Farmers already facing limited markets face more costs

Crop growers are facing multiple whammies as they head into spring.

Allen Featherstone, department head of agricultural economics at Kansas State University,  noted in a recent Farm Financial Situation and Trade webinar,  farmers have felt the brunt of the tariff war used by President Donald Trump.

“A tariff is a tax,” he said. “It is (like) a sales tax.”

Fertilizer and steel, which has been imported for many years, particularly went up sharply in the past year. That has sent the cost of inputs and machinery up. Previous studies have indicated tariffs have increased the cost of steel about $1 billion.

Now another wildcard entered the scene when the United States and Israel began bombing Iran in late February and that has elevated global oil prices.

Gregg Ibendahl, an associate professor in the department of agricultural economics at K-State, said on March 17 that oil traders, who have dealt with market shock before, were factoring in the possibility of the latest conflict.

Four years ago, when Russia attacked Ukraine, it took traders off guard, and the price immediately jumped to $130 a barrel, but Ukraine responded and the energy markets started to settle. About two months after the attack, oil prices dropped to below pre-Russia invasion prices.

“When we bombed Iran, I think traders were a little more cautious and they didn’t hike up the oil price as quick as what you might have expected,” Ibendahl said, adding prices had inched up from $65 to $75 a barrel at first and then hit a peak of above $100 a barrel.

“I think they’re putting the appropriate amount of risk into the oil price,” he said believing prices will settle into the mid-$95 a barrel until the Strait of Hormuz is secured.

Plan on higher costs

Ibendahl specializes in farm management and agricultural finance, and he said the war means farmers should plan on higher fuel and fertilizer expenses for this year.

A year ago, the average Kansas grain farm spent about $30,000 in diesel fuel, he said, adding that machinery and fertilizer are higher expenses than fuel. A $10 per barrel oil increase adds about 42 cents a gallon on the diesel fuel price.

“Basically $90 (a barrel) oil would translate into another $10,000 to a Kansas grain farm’s fuel expense. That’s one big thing right off the top. The second going it is going to effect is fertilizer.”

He uses a model that predicts fertilizer prices and before the war he estimated anhydrous at $855 a ton and expected some easing in the spring and summer. Now his predictor indicates that with a $10 a barrel oil increase that will about $30 per ton to the anhydrous price. For a Kansas grain farm that will mean another $12,000 in expenses and taken all together, with an inflation bump, it means the effect s likely to add about $25,000 in costs.

“It certainly adds a bigger chunk to production expenses when we were already looking at pretty tight margins,” Ibendahl said. “Farmers are the ultimate optimist. They will always have a struggle one way or the other and we’ll see what happens now. Farming is already pretty risky and this certainly doesn’t help that situation. Also, they’re in a business where there are thin profit margins and we just ratcheted up the level of risk and expenses to make things worse.”

Ibendahl said a minor silver lining is that many farmers likely locked in most of their fertilizer costs for the 2026 growing season, but with the possibility of anhydrous exceeding $1,000 per ton those who haven’t cemented their plans may switch from corn to soybean acres.

Farm operators will also need to keep an eye on how the war could impact fuel and fertilizer costs next year.

While the bulk of fertilizer can be bought and stored in advance there are not many farm operations that can store a year’s supply of diesel fuel. Normally, diesel is about 60- to 70 -cents a gallon higher than gasoline, but now the spread is as high as $1.50 a gallon higher.

“Whenever there’s a price shock it seems like the diesel price rises faster than what the gas price does relative to what it should be and you can see that going on now,” he said.

Long term there may be some better news for markets and oil on the horizon, Featherstone said.

Soybeans

There are indications that China may up its buy on U.S. soybeans above the 25 million metric tons in 2026 and that comes on the heels the country appears to have purchased 12 million metric tons in its first phase.

China has committed to purchasing at least 25 million metric tons of U.S. soybeans from 2026 to 2028, Featherstone said. That is still less beans than what China had previously bought in the past, which was as much as 30 million metric tons, but it is a starting point.

The unease created by Trump with his tariff war that began in earnest last May did hurt soybean producers as China looked elsewhere and Brazil was primed to fill that role, Featherstone said.

China cannot get all its soybeans it needs from Brazil, Featherstone said. “They can get a lot, but not all.”

Brazil, Argentina and the U.S. combine to make up 80% of the global soybean exports and China buys about 60% of the exported beans, he said.

With that in mind, his advice is for the soybean industry to continue to look to diversify its market options. the Trump administration has made overtures to open trade opportunities to other Asian countries, including Vietnam.

If the U.S. could get to the 25 million metric ton commitment from China and 17 million metric tons in Vietnam in 2026, “there may be light at the end of the tunnel.”

China has resumed purchasing U.S. sorghum, which is critical to Kansas, the nation’s largest sorghum producer, he said.

Cloudy crystal ball

Recently, the U.S.’s intervention in Venezuela with regime change could offer some relief on input costs, Featherstone said. Venezuela, before the regime change, had seen a 50% decline in per capital domestic product over the past years as its oil industry struggled.

Most of the oil Venezuela produced went to China, he said. Now more of the oil and extracted natural gas will eventually go to Texas for processing and that should be good news for the U.S. farmers as that would add mean more diesel, gasoline and ultimately fertilizer.

“In 2026, we won’t see much relief, but in 2027 we could see more,” he said, which all depends on how long it takes to get Venezuela’s production back on track.

Ibendahl said if the Iran war wraps up soon then that will ease long-term cost concerns; however, if it drags on and ships cannot safely get through the Strait of Hormuz than farmers will feel the impact.

“The longer it goes on the worse the effects are going to be,” Ibendahl said.

Dave Bergmeier can reached at 620-227-1822 or [email protected].