How U.S. Should Better Protect Itself from High Fertilizer Costs

There are numerous new reports on how the Trump administration’s decision to launch military strikes on Iran has raised prices for American farmers and ranchers, threatened to push costs higher for months, and strained the vital supply chain. And the failure to end Russia’s attack on Ukraine also continues to elevate costs.

Purdue University’s Center for Commercial Agriculture laid out several numbers in a new report that showed why American farmers are exposed due to supplies getting choked off from passing through the Strait of Hormuz in the Persian Gulf:

• U.S. imports 40% of its nitrogen, phosphorus, and potassium.

• U.S. imports 95% of potash (primarily Canada but 12% comes from Russia and 3% from Israel).

Brazil Dependency on Imported Fertilizer

Authors Joana Colussi and Michael Langemeier point out that Brazil may be at greater risk for financial hardship than the U.S. from the ongoing war with Iran because of its greater reliance on imported fertilizer. The authors compared the economic climate to when Russia invaded Ukraine, a key fertilizer exporter.

“…unlike in 2022, when rising input costs coincided with a strong increase in commodity prices, the current situation is characterized by fertilizer price increases with much smaller gains in soybean and corn prices,” they wrote.

The authors also said that Brazil’s planting season schedule also burdens that country’s producers with heavier financial exposure. “In the short term, this situation is likely to affect Brazilian producers more strongly, since the soybean fertilizer purchasing window for the 2026/27 crop season is happening right now. In the U.S. Midwest, by contrast, much of the fertilizer for the 2026 crop had already been purchased and/or applied last fall, before the conflict began,” they wrote.

Increasing Supply of Domestic Fertilizer

The authors urge both the United States and Brazil to reduce reliance on fertilizer imports, something that they have largely failed to accomplish following Russia’s attack on Ukraine and now exacerbated by the U.S./Israeli war with Iran.

“…both Brazil and the United States should step up efforts to expand domestic fertilizer production and reduce their exposure to external shocks,” the authors wrote. “This is a long-term challenge, but it is becoming increasingly necessary for both countries to remain competitive in the global grain market. Greater supply security would reduce vulnerability to geopolitical disruptions and provide more stability in input costs for producers.”

Short, Medium, and Longer-Term Forces on Farming from War with Iran

The war with Iran brings waves of financial repercussions for American farmers and ranchers. Conterra Ag Capital considers fertilizer costs the second wave of three that will feel the brunt of the war. 

Energy costs are the first wave as diesel soared $2 per gallon since late February. That raises operating costs for equipment and shipping. Those higher energy prices then put upward pressure on fertilizer.

The third wave, as detailed in the Conterra report, is that higher prices due to the war push inflation. This higher inflation gives the Federal Reserve continued reservations about lowering borrowing costs. That delays anticipated relief for those looking to borrow or refinance.

Conterra provided these three guidelines about farm finances:

• Liquidity matters more than leverage

• Timing matters more than price

• Flexibility matters more than speed

  
  

RELATED: The price pinch for higher fertilizer costs is widespread in the U.S. This survey found that nearly 70% of those responding say that they can’t afford the full cost of fertilizer.