We will see a double whammy in the ag sector. Fertilizer prices, including ammonia which is made from natural gas, are rising fast. Additionally, with the Northern Hemisphere planting season approaching, the cost of diesel fuel for the tractors and later this year for combines and other harvesting implements will of necessity pass through, eventually, to the end user.
From Bloomberg, March 8:
Palm oil surged as much as 10%, soybean oil jumped and wheat neared a two-year peak, as the war in the Middle East drove energy and fertilizer costs higher and threatened to tighten supplies across agricultural markets.
Disruptions to crude oil supplies wrought by the conflict are boosting the appeal of crop-based biofuels, lifting demand for vegetable oils and corn. The effective closure of the Strait of Hormuz — a major conduit for the fertilizer trade — has also led to a spike in the price of crop nutrients as farmers rush to secure supply. In addition, wartime food security concerns could spark some countries to stock up on staples like wheat.
Palm oil jumped the most since 2022, when top grower Indonesia halted exports. Chicago futures of soybean oil, palm’s closest substitute, rose as much as 5%, up for an 11th day and headed for the longest run of gains since 2008.
Wheat futures rallied more than 3%, after jumping the most since 2024 on Friday, while corn climbed over 2% and soybeans also rose.
“Grain and oilseed markets are following energy in early Monday trading,” said Joe Davis, director at Futures International, a brokerage. “The macro and energy markets will continue to lead ag commodities on any escalation of the war on Iran.”
Vegetable oils and meal in China also surged on Monday. The most actively traded soybean meal futures on the Dalian Commodity Exchange rallied as much as 6% to 3,066 yuan per ton while palm also rose to hit a daily limit. Rapeseed oil and meal did the same in Zhengzhou.
Spiking crude prices have stoked fears of faster inflation globally, rattling broader markets.
“The US consumer could see this immediately on prices at the pump, then in food inflation if shipping and fertilizer prices remain firm,” Davis said. “Although most farmers are locked in on price, or have purchased input needs for 2026, next year may be where farmers feel the pain if the Strait of Hormuz doesn’t re-open soon.”....
....MORE
Recently:
March 5 - "Iran Conflict Sends Farmers Rushing to Secure Critical Fertilizers"
March 2 - Fuel: More On Saudi Arabia's Giant Ras Tanura Refinery
March 5 - Diesel Prices Are Rising Fast
If interested see also:
May 2022 (Russian invasion) - Diesel equals Soybeans; Soybeans equal Diesel (in more ways than one)
....Way back in April 2008, the U.S. was still in Afghanistan and Iraq, Gaddafi in Libya and Morsi in Egypt had not yet been overthrown, the Maidan coup in Ukraine was six years in the future and the Russian invasion was fourteen years ahead, the price of oil was going parabolic on the charts, on its way to the record futures print, $147+, and I was thinking about substitution and pseudo-fungibility:
What Proportion of Food Price Increases is Attributable to Ethanol?
If I recall correctly it takes about five gallons of fuel to plant and
harvest an acre of corn (I just spent 60 seconds trying to remember if
that was conservation tillage or traditional. Then I realized that farm
management was not the focus of this post, I'll go with 5 gal./acre), so
the argument that rising input prices is a factor has merit....
Some things never change. But they should
Related, noted in a 2015 post:
Remember, the rule of thumb is it takes around 10 crude oil calories to produce 1 row crop (mainly corn and soybeans) calorie.
Most other food prices are similarly dependent on their input costs.
One oft-cited bit of nuttines is the fact it takes 127 calories of aviation fuel to get a head of lettuce from California to London....
March 2021 - Vaclav Smil: "How Much Energy Does It Take to Grow a Tomato?"
