Iran war has mixed impacts on Minn. farmers

American corn and soybean prices experienced a short-lived price rally last week following the start of the war in Iran. That’s because the conflict led to a virtual closure of the Strait of Hormuz, a vital trade passageway in the Middle East. 

The trade disruption sparked uncertainty surrounding the global availability of crops such as soybeans and corn.

“There’s the concern saying we need to buy some additional grain to make sure that it’s in process or in shipping,” North Dakota State University Crop Economist Frayne Olson said. “So that if there is any kind of additional disruptions, we don’t fall short, especially for international buyers or for international processors.”

The ensuing price rally allowed some soybean and corn farmers, such as Scott Dauk from Madison Lake, to sell off some of last year’s crop at an attractive price.

“It gets you excited that you might get to make some money this year,” Dauk said. “Because it’s been looking very bleak the last couple of years for trying to turn a profit.”

Global oversupply and reduced demand for U.S. exports has hurt corn and soybean farmers. 

Prices have come down some from the rally last week but are still higher than before the start of the war in Iran, Olson says.

And he notes that higher corn prices could stick around in the short term. That’s because gas prices are climbing due to the war. That boosts the price of corn-based ethanol, an ingredient in most gasoline.

In the long term, should higher gas prices persist, Olson said people could opt to drive fewer miles, which could lead to a decline in ethanol consumption. 

However, this increase in crop prices comes with significant downsides.

“It’s a balancing act,” Dauk said. “Yeah, you’re happy the price is up, but also your inputs are even going higher than they already are.”

Fertilizer and fuel price shocks

While high oil prices have helped crop prices climb, farmers still have to contend with the fact that the fuel they’ll use on their equipment will also be costlier.

At the same time, fertilizer prices have also surged as urea and other nitrogen fertilizers aren’t able to move through the Strait of Hormuz.

Brandon Fast, a corn and soybean farmer from Mountain Lake, said he had already booked enough fertilizer and fuel in advance. That’s helped insulate him from price shocks other farmers are seeing.

“We prepaid early, we’ve sold into some rallies, now it’s dependent upon the weather and what we’re going to end up getting for yields,” Fast said. “So I guess we’ve done the best of our abilities to set ourselves up for hopefully making some money.”

However, he said farmers in other regions who have alternative crops to plant may not have been able to plan as easily, and if they waited too long to make a crop plan, they likely didn’t order fertilizer or fuel in advance. That means they’re likely seeing these new costs stack up. 

“You start snowballing all your input costs when you were trying to barely break even before, or you couldn’t even hit break even,” Fast said. “It adds up really, really quick, and that hurts the bottom line.”

Scott Dauk from Madison Lake also ordered fertilizer and fuel in advance for the spring planting season. However, he still worries he could have to pay higher prices if the war in Iran continues throughout the year. 

“It might get to me this summer, when we have to start bookings for the ‘27 crop,” Dauk said. “It may cause some sleepless nights, but you never know.”