NCGA addresses impact of Middle East conflict on farmers during press briefing 

The National Corn Growers Association assembled a panel of experts recently to address the impacts of the Middle East conflict and what impact the closure of the Strait of Hormuz is having on the nation’s corn growers.  

Panelists covered the rising cost of diesel fuel, fertilizer availability and prices, and actions taken by domestic fertilizer companies and Congress to help mitigate the concerns. NCGA’s economist also discussed the economic mood. 

Included on the panel was: Lesly McNitt, NCGA vice president of public policy; Matt Frostic, Michigan farmer, NCGA first vice president and chair of the input task force; Brandon Hunt, Kentucky farmer, NCGA board member and input task force member; Gretchen Kuck, NCGA economist; Nancy Martinez, director, public policy, trade and biotechnology; and Matt Ziegler, director, public policy, renewable fuels. 

“While the closure of the Strait of Hormuz presents challenges for our growers, it’s important to remember that our growers have also already been facing tough economic times well before this conflict began,” McNitt said. “In fact, the nation’s corn growers are in their fourth year of negative returns attributed to low corn prices and high input costs.” 

Fertilizer inputs have been top of mind for many corn growers and she wanted to “go back to basics” and let Frostic and Hunt describe what they use nitrogen, potash and phosphates for when it comes to corn production. 

Frostic said in every agricultural region, each treats nitrogen, phosphorus and potash a little bit differently. 

“Structurally they’re the same. Phosphorus and potash tend to be very stable in the soil, while nitrogen will move through,” he said. “We can manage phosphorus and potash a little bit differently in that maybe we can cut our rates to get through a high-priced year to try and capture profitability. But nitrogen is one of those things that if we cut even one unit of that product out, we add will lose a bushel of corn.” 

Nitrogen necessary 

It’s hard to cut nitrogen, according to Frostic, and it’s one element that has become “extremely expensive” for many corn growers.  

Hunt agreed, and said crops are very dependent on these inputs, and each one of them plays an important role.  

“Each one of them has a different part of the pie, if you will, specific to corn, not just extremely important as it has a monetary valuation on how much we apply versus what we yield in the field,” he said. “So, while we would do a better job of knowing how much exactly to put on if we could predict the weather, when we have to make these decisions, we don’t always know this.” 

Many farmers set themselves up for success based on yields, Hunt said, but in the current economic environment, they have to be cognitive of the cost. 

“We’re really trying to balance right now economics and yield production at the farm gate,” Hunt said. “And that causes some different discussions, and we’ve had in years past, probably so extremely important foundational principle, if you will, of raising row crops in the United States, and we’re in a pretty tough spot today.” 

Rising costs 

McNitt said input cost increases have caused farmers financial distress, particularly during the past four years. 

“Fertilizer prices are up 74% since 2007. They plateaued around 2022 but in 2022 corn futures topped out at about $8 (a bushel). Today I was looking at the May future contract prices, $4.56,” she said. “While farmers are sourcing fertilizers domestically, whenever possible, they have to turn to imports because there’s not enough domestic supply to meet demand.” 

A petition filed by two fertilizer companies, JR Simplot and Mosaic in 2020 with the International Trade Commission, but countervailing duties on phosphate imports, completely blocked Morocco out of the fertilizer market.  

“We raise that because when you face supply constraints elsewhere, that’s one additional supplier that’s not available to American farmers right now, and it’s a pretty significant one,” McNitt said. “These duties resulted in availability issues, in lack of competitive options for farmers, and have kept phosphate prices high.” 

She said since these duties on phosphates have been in place, farmers have paid $6.9 billion in additional costs. 

“Now the conflict in the Middle East has further complicated access to critical fertilizers,” she said. “In a typical year, the United States sources about 40% of imported phosphate products from Saudi Arabia. When these fertilizers can’t be ttransported through the Strait of Hormuz there are real implications for availability and price, and there is a global market impact.” 

Limited options 

American farmers can’t pivot to other options because of the countervailing duties and high prices elsewhere. 

McNitt said NCGA sent a letter to both Mosaic and JR Simplot’s CEOs asking them to renounce their support for phosphate duties and allow American farmers to regain access to critical fertilizer imports.  

