WEST LAFAYETTE, IND. (RFD NEWS) — Farmer Donald Chase says the latest geopolitical pressures have thrown a big wrench into his budget this year.
“I started making budgets knowing that things were tight back in the fall, and then I adjusted,” Chase says. “And then after we began a war in Iran, I had to adjust again, and it’s like insult to injury. And now we have the weather concerns, and we’re irrigating. Corn looks good, but it’s only going to increase costs, and we were already in a really tight situation to begin with.”
Chase calls the current times ‘unprecedented.’ He locked in nitrogen supplies back in the fall, but still needs to buy dry fertilizers, which he says have gone up 50 percent in price since the last time he checked.
While overall inflation has cooled from highs seen in recent years, the same can’t be said for input costs. Dr. Michael Langemeier, an economist at Purdue University, says increases in farm input costs do not always align with inflation. Worse, farm cost increases tend to be more unpredictable and impact farmers more quickly than consumer inflation.
“They often rise faster and move more unpredictably. Over the long run, general inflation has averaged about 3.4 percent per year. That’s inflation on consumer items. Farm input prices have increased by about 4.1 percent annually,” Langemeier explains. “That gap may seem small, but over time, it has a major impact on cost structure, margins, and break-even prices. But what really matters is that not all inputs behave the same.
However, Langemeier says costs rise at different rates across input sectors that within the farm economy.
“Some costs, like labor and machinery, tend to track closely with general inflation. Those items are also used in other industries, and that makes them more predictable. But others, like fertilizer, fuel, and feed, and I would also add feeder animals, are driven by global markets, energy prices, supply shocks, and other things, and that’s where volatility comes in,” he continues. “Here’s the surprising part: even when inflation stabilizes, your costs might not. Over the past year, inflation increased by about 2.8 percent, but total farm input costs rose by more than 10 percent.”
The disconnect can be significant in farm country, which Dr. Langemeier says has worsened amid recent geopolitical tensions.
“That disconnect is exactly why break-even prices for crops like corn and soybeans haven’t come down, and when you break it down further, the variation is even more important,” he says. “Fertilizer prices, especially nitrogen, phosphorus, and potash, have risen much faster than inflation in the last year. More recently, we’ve seen additional pressure. Diesel prices jumped 34 percent in March, and anhydrous ammonia prices increased about 13 percent. Compared to a year ago, if we go from April ’25 to April ’26, anhydrous ammonia prices are now more than 40 percent higher.”
When it comes to adjusting your farm budget, the economist recommends producers keep three things in mind:
- Don’t rely solely on inflation headlines
- Focus on individual input categories
- Expect continued volatility in break-even prices
The ongoing conflict in the Middle East is underscoring the impact of rising fertilizer costs on economic stability in the ag sector, as well as the risks associated with dependence on imported inputs for agriculture, both in the United States and globally.
Langemeier’s colleague, Dr. Joana Colussi with Purdue University’s Department of Agricultural Economics, joined us on Friday’s Market Day Report for a closer look at global fertilizer markets and supply dependence.
In her interview with RFD News, Colussi discussed the current impact of the war in Iran on global fertilizer markets and the current state of conditions. She also addressed the United States’ reliance on external fertilizer sources and Brazil’s dependence on imported fertilizers.
Finally, Colussi reflected on whether any market or production shifts have occurred since the Russia-Ukraine conflict brought fertilizer supply chains into focus, and shared the key takeaway from the available data.
