WASHINGTON, D.C. (RFD NEWS) — Input costs are forcing farmers to second-guess their break-even levels this year, as rising fertilizer and diesel prices add pressure across farm country. Economists warn that recent jumps in input costs are weighing on an already stressed ag economy. Economists with Alabama Extension say the latest gains are a reminder that input volatility can quickly change an operation’s profitability.
A recent Farm Bureau survey shows just 19 percent of Southern farmers have pre-booked their fertilizer supplies, leaving many exposed to potentially higher costs later this year.
Fertilizer economist Josh Linville at StoneX warns that the ripple effects will be felt for some time, as the Strait of Hormuz remains off-limits. He says even if the Strait were to reopen, restoring supply chains will take time.
“Think about this on the global scale: If the Strait opens tomorrow, first, you’ve got to convince all these vessels it’s safe to sail. That’s going to take a minute,” Linville explains. “Second, you think about some of the attacks that we’ve seen. Qatar and Iran both had some of their gas plants destroyed by missile and drone attacks. Both of those nations’ attacks were centered on the plants that feed their nitrogen production facilities. Now you’re talking about repairs. That takes a while. Once you get that going, you’ve gotta get LNG, you gotta get natural gas production back up and running. Once that starts getting the fertilizer plant, you gotta restart the fertilizer.”
Grain trader Brian Hoops with Midwest Market Solutions says the conflict involving Iran is unlikely to be resolved quickly, with markets already adjusting to that reality.
“The news has kind of changed to the point where it doesn’t look like this is going to be a quick resolution with the Strait of Hormuz,” Hoops notes. “Iran is not budging on their demands. They want to have a nuclear option. President Trump, of course, is not going to budge on his demand that they can’t have this option. And so it looks like that strait is going to remain closed for some time, with the U.S. kind of trying to control it and hurt Iran financially, as they’re not able to ship any oil out. So look for that war to continue and oil prices to stay elevated, which in turn will help the grain market stay elevated as well.”
Farmer Madi Roy in the Pacific Northwest says higher costs are adding to an already long list of challenges facing the industry.
“Rising input costs, trade challenges, labor and workforce concerns, increasing land costs, and developmental pressures,” Roy explains. “Our growing urban-rural divide. We see that as a huge challenge as well. Infrastructure, declining research funding, climate conditions—those are kind of the key challenges we outlined in our report, recognizing that there are other things our producers are facing as well.”
Roy says the financial strain on producers is significant.
“And at the same time, in 2024, we’re number eight in production costs,” she continues. “So, you can see a huge disparity between what producers are actually bringing in and what it’s actually costing them. Another key thing we’ve found by looking at USDA Economic Research Service data is that our producers have an estimated take-home pay of negative $300 million in 2024. We’re the lowest. We have the lowest take-home pay in the nation.”
Analyst Darin Newsom says markets are already signaling prolonged inflation tied to energy and commodity prices.
“We’ve got strong rallies continuing. We’ve got markets pushing to new highs. We’ve got strong commercial buying as seen by the strengthening inverse or ‘backwardation’ in New York terms,” Newsom told RFD News. “So, I mean, nothing’s changed about these markets. I read somewhere gasoline was at its highest price since 2022. So, you know, this isn’t going to stop anytime soon. There’s no change. There’s no real change going on in the Middle East in the war with Iran. And this is what the market’s telling us. And so just tell—we know inflation’s going to be real. We know it’s going to be with us for quite a while. We’re seeing it not only in the energy sectors, but pretty much across the board right now in the commodity complex as a whole.”
A new read on inflation is expected on May 12, when the latest Consumer Price Index is released.
Back on the fertilizer front, Brooke Rollins says the administration is taking steps to address both short-term supply challenges and long-term structural issues, including the shrinking number of fertilizer producers in the U.S.
“First, of course, you all know, in March, President Trump suspended the Jones Act for 60 days to boost shipping flexibility and help vital resources like fertilizer flow more freely to U.S. ports. Just last week, President Trump further extended this waiver by 90 days. According to the U.S. Maritime Administration, we saw this tool used in early April for several anhydrous ammonia deliveries, so we’ve seen it actually in action, and we expect more fertilizer to come in under this waiver in the coming days and weeks.”
“Just last week, I had several of the CEOs from major fertilizer companies in the office here at USDA. Several of our cabinet members were there as well. Great American company CF Industries listened to farmers and to the administration and has delayed their scheduled maintenance on their ammonia plant in Donaldsonville, Louisiana, supplying an additional 100,000 tons of granular urea to U.S. customers that otherwise would not have been available this planting season. Another example, Pivot Bio, is also allowing customers to lock in their prices through the 2028 season.”
Rollins says coordination across federal agencies and the private sector is helping stabilize supply, as efforts continue to close fertilizer gaps and support producers through the growing season.
American Farm Bureau Federation (AFBF) economist Dr. Faith Parum joined us on Thursday’s Market Day Report for a closer look at the USDA’s ongoing actions to strengthen long-term domestic fertilizer capacity, and how those initiatives can help bolster supply chain resilience, stabilize input availability, and support affordability for farmers over time.
In her interview with RFD News, Parum discussed how quickly these actions may translate into additional fertilizer supply at the farm level and what expanding domestic capacity could mean for long-term fertilizer prices.
“We think that’s a great step, but it’s going to take a few years for some of those new production facilities to come online,” Parum noted. “So it’s not going to do much to stabilize prices in the short term, but we’re hoping, you know, for the next geopolitical crisis, we’ll have a stronger supply chain.”
Parum also addressed what farmers should watch for in the USDA’s upcoming commodity cost and return forecasts, particularly regarding input costs and overall profitability.
“We’re expecting to see another update of that commodity costs and returns, and what cost of production per acre looks like for each major row crop,” she explained. “This will be the first USDA data that looks at cost per acre since the crisis in Iran started, and so, we’ll see how fuel prices have increased and how fertilizer prices have increased per acre, and that will give us a good look at what profitability will look like in the coming year.”
Finally, Parum shared expectations for how the Farm Bill process may play out as the legislation moves to the Senate, as well as what the Farm Bureau is watching for in the next steps.
“We’re really excited to see updates to loan limits,” she said. “They haven’t been updated since 2018, and we all know that farming has gotten a lot more expensive since then. So we’re very excited to see those provisions in there. There’s also a lot of research and trade funding that is made permanent based on updates in the One Big Beautiful Bill, so that’s really great news. And a fix to Prop 12 is also in there—so all great things.”
While E15 was not included in the Farm Bill, Parum shared that the Farm Bureau’s outlook remains positive for the upcoming House vote.
“Year-round E15 was not voted on today—that will be voted on when the House comes back from recess,” she said. “So we’re eagerly awaiting that vote. We all know that will be an easy win for farmers and consumers—a boost to domestic corn demand while making prices at the pump a little bit cheaper.”
