The impact of the military conflict with Iran on the economy of American farms

The situation in the Strait of Hormuz, through which about 20 percent of global petroleum product consumption passes, has led to instability in energy markets. Fluctuations in fuel prices directly affect agriculture, as diesel fuel is essential for machinery operation, gasoline for transporting the harvest, and natural gas is a key component in the production of nitrogen fertilizer.

The fertilizer market is of particular concern: disruptions in raw material supplies led to the cost of urea nearly doubling in the first weeks of the conflict. Amid rising energy prices and resource shortages, farmers are forced to reduce sowing areas or change the structure of their crops. Corn production, which requires significant volumes of nitrogen fertilizer, has proven to be the most vulnerable. In parallel, logistics costs are rising: insurance premiums for maritime transport, freight rates, and transit times for cargo are increasing.

Experts point to long-term threats associated with the loss of export markets. Historical experience from the trade war with China, when the volume of soybean exports fell by 74 percent between 2017 and 2018, shows that once buyers reorient toward alternative suppliers from Brazil, Argentina, or Australia, it is extremely difficult to regain previous positions. Such diversification of trade flows could lead to a permanent reduction in the dependence of partners on American suppliers.

Economic pressure comes at a time when the industry is already burdened with significant debt: according to forecasts, by 2026 the total debt of the farm sector will reach approximately 624.7 billion dollars. In states where agriculture plays a key role, such as Iowa, Indiana, Nebraska, and rural areas of Illinois, high production costs and shrinking profits pose a threat to the stability of family farms. Data from the 2022 Census of Agriculture indicate that the average age of producers has reached 58.1 years. Financial pressure could accelerate the aging of the sector and hinder generational succession in agribusiness.

Despite possible emergency assistance programs, similar to the Market Facilitation Program, under which the administration paid farmers about 23 billion dollars to compensate for losses from tariffs, such measures are unable to eliminate long-term structural costs or fully restore buyer confidence in American suppliers.