Middle East war threatens agricultural margins

The global agricultural sector may face declining profitability in 2026 due to the escalation of the conflict in the Middle East. This is stated in a scientific article prepared by economists Gary Schnitkey, Nick Paulson, and Jim Baltz from the University of Illinois, along with Carl Zulauf from Ohio State University.

The authors note that military actions against Iran, which began on February 28, 2026, involving the United States and Israel, have already caused a sharp increase in energy and fertilizer prices. While the impact on agricultural markets is less direct, the overall rise in costs is putting additional pressure on farmers and may reduce their margins.

According to the study, corn and soybean prices increased after the conflict began, but saw a sharp correction in mid-March. December 2026 corn futures rose from $4.69 to $4.90 per bushel, while soybeans climbed to $11.68 before falling back to around $11.21 amid geopolitical uncertainty and the potential for reduced exports to China.

At the same time, the energy market remains the key transmission channel. Oil prices surged from about $67 to over $90 per barrel following the outbreak of the conflict. This has already pushed U.S. farm diesel prices up to $3.90 per gallon, and further increases in crude oil could drive prices above $4.50.

Although fuel represents a relatively small share of total crop production costs, its increase has a multiplier effect. Higher transportation, fertilizer production, and crop protection costs could trigger another wave of inflation in the agricultural sector.

The authors also highlight fertilizer markets. About 10% of global urea production is concentrated in the Middle East, meaning any disruption in gas supply or production quickly affects prices. Since late February, urea prices in the U.S. have risen from below $500 to over $650 per ton, while anhydrous ammonia has exceeded $900.

At the same time, many farmers have already purchased or locked in input prices for the 2026 planting season, which may limit short-term impacts. However, those who have not yet secured nitrogen fertilizers will face higher costs and may even adjust planting decisions, shifting acreage from corn to soybeans.

The дальнейший impact of the conflict will depend on its duration and its effects on global energy flows, particularly through the Strait of Hormuz. In the longer term, persistently high energy prices could lead to sustained cost increases across the entire agricultural supply chain and reduce the profitability of corn and soybean production.

Tags: corn, soybean, margin