.S. agriculture.
The superposition of these two headwinds is constantly crushing U.S. farmers. A survey by AFBF earlier this month showed that about 70% of the surveyed farmers said they could not afford all the fertilizers needed for farming, and nearly 60% of farm households had deteriorated finances due to high prices of fertilizers and fuel. "Farmers are facing headwinds that no generation has ever encountered before," said Zippy Duvall, president of AFBF. "The agricultural outlook is very bleak, and rural areas need help."
Strait of Hormuz Blockade Sends Fertilizer Prices Soaring to Record Highs
The Strait of Hormuz is not only a crucial waterway for one-fifth of the world's oil supply but also a key channel for global fertilizer trade, with more than one-third of global fertilizer trade passing through it. According to AFBF data, Middle Eastern countries affected by the strait blockade account for nearly half of the world's total urea exports. The outbreak of the conflict led to an abrupt tightening of supply, and prices rose sharply immediately.
This supply shock has had a particularly direct and severe impact on corn farmers who rely on anhydrous ammonia. John Yeley, a farmer who grows 3,500 acres of corn and soybeans near Marshall, Illinois, revealed that before the conflict, the price of anhydrous ammonia he used was $800 per ton, and now it has risen to $1,050 per ton, which means his expenditure on this key agricultural material will be $53,000 more than before the war. "This is an entirely unexpected increase in costs," Yeley said helplessly.
Gerald Mashange, an agricultural economist at the University of Illinois at Urbana-Champaign, characterized this fertilizer price shock as a "comprehensive turmoil". More crucially, the price surge coincides with the critical period of spring ploughing, when farming time is urgent and cannot be delayed. "The timing couldn't be worse," said Philip Nelson, president of the Illinois Farm Bureau. "This is a very sensitive period. The shortage of fertilizers has directly threatened food production, and delayed farming time may affect the full-year harvest."
Costs Remain at Historical Highs; Low Grain Prices Make the Situation More Dangerous Than in 2022
The continuous high fertilizer prices are not a new problem. After the Russia-Ukraine conflict in 2022, the price of natural gas, a key raw material for ammonia and urea, rose sharply, followed by a surge in fertilizer prices, which have not dropped significantly since then and have remained at historical highs for a long time. "Since fertilizer prices rose in 2022, it has been squeezing everyone here," said Lance Lillibridge, a corn farmer from Vinton, Iowa, admitting that the continuous rise in production costs has made it difficult for farmers to bear.
However, John Newton, vice president of AFBF in charge of public policy and economic analysis, pointed out that the current situation of U.S. farmers is actually more difficult than in 2022 - although the absolute increase in fertilizer prices is less than that at that time, corn prices are now much lower than in 2022, making it difficult for farmers to increase their income, and the imbalance between costs and income is more serious. Data from the National Corn Growers Association shows that measured by "corn purchasing power", farmers currently need 185 bushels of corn to exchange for one ton of urea, setting a historical record. Nelson added that after adjusting for inflation, current corn and soybean prices are equivalent to those in the mid-to-late 1970s and early 1980s, while production input costs such as fertilizers and fuels have nearly quadrupled during the same period, and the income gap continues to widen.
Tariffs Add Insult to Injury; Farm Finances Are on the Brink of Crisis
Even without the impact of the Iran conflict, agricultural states in the Midwest such as Illinois have been deeply dragged down by Trump's trade policies. Tensions in trade have accelerated the loss of U.S. soybean market share in the international market. In 2018, U.S. whole soybeans accounted for 47% of the global export market; now this proportion has dropped to only 24.4%, almost halving the market share. Countries such as Brazil have taken the opportunity to fill the market gap and become the biggest beneficiaries.
At the end of last year, the Trump administration launched a$12 billion rural assistance program, partly to buffer the impact of trade policies, but farmers generally believe that this move is a drop in the bucket, equivalent to only about one-third of the losses farmers suffer in a year. "This is just a drop in the bucket, nothing more than putting lipstick on a pig," Yeley said bluntly, stating that the assistance program cannot fundamentally solve the problem.
Newton from AFBF said that many farmers have been continuously losing money since 2023, and some have had to seek financial assistance from the federal government. "Some are going bankrupt." According to AFBF data, the number of U.S. farm bankruptcies increased by 55% year-on-year in 2024, and the cash flow of many farms has been continuously deteriorating in recent years. Bart Morgan, Yeley's neighbor who farms about 1,000 acres near Marshall, was forced to abandon 2,000 acres of farmland last year because his landlord raised the rent. Now he can only supplement his farm income with part-time jobs - he works as an agricultural insurance salesman and does snow removal work in winter. "Unless you own your own land and machinery, there's almost no point in continuing to farm now," Morgan sighed.
Slow Supply Recovery; Autumn Agricultural Outlook Causes Concern
Even if the Strait of Hormuz is eventually reopened, the decline in fertilizer prices will be a long process, which cannot quickly ease the cost pressure on farmers. "Reopening the strait does not mean that fertilizers will arrive at your port the next day," Newton pointed out. "It takes time, and the recovery of the supply chain needs to be promoted step by step." Bart Morgan estimates that it will take one to one and a half years for fertilizer prices to return to normal, and about six months for agricultural diesel prices to return to a reasonable range.
This means that the high cost pressure may continue until the autumn harvest period, further compressing farmers' profit margins. "This autumn will be terrible," Yeley predicted. At that time, many farmers will be unable to afford autumn fertilization. "Everyone will start using less fertilizer, and yields will drop." He also warned that the decline in crop yields may further pass on to food prices, pushing up global food inflation. "This is a vicious circle, and ultimately both consumers and farmers will bear the cost."
In the long run, the continuous financial pressure has been shaking the confidence of the younger generation in the agricultural industry. Lillibridge said that young people watch their parents fall into financial difficulties due to geopolitical tensions and the monopolistic behavior of agricultural giants. "They see a boot always stepping on the farmer's neck, with no hope in sight. Why would they take this path?" This lack of confidence may further exacerbate the brain drain in U.S. agriculture and affect the long-term development of the industry.
Risk Warning and Disclaimer
The market is risky, and investment needs to be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are in line with their specific situation. Investment based on this is at your own risk.
+1 6269975768
微信
Teams