WEST LAFAYETTE, IN – Rising energy and fertilizer costs tied to the Iran conflict are pressuring farm margins, but the overall outlook for U.S. farm income remains uncertain rather than uniformly negative. Economists with the Center for Commercial Agriculture at Purdue University say the impact will depend on how long disruptions last and how markets respond.
Crude oil surged above $110 per barrel following the disruption of the Strait of Hormuz, pushing diesel and fertilizer costs sharply higher. Nitrogen prices jumped more than 30% in a matter of days, creating a significant cost shock just ahead of spring planting.
Farmers are already adjusting. Lower fertilizer application rates and potential shifts from corn to soybeans could reduce costs while tightening overall grain supplies. That supply response may help support commodity prices.
Timing matters. Producers who locked in fertilizer purchases earlier face limited exposure, while those buying now are more vulnerable to higher costs.
Historical trends suggest energy-driven cost spikes can be offset by stronger commodity prices, though the outcome depends on the duration of the conflict.
Farm-Level Takeaway: Higher costs may be offset by rising commodity prices.