Farmers burdened by global tensions and rising costs

As conflict in the Middle East intensifies, the agricultural sector is bracing for added strain as disruptions to key resources push costs higher.

Why it matters: Rising global tensions are adding to existing challenges, including higher input costs and thinning profit margins. A surge in crop production in 2025 driving prices down combined with ongoing tariff pressure, has left the agricultural economy in a difficult position.

“If we look at the crop side of the equation, it’s clear the agricultural industry has been struggling with low prices for the past couple years and that has led to lower farm incomes across the country,” said Chad Hart, associate professor of economics at Iowa State University (Ames, IA). “That pressure continues to impact the industry’s financial health.”

For the last few years, the cost of producing crops has risen, but the profits have dropped. “We’ve seen lots of inflation over the last couple years,” said Brendon Misik, CCE, CICP, senior manager, ag credit for Nutrien (Deerfield, IL). “Farmers are paying higher rent for their land and higher prices for their equipment. New technology is improving agricultural equipment, which is fantastic but costly. Interest rates are also higher than they were five years ago. They’ve come down a bit over the last few years, but they’re still high. Farmers are getting squeezed and they can’t pay their bills, leading to bad debt for retailers and eventually leading to bad debt for wholesalers.”

The conflict in the Middle East only serves to place additional pressure on farmers as trade stifles under global tensions. The Strait of Hormuz, a portion of a valuable trade route between Iran and Oman where 20% of the world’s oil exports pass through, was formally closed on March 2. After temporarily opening again on April 17 during a ceasefire between Iran and the United States, the waterway remains closed to most traffic as tension between the two nations persists. Oil is not the only vital resource traded through the Strait. Certain chemicals transported through the Strait are needed for the manufacturing of fertilizers.

“There is a physical bottleneck of energy and fertilizer products at a time when most farmers are preparing for planting season in April and May,” Hart said. “So, these higher prices combined with limited supplies are putting a real pinch on agriculture, not only here in the United States but worldwide.”

Many farmers are uncertain about the future as they head into planting season. “The biggest change I’ve seen in customer behavior is still that there is more tension because of the unknown,” said Jason Mott, CCE, corporate credit manager for MFA Incorporated (Columbia, MO). “Farmers don’t know what materials are going to cost or what crop prices will be. With the recent spike in fertilizer and chemical prices, some producers will just choose not to use as much fertilizer, which has the potential to impact what their crop yield this year.”

Planting habits are responding to rising input costs, with farmers planting 3% less corn compared to last year while increasing soybean planting by 4%, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service. “We’re seeing a shift away from corn and towards crops like soybeans,” Hart said. “So, they’re moving from high-cost crops to low-cost crops to try to avoid some of those higher prices.”

There is no predicting when the Strait will be operating at full capacity, and according to Hart, even when the Strait reopens, it will be a long road to returning to normal. “It would take some time for the energy and fertilizer producers to get up and running to where they were pre-war,” Hart said. “That’s part of the problem. It’s not just a matter of moving ships around and getting product delivered. Some of the infrastructure, including oil and natural gas refineries, will need to be rebuilt. It will take a while to get them up and running and that will lead to higher costs for energy and fertilizer for some time after the Strait reopens.”

The bottom line: For credit managers in the agricultural industry, changes in customer behavior caused by financial stress are easier to manage when they stay in close contact with their customers. “Some customers will continue to do what they’ve always done, and some will pull back a little bit,” Mott said. “But the bottom line is communication is essential for credit managers in any industry. We need customers to talk to us and let us know where they are and what we can do to help.”

Learn more by attending Chad Hart’s session “The Ag Economy Today: Key Indicators and Insights” at this year’s Credit Congress & Expo in St. Louis. More information is available here.