Tennessee farmer Todd Littleton is thousands of miles from the Strait of Hormuz, but he’s seeing the early fallout from the shipping lane’s effective closure as fighting continues in and around Iran.
The turmoil couldn’t have come at a worse time, as planting season starts. Littleton has 4,000 acres for corn. Now he has an unplanned $50-per-acre increase in the cost of nitrogen, a critical fertilizer, for his corn crop. Diesel fuel is up 50 cents a gallon, he said, and the natural gas used to heat the Gibson County farmer’s poultry houses is more expensive too.
“To put it in perspective, the increases in fertilizer and fuel costs means it will cost me an additional $100,000 to plant corn this year,” Littleton said.
It will be difficult for Littleton to fully absorb those costs, he said, noting that “net losses have been at record levels across farm country during the last three years.”
“All of these cost increases could not have come at a worse time for the agricultural industry,” he told MarketWatch. “We love to do what we do on farms — keeping people fed, clothed and moving. But we have to be able to make ends meet so we can keep operating.”
Americans are about to get a crash course in the global economy — and it’s not just about oil supply. Rising costs for fertilizer, feed, packaging and shipping are going to seep into the prices that people see on grocery shelves, experts say.
The price of oil is catching a lot of attention from investors and everyday drivers. Indeed, a gallon of gas costs $1 per gallon more than it did last month. On Friday, Brent crude oil for May delivery traded at over $110 a barrel.
Yet fertilizer is the “deeper story,” as around one-third of globally traded fertilizer typically moves through the Strait of Hormuz, said Jake Hanley, chief growth officer and director of investments at Teucrium.
The Persian Gulf “isn’t just an oil region,” he said. “It’s the nitrogen supply chain.”
Nitrogen is essential for plant growth. Middle East urea, a widely used nitrogen fertilizer, has climbed over 50% in value since the start of the year, according to Josh Linville, vice president of fertilizer at financial-services company StoneX.
Major fertilizer producers and exports are currently blocked behind the Strait of Hormuz, said Linville. That includes three of the world’s 10 largest urea exporters: Iran, Qatar and Saudi Arabia.
The U.S. and Israel’s strikes on Iran have happened to coincide with the start of the planting season in America. Timing matters for American farmers because fertilizer purchasing, field preparation and early-season fertilizer applications are already underway, wrote Faith Parum, economist at the American Farm Bureau Federation, in a report earlier this month. That means farmers have limited ability to adjust if input prices spike suddenly.
And while there are many options that may help alleviate the virtual halt in the passage of oil tankers through the strait, for fertilizer “there’s no pipeline bypass, no strategic reserve, no quick fix,” said Hanley at Teucrium.
Consumers are learning fast about the macroeconomic consequences of the war in Iran. For the first time in at least a year, Americans said global conflict, not inflation, was their top concern, according to an early-March sentiment gauge from Numerator.
Which grocery prices are poised to increase?
Gas pumps and grocery stores are two places where shoppers are keenly aware of prices. Food shoppers have already seen a slow creep higher recently: The cost for a basket of food was up 2.6% year over year in February, according to the Bureau of Labor Statistics.
The grocery industry was already absorbing the Trump administration’s steel and aluminum tariffs, which increased the cost of cans and certain bottling materials, said Phil Lempert, editor of SupermarketGuru.com. Now, higher oil prices will increase the cost of plastic packaging and films coming from petrochemicals, he said, while higher fertilizer costs will also feed into prices.
“The result is more expensive packaging in center‑store categories like canned vegetables, soups and beverages, while higher fuel costs hit the fresh side of the store, from berries and lettuce to many of the foods in the refrigerated cases,” Lempert told MarketWatch.
Shoppers could pay 15% more by the fall for coffee, tea and chocolate, said Lempert. “Expect more pressure as the global 10% duty applies across many origins and as freight and insurance premiums rise on disrupted trade lanes,” he noted.
Bananas, mangoes, pineapples and off-season berries and vegetables are all exposed to higher input costs, Lempert added, and consumers could pay between 5% and 20% more by the fall, depending on produce origin.
Off-season produce is vulnerable to higher prices because of the increased price of diesel fuel for trucks, refrigeration and fertilization, said Stanley Lim, co-director of Michigan State University’s Food Access & Supply Chain Technology Lab. Mexico and Canada “supply much of U.S. fresh produce; that means berries, avocados, peppers, tomatoes and similar items are more exposed than the average grocery item,” he said.
Meat and poultry could be another area where consumers will see price increases, Lempert said. The U.S. is a “major meat producer,” but tariffs have still increased meat prices by roughly 5%, according to Lempert — “and that’s before you factor in more expensive feed, fertilizer and fuel.” The cost of beef could rise between 50 cents and $1 per pound by the fall, he noted.
Corn uses the most fertilizer and is the U.S.’s biggest grain export market for global feed demand, said Darin Newsom, senior market analyst at Barchart. And if feed demand goes up, beef prices will also go up until demand slows, he said.
Seafood could be yet another product prone to higher costs. Significant amounts of fish and shrimp come to the U.S. from Asia and overseas fisheries. The industry was already dealing with tariffs, and now it faces the prospect of longer, more expensive shipping routes that bypass the Middle East. The price of seafood sourced from Asia could increase 20% by the fall, Lempert said.
But seafood closer to home is also affected by higher fuel costs. Lobsterboys, based in Long Island, N.Y., buys from American and Canadian fishermen and sells straight to consumers and businesses, including restaurants, hotels and casinos. Since the start of the fighting in Iran, the business has been forced to raise its prices 25% to 30%, said Justin Maderia, Lobsterboys’ co-founder and co-CEO. “It’s a massive chain effect from all fuel prices going up,” he said.
The fishermen who supply the company’s seafood use boats that run on diesel. Lobsterboys then brings lobsters from a Canadian site to a New York distribution point, also via trucks running on diesel.
Justin’s brother, Travis, also a co-founder and co-CEO, said he was talking to Canadian lobstermen who have seen their per-liter diesel costs rise 60 cents since the U.S and Israel first attacked Iran. At a time when Atlantic Ocean waters are so cold, the fishermen have to work harder in a risky profession to rustle up dormant lobsters — which means they have to be paid more to justify the trip.
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