Hormuz Crisis Wrecks Agricultural Economy as Input Costs Soar

The recent closure of the Strait of Hormuz has sent shockwaves through the agricultural industry, causing input costs to skyrocket. According to American Farm Bureau Federation Economist John Newton, production expenses are expected to reach nearly $500 billion in 2026. This surge in costs far exceeds any revenue gains from rising crop prices.

The USDA's September World Agricultural Supply and Demand Estimates (WASDE) revealed that season-average corn prices have approached $5 per bushel and soybean prices are near 'beans in the teens'. However, Newton warns that post-Hormuz input cost shocks for diesel and fertilizer far exceed any revenue gains. The estimates show corn up 30 cents to $4.80, soybeans up 60 cents to $12, and wheat up 20 cents to $6.40.

Fertilizer expenses are projected at a record $40 billion, up 15% or $5 billion from the previous year, while fuel expenses, including diesel, are projected to reach a record $22 billion this year, up 29% or $5 billion from 2025. Newton also expects another interest rate increase during the upcoming Federal Reserve Open Market Committee meeting, which will further increase interest expenses already projected at a record $34 billion.

The persistent inflation is expected to result in higher production costs for corn and soybeans compared to pre-Hormuz input cost projections. The net result is that despite recent price optimism, no major row crop is projected to clear breakeven unless prices improve even further.