War in Iran and the Ripple Effect on Farm Inputs

The war in Iran may be far away but it could have a major impact on this year’s planting season. Frayne Olson, NDSU Extension Crops Economist, has the latest developments. 

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Bruce Sundeen: 00:00

You're listening to In The Pod, soybean updates, a weekly trek into the latest soybean information from NDSU Extension. The war in Iran may be far away, but it could have a major impact on this year's planting season. Frayne Olson, NDSU Extension crops economist, has the latest developments. Frayne, farmers are already worried about fertilizer prices being too high. What kind of impact does the war in Iran have on fertilizer?

Frayne Olson: 00:28

So there's two major impacts. Number one is obviously on the price. And over the last several days, we've seen urea, the nitrogen component of the fertilizer, increase substantially anywhere from 80 to $100 a ton, which is pretty substantial at this time of year. The other major concern, of course, is the supply chain. Are we actually gonna physically have this available? First, the good news, most of the fertilizer we need for spring's work is already in the fertilizer shed ready to go. For the farmers that have already pre priced it, the prices are not going to change. The bigger concern is we don't have enough physical storage in the region to cover all of the needs for the entire springs work. The fertilizer starts to go out, the fertilizer dealers start to refill to make sure that they can get all the tons they need to be able to finish the season. The real concern right now is what happens to the refill portion of it, not only from a costing standpoint, but just to make sure physically it's available. The Persian Gulf region where all of the blockades are right now, supplies depending on whose numbers you use, 20 to 25% of the supplies come out of that region for the urea, the nitrogen products. The phosphorus and the potash, potassium portions, those prices really haven't changed. The supply chains for them are very different. The real concern is the nitrogen products. There are vessels right now stuck in the Persian Gulf that were intended to be delivered. It takes approximately a month to get it from the Persian Gulf to New Orleans and about another month, almost a month, to get it from New Orleans up to our region. The supply chain is pretty long on this. The concern is, are we gonna have the available supplies? What is the price going to be? The answer to that really depends upon how long these blockades last. The sooner that we can get more product moving in and out past the Strait Of Hormuz, then it's a little easier. That's really the choke point right now. That's the biggest concern for the fertilizer sector.

Bruce Sundeen: 02:27

With all of this going on, should farmers adjust their planting schedules right now?

Frayne Olson: 02:31

I am starting to get the question from farm managers, should I be adjusting my planting acreage? Should I be looking at some more soybeans and less corn or should I be shifting things around a little bit? My recommendation right now today is no, stick with the plan that you have. Give the supply chain a chance to be able to work around this blockade, work around some of the choke points. People are very creative, and I'm pretty confident we'll be able to find some alternative supplies. Again, the cost will be up there. It will likely stay for most of the summer, if not into fall. I do believe that the supply chain will be there. So right now, most farmers have put the plan together for a lot of reasons, for rotation reasons, disease management, labor management. I wouldn't recommend making any big adjustments at this stage.

Bruce Sundeen: 03:19

Mostly, you're saying this because we're just not sure where this is going.

Frayne Olson: 03:23

Correct. We're really on the front end of this issue, so pay attention to what's happening. Things can change very rapidly. It's early in the process. The expectation now is that the Strait Of Hormuz will be opened up, hopefully opened up soon to be able to allow not only liquefied natural gas, but also crude oil and then the fertilizer shipments to be able to be freed up. If that happens, if we only have a week or two delay, we should be fine. If this continues or lasts much longer, then you might have to make some adjustments.

Bruce Sundeen: 03:54

Thanks, Frayne. Our guest has been Frayne Olson, NDSU Extension crops economist. You're listening to In The Pod, Soybean Updates, a weekly trek into the latest soybean information from NDSU Extension supported by the North Dakota Soybean Council.