Agricultural Uncertainty Remains Because of War in the Middle East

Global politics continue to impact the American economy overall. Gas prices initially declined – and fell below $4 per gallon for the first time since March – after President Donald Trump reached a Memo of Understanding (MOU) with Iran that could, in theory, end the war with Iran that has lasted since February 28.

However, the framework agreement is only a temporary pause and not yet a final deal. Numerous members of Congress, including both Republicans and Democrats, have publicly expressed concerns about the deal if it results in several hundred billion dollars going to Iran in the future as the U.S. tries to prevent the country from developing nuclear weapons.

RELATED: American Farmland Owner searched for ways American producers could get relief from fertilizer prices in this story. 

Some also insist that Congress has a role in a final agreement. The war is complicated, and not only because of the U.S. commitment that has resulted in the deaths of 13 American soldiers, significantly highly gas and diesel prices, potentially several hundred billion dollars in additional costs to U.S. taxpayers, and thousands of dead in the Middle East.  

Countries Affected by War with Iran

More than a dozen countries have been directly affected by the 4-month war. The United States, Iran, Israel, Qatar, Lebanon, United Arab Emirates, Saudi Arabia, Qatar, Kuwait, Bahrain, Iraq, Oman, Jordan, and Turkey have all been impacted by military action in some capacity.

The significant number of countries involved, complexity of discussions of the parties involved in a final peace agreement, and the uncertainty of any further Israeli strikes in the Middle East continue to challenge peace progress. And that challenges agricultural producers on various fronts.

What happens to fuel supplies and prices?

Seeing fuel prices initially decline after gas and diesel costs spiked for months was a welcome relief. But how far will they fall, and how long will it take for them to return to pre-war levels? Will it be months? Will it be longer? Will they fall back to those levels at all?

When will the transportation process return to normal?

Nearly 20% of the global crude oil supply passes through the Strait of Hormuz, the vital passageway that has largely been halted since the war began. That logjam has forced fertilizer inputs, which have already financially stressed farmers and ranchers before the war because of rising prices, even more.

The world’s supply of nitrogen-based fertilizer, urea, relies on the Strait of Hormuz with 40% traveling through that area during peaceful times. And nearly half of the global output of phosphate’s key ingredient, sulfur, also typically ships through Hormuz.

Farmers dealings with tight margins can’t afford fertilizer prices to jump 40 -50% because of more limited supplies and higher transportation costs. Did some sellers also inflate prices to take advantage of the situation?

Some prices have fallen from their highs, but farmers hope for much steeper declines.

RELATED: Earlier this year, a veteran lending executive told American Farmland Owner that extended financial strain could be too much for these types of farmland owners.