“In the meantime, NCGA is strongly discouraging fertilizer companies from price gouging or from using the Middle East conflict as an excuse for discouraging policymakers from taking additional actions that could help diversify supply and offset some of these price shocks that farmers are experiencing,” she said. 

McNitt said when it comes to nitrogen, it too is important to farmers and helps strengthen plant growth, withstand environmental challenges and produce strong yields. In the U.S. most nitrogen is produced domestically and depending on the year, somewhere between 5% and 20% is imported from Qatar, Saudi Arabia and Iran. Those countries are third, fourth and fifth on the list of largest exporters of nitrogen fertilizer. 

“Together, they account for 25% of the global nitrogen fertilizer trade,” McNitt said. “Iran is shipping fertilizer to Turkey and Brazil. If you have the strait closure, and let’s say, Turkey and Brazil aren’t able to get their nitrogen, they’re looking to other sources. So even though we’re not importing a ton of nitrogen in the U.S., that closure in the strait really has a global impact, because fertilizer is a global market.” 

Other forces at work 

Brazilian demand causes strain on other suppliers, and that has a ripple effect on American farmers, according to McNitt. 

“The pandemic was another major one, war in Ukraine, and now this conflict in Iran is the latest shock,” she said. 

Diesel fuel is another sticky issue and is now more than a dollar more expensive per gallon than it was prior to the start of the conflict.  

“Spring planting is starting, and it’s a really intensive time for fuel use, as farmers are out in their fields, and that’s really making this one of the most critical times this this season,” she said. “The increased price of diesel is just one more factor that’s weighing on already thin or negative profit margins.” 

Farmers are already facing strained financial conditions in the farm economy, and Kuck gave a deeper look at the economics of the issue. It’s taken a while to get to where things are today, she said. 

“This year has already been tough. Ever since, really 2022 the Russian invasion of Ukraine, we’ve had higher prices that really haven’t come down,” she said. “We’re already operating at those conditions.” 

There’s already been export bans on Chinese phosphate as well as constraints on nitrogen, and continued impacts from the Russian invasion of Ukraine. 

President Donald Trump’s tariffs also caused market disruption ad uncertainty. 

Kuck said it is clear to her this is an important time and farmers are already constrained. “We’re going ahead into our fourth year of negative profit for the average corn grower,” she said. “When you look at that, you have tight operating conditions, maybe you’ve already made some of those cutbacks, even before the shock.” 

Expense cutting? 

Kuck is seeing indications of that farmers might cut back on fertilizer applications. Using the U,S. Department of Agriculture’s cost of production of $917/acre to plant corn, it’s easy to see the dollars just aren’t there.  

“You have tighter credit conditions,” she said. “That’s about $150 a loss per acre.” 

As a result, farmers are making difficult decisions.” 

McNitt said NCGA doesn’t like to complain about problems, without bringing a solution to the table first. 

“Those solutions come in a couple of key forms. Our efforts to drive additional demand by increasing existing or expanding existing markets and developing new markets for corn and corn products, both foreign and domestic,” she said. “And then on the other side of the coin we’re also engaged in efforts to develop policy, regulatory solutions that will get at some of the root causes of these higher input costs.” 

As for demand, McNitt said if you spend any time with corn farmers during the past few years, you should know year-round E15 legislation is at the top of the priority list. 

“Thinking about how gasoline prices have been impacted by the closure of the Strait of Hormuz, I found myself thinking over the last few days or last couple of weeks, wouldn’t it be nice if we had year-round nationwide E15 right now?” she said. “Because the last national average gas price I heard this week was about $3.70 (a gallon) and we know that year-round E15 can save consumers about an average of 25 cents per gallon at the pump.” 

In the absence of a permanent fix on it, NCGA is calling on the Environmental Protection Agency to issue summertime waivers for E15. 

“Doing so would enable the whole liquid fuel supply chain to begin blending E 15 into the pipeline,” McNitt said. “It would give that certainty and stability for the entire sector to know that the waivers will be issued, and that they can start to prepare for the summer months as early as possible.” 

Kylene Scott can be reached at 620-227-1804 or [email protected].