The blockade of the Strait of Hormuz has led to disruptions in the global fertilizer supply chain, causing prices of urea and agricultural diesel to surge by nearly 50%. Combined with trade frictions eroding export shares, American farmers are now facing a dual squeeze of rising production costs and low grain prices. Approximately 70% of farmers have indicated an inability to afford agricultural inputs, with many farms encountering severe financial strain or even bankruptcy risks. Analysts warn that if high-cost pressures persist into the autumn, reduced production could trigger a ripple effect on food prices.
The dual shocks of the Iran war and trade frictions are pushing the U.S. agricultural sector into its most severe financial distress in decades.
Since the outbreak of the Iran conflict in February this year, the blockade of the Strait of Hormuz has severely impacted the global fertilizer supply chain. According to data from the American Farm Bureau Federation (AFBF), prices for urea, the most globally traded nitrogen fertilizer, have surged by 47%, marking a record increase; overall nitrogen fertilizer prices have risen more than 30%; and agricultural diesel prices have simultaneously increased by 46%.
Meanwhile, the trade war sparked by tariffs imposed under the Trump administration remains unresolved, with ongoing international tensions continuing to erode the U.S. soybean export market share.
The convergence of these two adverse factors is overwhelming American farmers. An AFBF survey conducted earlier this month revealed that approximately 70% of surveyed farmers cannot afford their full fertilizer requirements. "Farmers are now facing headwinds unseen by generations," said AFBF President Zippy Duvall. "The agricultural outlook is bleak, and rural areas need assistance."
Blockade of the Strait of Hormuz drives fertilizer prices to record highs
The Strait of Hormuz is not only a critical chokepoint for one-fifth of the world’s oil supply but also a key route for fertilizer trade. AFBF data shows that Middle Eastern countries affected by the strait's blockade account for nearly half of global urea exports. The outbreak of hostilities caused an abrupt tightening of supplies, leading to a sharp spike in prices.
This shock has been particularly direct for corn growers reliant on anhydrous ammonia. John Yeley, a farmer near Marshall, Illinois, who cultivates 3,500 acres of corn and soybeans, told the Financial Times that before the conflict, the price of anhydrous ammonia he used was $800 per ton; it has now surged to $1,050. This means his spending on this critical input will increase by $53,000 compared to pre-conflict levels. "This is an unforeseen cost increase," Yeley said.
Gerald Mashange, an agricultural economist at the University of Illinois Urbana-Champaign, characterized this price shock as a 'comprehensive upheaval.' More challenging is that the price surge coincides with the crucial spring planting season. "The timing could not be worse," said Philip Nelson, president of the Illinois Farm Bureau. "This is an extremely sensitive period."
Costs at 'historic highs,' low grain prices make conditions worse than in 2022
Persistently high fertilizer prices are not a new issue. After the Russia-Ukraine conflict in 2022, natural gas — a key raw material for ammonia and urea production — soared in price, triggering a fertilizer price spike that has yet to significantly retreat. "Since the fertilizer price hike in 2022, it has been draining everyone here," said Lance Lillibridge, a corn grower from Van Wert, Iowa.
However, John Newton, vice president of public policy and economic analysis at AFBF, pointed out that the current situation is actually more difficult than in 2022—although the absolute increase is not as high as it was then, corn prices are now much lower than in 2022. Data from the National Corn Growers Association shows that, measured in terms of "corn purchasing power," farmers currently need 185 bushels of corn to exchange for one ton of urea, a record high. Nelson noted that after adjusting for inflation, current corn and soybean prices are comparable to those in the late 1970s and 1980s, while input costs such as fertilizers and fuel have nearly quadrupled during the same period.
Tariffs exacerbate financial strain on farms
Even without the conflict in Iran, Midwestern agricultural states like Illinois have already been deeply affected by Trump's trade policies. Trade tensions have accelerated the loss of U.S. soybean market share internationally, with Brazil benefiting. At the end of last year, the Trump administration launched a $12 billion rural aid plan, partly aimed at cushioning the impact of trade disruptions, but farmers generally feel it is insufficient. "It's just a drop in the bucket, like putting lipstick on a pig," Yeley said.
AFBF's Newton stated that many farmers have been operating at a loss since 2023, with some already seeking federal financial assistance, and "some are going bankrupt." Bart Morgan, Yeley’s neighbor who farms about 1,000 acres near Marshall, was forced to give up 2,000 acres of farmland last year due to increased rent from his landlord and now supplements his farm income with part-time jobs—he sells crop insurance and works as a snowplow operator in winter. "Unless you own your land and machinery, continuing to farm today hardly makes sense," Morgan said.
Slow recovery in supply raises concerns for the fall outlook
Even if the Strait of Hormuz eventually reopens, the decline in fertilizer prices will be a lengthy process. "The reopening of the strait does not mean fertilizer will arrive at your port the next day," Newton pointed out, "It takes time." Bart Morgan estimated that fertilizer prices would take one to one-and-a-half years to return to normal, while diesel would require about six months.
This means the pressure of high costs may persist into the fall harvest season. "This fall will be terrible," Yeley predicted, noting that many farmers will be unable to afford fall fertilization. "People will start using less fertilizer, and yields will decline." He warned that the drop in production could affect food prices, "It's a vicious cycle."
In the long term, financial pressures are undermining the confidence of the younger generation in agriculture. Lillibridge said that young people see their parents trapped in financial difficulties due to geopolitical tensions and monopolistic practices by agribusiness giants. "They see a boot always on the neck of farmers. Why would they want to follow this path?"
Editor/Deng