As U.S. farmers move into this year’s harvest and begin planning for the 2026/27 marketing year, they are finding themselves in a familiar and unfortunate situation as the Iran war and Strait of Hormuz uncertainty is impacting input prices, and the re-emergence of tariffs are projected to further drive cost pressures, Stephen Nicholson, North American head of crops at RaboResearch, told AgNavigator.
“My concern is that ‘27 input costs are going to be higher than they were in ‘26. ... The tariffs are back with a vengeance. We’re not reducing steel and aluminum imports, so that doesn’t help farm machinery manufacturers or pickup truck manufacturers. You think about the Strait, and particularly from a fertilizer perspective, that doesn’t help. We already know that story. That story — I hate to say this — certainly looks like it’s going to be with us for a while,” Nicholson elaborated.
Between a rock and a hard place: Tight supplies, high prices
Since the Iran war started, the ag industry has grappled with fertilizer market shocks and growing concerns around crop protection availability, Nicholson said. European farmers are particularly feeling the pressure from fertilizer production because the region has reduced its urea and ammonia production due to environmental regulations, he noted.
As the war drags on, pre-cursors to fertilizers, like sulfuric acid, are making it hard to produce phosphate economically, Nicholson explained. In April this year, fertilizer giant Mosaic revealed a plan to reduce production from its South American division (Mosaic Fertilizantes) by a million tons due to high sulfur prices.
“You’ve got record high phosphate prices, and we know from history that if you have record prices, people tend to make good profits. But when you have sulfuric acid even higher, the margins for phosphate rock are negative, and so phosphate manufacturers are just saying, ‘I’m closing the plant because why am I going to keep running this at a negative margin,’” Nicholson elaborated.
On top of the Iran war, the Trump administration rolled out a fresh round of tariffs under Section 301 of the Trade Act of 1974 on July 23, adding further cost pressures to a variety of agricultural inputs. This comes nearly five months after the Supreme Court struck down the Trump administration’s use of International Emergency Economic Powers Act.
“Crop protection products have been okay, but we’re starting to see now the tariffs are back, that will probably ramp up the price a little bit. And it depends a lot on what China wants to do. Do they want to ship active ingredients to us or not? What price do they want to put on it? So, you’d have to think that maybe chemistry will also be up in ‘27, and we know that seed is as good as property taxes — they keep going up,” Nicholson noted.
U.S. soybeans face growing global competition
On the demand side, U.S. soybeans and other major commodities are remaining competitive, but Brazilian competition remains high. Additionally, questions remain about the U.S.’s relationship with China, with farmers unsure about what the two countries promised with soybean, Nicholson explained.
In June, China imported 12.08 million tons of soybeans from Brazil and 1.27 million from the U.S. for an increase of 13.7% and a decline of 20.6% from a year ago, respectively, according to data from China’s General Administration of Customs.
“We thought [the trade deal] was 12 million metric tons by the end of the calendar year. That didn’t happen. And then it was 25 million metrics tons for the next three years each, but we didn’t make the 20. And then all of a sudden, early this winter, it was ‘oh, there’s another 8 million tons [China] agreed to,’” Nicholson said.
There is “a lot of confusion about the volume that’s been agreed to, what’s the time periods agreed to, and did China really agree to this? The President said they did, but that’s the President saying that. That’s not Xi Jinping saying it,” he emphasized.
This comes as a number of crops are expecting good harvest, despite weather and El Niño concerns teeing up potential disruptions, Nicholson said. South and Southeast Asia “tend to get hurt hardest by El Nino,” but it is “not a big deal” for the U.S., in terms of impact on corn and soybean yields, he added.
“We’re not in the camp that we’re going to see record another record corn yield or bean yield for that matter [in 2025/26]. But I think that the potential that it could be pretty close is there. It’s going to be a good crop. Not dismissing some of the problems with too much water. That’s really been the biggest issue ─ just too much water in some parts of the you know the heart of the Corn Belt,” he elaborated.
Farmers could receive another $12 billion this year … and in 2027?
Tight farm margins in 2026 have raised the prospect of additional government assistance. The House of Representatives passed a $95 billion budget resolution on July 22 along party lines, which included $12 billion in additional farming assistance. This comes after the Trump administration provided $12 billion in assistance this year to farmers.
While the government assistance shores up balance sheets, the support creates an economic dilemma, where a large pool of money chases a tight supply, thus leading to inflation in the ag economy, Nicholson noted. Increasingly, farmers are frustrated with the reliance of government support, which is not changing the underlying issues impacting farming margins, he added.
The ad-hoc farmer assistance “is not solving the problem of these perpetual challenged margins or challenged profitability. And frankly, in our view, it’s probably making it worse,” Nicholson said.
He added, “When you talk to farmers, they’re a little frustrated with this as well. They would like to have a market to market to and not have to worry about ‘well, do I get a government payment to break even?”
