Iran war combined with drought puts American farmers in the worst crisis in 40 years: fertilizer prices double, losses reach 31 billion this year

Farmers in the U.S. Corn Belt are facing the most severe financial crisis in 40 years. The surge in diesel and fertilizer prices caused by the Trump administration's war against Iran, combined with continued droughts, is pushing American food producers to the brink of collapse, with industry losses expected to reach $31 billion this year.

According to an August 25 report from the Financial Times, a new study by the American Farm Bureau Federation (AFBF) indicates that, without government aid, farmers growing corn and eight other major crops will suffer $31 billion in losses this year, with losses expected to further widen to $32 billion in 2027.

This year, corn growers are losing $131 per acre and soybean growers $80 per acre. AFBF economist Faith Parum pointed out that 2027 will mark the sixth consecutive year of losses for most major U.S. row crops.

John Hansen, president of the Nebraska Farmers Union, characterized the current situation as "the most severe financial downturn in agriculture since the 1980s."

The crisis is spreading to broader American society. The latest Financial Times polls show that over 53% of registered voters say their personal financial situation has worsened since Trump returned to the White House in January 2025. With only 71 days left until the midterm elections, the predicament of agricultural states has become a potential threat to the Republican Party's control of Congress.

Impact of War: Surging Diesel and Fertilizer Prices

After the U.S. launched a military strike against Iran in February this year, traffic through the Strait of Hormuz shrank sharply, directly pushing up global energy and fertilizer prices and adding to pressure on U.S. agriculture.

According to data from the U.S. Energy Information Administration, the national average diesel price has soared from $3.81 per gallon before the war to $5.45, an increase of over 43%. Diesel is the main fuel for agricultural machinery, so this price rise directly increases production costs.

The surge in fertilizer prices is also shocking. Matt Bailey, a corn and soybean grower in eastern Nebraska, said a commonly used phosphorous-rich planting fertilizer “11-52-0” used to cost $470 per ton ten years ago, and now is over $900, more than double the price. “Where do you even start to calculate? How do you make a budget?” he said.

Brad Lubben, professor of agricultural economics at the University of Nebraska-Lincoln, noted that interest expenses, labor costs, and machinery prices have all risen sharply. “If you examine every component of the production budget, most have significantly increased in the past few years.”

It’s important to note that upward pressure on fertilizer prices did not start with the Iran war. Since the outbreak of the Russia-Ukraine conflict in 2022, global fertilizer supply had already been heavily disrupted, and the Iran conflict further exacerbated the situation.

Drought Compounds: Extreme Weather Pushes Yield Risks to Record Highs

Besides cost pressure, the U.S. Corn Belt has been hit by severe droughts this year, further squeezing farmers’ incomes.

Nebraska is one of the hardest-hit states. Data shows that from January to July this year, the state received only 11.86 inches of precipitation, about 3.1 inches below normal, making it the 18th driest period since records began in 1895.

John Dittrich, who grows corn and soybeans near Meadow Grove, Nebraska, said extreme weather is becoming an increasingly severe threat.

“Our drought is worse, heavy rain events are worse, high winds are worse.” He said the business pressures from weather risks and rising costs are “unlike anything I’ve seen in my 44-year career.”

Recent rainfall has brought some relief, but for many farmers it came too late. John Hansen, president of the Nebraska Farmers Union, commented:

“Much of the crop damage is already done; it’s like closing the barn door after the horse has bolted.”

Matt Bailey also expects this year’s yields to be affected. “Considering all the dryland… six weeks straight without moisture, battered all to hell— I don't think we'll have a good harvest this year.”

Rising Food Prices: Inflation Pressure Transmits to Consumers

The combined impact of drought and war is raising grain prices and fueling concerns about further inflation.

Traders have begun lowering expectations for the 2026 corn harvest. U.S. December corn futures have risen 10% this month to $5.15 per bushel, the highest since 2023. Prices for soybeans and wheat have also rebounded recently.

Brian Choi, CEO of food research institution Food Institute, warned: “This definitely means higher food prices.” He pointed out that corn prices have risen nearly 20% this year, “eventually this will reach consumers.”

This trend complicates market expectations for Federal Reserve monetary policy. U.S. inflation is already above the Fed’s 2% target, and further increases in food prices could increase tightening pressure.

Political Pressure: Agricultural States Become Midterm Election Wildcards

The agricultural crisis is translating into political pressure, putting Republicans in a dilemma ahead of the midterms.

Trump promised in June this year to “never let farmers down,” and his administration applied for a $11 billion agricultural emergency aid package covering both commodity and specialty crop producers. But farm groups largely see this as far from sufficient.

Meanwhile, some of Trump’s policy moves have met strong backlash in agricultural circles. Last week, he announced a 90-day tariff waiver on up to 300,000 tons of imported beef, a move some ranchers called a “betrayal.”

The shadow of trade conflict also hangs over the sector. Several farmers said Trump’s tariff policies have harmed U.S. agricultural exports, especially soybean sales.

Republican Senator Thom Tillis admitted on Monday:

“With 71 days until the midterms, we currently have no positive message to send to agricultural states, and it's been like this since last year's so-called 'reciprocal tariff day.'”

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