Rising fuel, fertilizer costs pressure farm margins

Jacqui Fatka

April 8, 2026

Key Points

• The longer the political uncertainty endures in the Middle East, the greater the lasting impact of stalled fertilizer and oil production.
• Fuel and fertilizer prices have increased 20%-40% since the conflict began, and buyers who delayed decision making are more exposed.
• Improved commodity prices are not anticipated to offset higher farm supply prices. Ongoing supply chain disruptions for urea could recreate 2022-level fertilizer prices without 2022 crop-price support.

Heading into the 2026 spring planting season, farmers faced elevated input costs and tight margins. Those input costs pushed even higher with the start of the Iran conflict, although the impact to farmers will be determined by the duration of the conflict.

In December, the USDA forecasted a 3% year-over-year rise in cost of production for major commodities in 2026. However, recent increases in energy and fertilizer prices are likely to drive production costs even higher. Fuel and fertilizer prices have increased 20%-40% since the conflict began. USDA had expected fuel, lube and electricity expenses to ease, but the sharp increase in farm diesel prices following the onset of the Iran conflict could add $2,000 in fuel costs per farmer and hundreds of thousands more for grain elevators. Farmers likely secured diesel prices for spring planting between December and February, avoiding the latest surge. Without a quick resolution of the war, farmers may not see the same cost relief this summer for their fall fuel purchases. Despite optimism over the announced ceasefire, oil prices are still holding above $90 per barrel, about 30% higher than in 2025.

Farmers made most of their spring fertilizer input decisions last fall or over the winter ahead of the spring planting season, although more farmers than usual delayed those choices hoping for costs to come down. As of late March, Agriculture Secretary Brooke Rollins confirmed publicly that roughly 25% of American farmers had not yet secured their fertilizer for this spring. Those slow to pull the trigger may have taken a costly gamble. Once the war sent prices soaring, many retailers chose not to offer bids on fertilizer if buyers had not locked in prices and supplies.

Last fall’s weather was favorable for fertilizer applications, but a considerable amount still needs to be applied to this year’s crop. The American Farm Bureau Federation estimates spring fertilizer applications account for about 50% of nitrogen applied to corn, 28% applied to cotton and 42% applied to spring wheat. But farmers and ag retailers could feel the pain into the summer as they will begin to look at securing 2027 fertilizer supplies. The duration of supply disruptions will limit already tight supplies heading into next year.

Urea and phosphate (MAP/DAP) pose the greatest exposure to elevated prices; potash and ammonia used in the U.S. do not travel through the Strait of Hormuz region. Nearly 50% of the world’s urea exports originate from the Middle East, with Iran alone contributing 11% to the global supply as the second-largest urea exporter. In the meantime, Europe’s high natural gas prices have slowed its urea production to an estimated 75% of normal, which eliminates 3.5 million tons of urea production per year. Estimates indicate that the U.S. market still needs as much a 2 million tons of urea this spring.

Meanwhile, the most economically devastating blow may be the March 19 retaliatory Iranian strike on the $26 billion Ras Laffan complex of 14 production facilities in Qatar. The raid reduced Qatar’s liquid natural gas export capacity by an estimated 17%. Rebuilding the damaged LNG infrastructure is expected to take three to five years, offering no quick solution.

At the onset of the Ukraine-Russia war, fertilizer prices surged in a similar fashion. However, in 2022, Russian fertilizer wasn’t eliminated from global markets; it was redirected. By 2023, Russian urea shipments had increased 35%–40% above pre‐war levels. The closure of the Strait of Hormuz has prevented urea shipments from Persian Gulf countries, resulting in storage tanks reaching capacity, operational shutdowns at plants and permanently lost production.

The conflict in the Middle East is not expected to trigger a surge in grain prices comparable to 2022. Agricultural commodity prices have registered only modest gains in the first weeks of this crisis. In the throes of the Ukraine war in 2022, farmers managed to cope with DAP fertilizer prices over $1,000 per ton because corn was selling for $6–$7 per bushel. However, if trade flows out of the Strait of Hormuz remain hindered two to four months, we could see fertilizer costs soar to 2022 levels, even though corn is only priced at $4.00–$4.50 per bushel and soybean margins were already negative before this crisis started.

Duration of the conflict and ongoing uncertainties and risk premiums will dictate the comprehensive effect on farm level profitability as well as the ripple effect throughout the entire agribusiness supply chain. If the conflict drags on, nitrogen fertilizer prices could double and Brazil and India would have greater exposure to higher prices. Continued restrictions on fertilizer and energy shipments and production due to the ongoing conflict are likely to maintain upward pressure on prices and place sustained stress on supply availability.