If you’ve been hearing a lot about the war in Iran and the Strait of Hormuz, and are wondering how it might impact your life, look no further than your dinner table – or breakfast nook, or the desk where you scarf down lunch.
Experts expect the ongoing war to bring up food prices, putting further strain on American consumers who have been dealing with inflated prices for years, since the COVID-19 pandemic. According to the Bureau of Labor Statistics’ latest Consumer Price Index report, the food index increased 0.4% over the month in February, as did the food at home index, while the food away from home index rose 0.3% and the index for energy rose 0.6%.
President Donald Trump’s tariffs have also drained money from U.S. households, according to multiple reports. While some of the tariffs have been struck down, it’s unclear if consumers who bore the brunt of the costs will ever get their money back.
At the end of last month, Trump announced that the U.S. and Israel had begun airstrikes on Iran. Now we’re weeks into fighting, and the critical Strait of Hormuz off the Iranian coast – where much of the world’s oil and fertilizer passes through – is blocked as missiles fly.
Blockages to both the oil and the fertilizer are expected to make meals more expensive here in the U.S. That’s because scarcity could make costs go up for farmers, who then might raise their prices to cover those costs (known as “input costs”), again leaving consumers to pick up the tab.
“When you start looking at urea – a significant portion of the world’s urea which is a fertilizer, comes through the Strait of Hormuz,” Mike Strain, commissioner of the Louisiana Department of Agriculture & Forestry told Tommy Tucker of Audacy station WWL in New Orleans recently. He explained that our dependency on other countries for urea and rock phosphate fertilizer “could result in higher input costs.”
Around 15% of fertilizer imports to the U.S. are from the Middle East, according to The Independent. As Strain mentioned, the outlet said “about half the global supply of the key ingredient urea comes from the region,” as well as 30% of ammonia, per the American Farm Bureau Federation.
Farm Journal recently reported that an estimated 10% to 15% of farmers in the Northern U.S. haven’t bought spring supplies yet. If they have to buy fertilizer at a higher price than expected, it could change growing plans such as switching to crops that need less fertilizer, explained farmer Paul Sproule.
“We… get most of our fertilizer... from the Middle East, so that could actually impact the farmers out there,” CBS News Jill Schlesinger told Audacy station WBEN in Buffalo, N.Y., earlier this month. She told consumers to expect higher prices in the short term. Katherine Thompson, a senior fellow in defense and foreign policy studies at the libertarian Cato Institute, also told WWL’s that the war in Iran is eventually going to increase food costs.
Fertilizer prices have already risen “dramatically” since the U.S.
and Israel attacked Iran on 28 February, The Independent reported this week. It said that the shipping disruption at the Strait of Hormuz has “largely halted the export of nitrogen fertilizers manufactured in the Persian Gulf and restricted access to key fertilizer ingredients.”
“When the ports started raising their nitrogen prices due to the conflict due to shipping concerns, that directly affects me here on the farm,” said Tennessee farmer Todd Littleton. According to The Independent, he is facing an additional $100,000 bill for fertilizer this season.
Zippy Duvall, president of the American Farm Bureau Federation, said some farmers are having trouble finding fertilizer at all, the outlet added. He said the situation is “serious.” Harry Ott, a cotton, corn and peanut farmer who also leads the South Carolina farm bureau, called the situation “dire.”
“Even before the latest price increase, other factors in the last several years have led to high fertilizer prices, starting with the war between Ukraine and Russia, which blocked access to raw materials and increased natural gas prices. China also cut phosphate exports as it focused more on domestic needs,” The Independent said.
According to Open Markets, Philip Nelson, a fourth-generation farmer in LaSalle County, Ill., who was recently elected as Illinois Farm Bureau president, said that overall input costs for farmers have quadrupled in recent years. While those prices climb higher, commodity prices are at the same level as 1974, adjusting for inflation, he said.
Jacqui Fatka, a farm supply economist for creditor CoBank, said that even if the Iran War is resolved quickly, what’s happened already is expected to have an impact on prices. She explained that it could take around a month or more for shipments to make it from the Middle East to the Port of New Orleans once the strait allows traffic to the U.S. through.
Thankfully, experts believe that increased fertilizer prices won’t impact food costs significantly for consumers, and the Trump administration has taken steps to ease fertilizer costs, including increasing imports from Venezuela. Nitrogen and phosphate-based fertilizers are largely produced domestically in the U.S., which could also help offset some of the increased costs, according to Anne Villamil, a professor of economics at the University of Iowa.
However, she noted that increased fertilizer costs aren’t they only thing driving up input costs for farmers. There’s also oil.
While Trump has brushed off concerns about rising oil costs, Americans have seen prices spike at the gas pump in recent weeks as crude oil stalls in the strait of Hormuz. AAA data updated Wednesday showed that average national prices per gallon were up to $3.842. A month ago, the price per gallon nationally was under $3 per gallon.
“Soaring oil prices could result in higher food prices, given the increased cost of diesel needed to transport products to grocery stores and petroleum products used in plastic packaging, said Chad Hart, an economics professor at Iowa State University,” The Independent reported.
The Conversation explained in a recent article that price spikes such as the ones caused by Hormuz disruptions “function as a tax” on consumers. It said that higher energy costs – including higher electricity costs in addition to fuel costs – “ripple through transport, food production, manufacturing and household budgets.”
According to the outlet, “estimates suggest that for every increase of $10 per barrel of oil, additional fuel costs amount to roughly $560 per year per American household, including costs embedded in goods and services. That means that the added burden per U.S. household this year could reach $2,000, based on current oil prices. Military expenditures could also cost U.S. households an additional $541 this year.
“In short, a prolonged war combining high energy prices and sustained military expenditures would likely amount to between three to four per cent of the median U.S. household expenditure — roughly half of what many families spend annually on food or health care,” The Conversation said.
Strain, the commissioner of the Louisiana Department of Agriculture & Forestry who spoke to Audacy, said prices would hit the gas pump first. By late fall and next year, he said we might see the impact in “in overall food prices.”