Military conflict with Iran: consequences for the American agricultural sector

Modern U.S. agriculture is largely dependent on energy prices. Diesel fuel is necessary for operating machinery, natural gas is a key component in the production of nitrogen fertilizer, and gasoline facilitates the transport of the harvest. According to data from the USDA, rising fuel prices inevitably lead to increased production costs and lower farmer income, which ultimately reflects on food costs.

The situation in the fertilizer market poses a particular threat. Since the production of ammonia and urea is directly linked to the use of natural gas, and the blockade of the Strait of Hormuz limits the supply of raw materials, urea prices almost doubled in the first weeks of the conflict. In conditions of resource scarcity and rising costs, farmers specializing in growing corn are forced to reduce sowing areas or choose less costly crops.

Logistical difficulties are also hitting the agricultural sector. Increased insurance premiums for transportation and higher freight tariffs complicate export activities. There is a risk of losing markets: the experience of the 2017–2018 trade war with China shows that shifting buyers to alternative suppliers from Brazil, Argentina, or Australia can become a long-term trend that is difficult to overcome after the situation stabilizes.

This pressure comes at a time when the sector is already burdened with significant debt. According to USDA forecasts, the total debt of farm holdings will reach 624.7 billion dollars by 2026. High resource costs, narrowing margins, and financing difficulties hinder the sustainability of family farms, especially in the states of Iowa, Indiana, Nebraska, and rural areas of Illinois.

The situation is complicated by demographic factors: according to the 2022 Census of Agriculture, the average age of American farmers was 58.1 years. Continued financial pressure could slow the influx of a new generation into the industry and undermine the U.S. reputation as a reliable supplier of food to the global market. The application of government subsidies, based on the experience of previous periods, only partially compensates for short-term losses, but does not solve structural problems or restore buyer confidence.