70% Of Farmers Can't Afford To Grow All Their Crops

The War in Iran and the impact on oil and energy have continued. Gas hit $4.12 a gallon on Monday, April 27. As The Hill wrote, it's the highest price since the beginning of combat. National gas prices, all formulations, are worse than the publication wrote. Other than the $5 per gallon price in June 13, 2022, it's the highest price since August 1990, according to data from the U.S. Energy Information Administration, as this graph from the Federal Reserve Bank of St. Louis below shows. It could also get worse, not only creeping up toward that 2022 price, but rise to what the cost used to be given the impacts of inflation over time, like the following version of the graph, which shows prices adjusted for inflation, specifically the part that tracks energy costs. Even with the current higher cost, in real terms after inflation, it's more like returning to the prices of 30 years ago. But it still hurts consumers. Something that will likely hurt much more is the immediate future of food prices, because like gas, they depend on oil prices. Modern nitrogen-based fertilizers are strongly connected to oil. When oil prices rise, so do fertilizer prices and, as a result, the price of food. There are organic forms of fertilizers, but the scaled-up majority in the U.S. are the ones connected to oil. The conflict in the Middle East has had a strong impact on the price and availability of oil. With all the uncertainty in processes to bring some semblance of peace back to the region, both Brent and WTI crudes have risen in price again. As of April 28, May futures for Brent were $112.2 per barrel, and WTI was $100.4. Currently delivered prices can be higher. The result is wreaking havoc on farmers. An agricultural lobbying group, the American Farm Bureau Federation, ran a survey and found that 70% of farmers couldn't afford all the fertilizer they needed. "Fertilizer pre-booking rates varied significantly by region, with just 19% of Southern producers reporting fertilizer purchases secured ahead of the season, compared to 30% in the Northeast, 31% in the West and 67% in the Midwest, reflecting differences in planting decision timelines and exposure to recent price increases," the AFBF wrote. Farm diesel prices, which fuel the heavy machinery used in the industry (other than small-scale farms that don't produce the majority of food crops in the country) are up 46% since the end of February, according to the organizations. Things were already difficult for farmers. According to the USDA Economic Research Service, the total 2026 net farm income forecast is $158.5 billion. While that is a $4.6 billion or 3.0% increase compared to 2025 in nominal terms, when adjusted for inflation, it's a $1.7 billion or 1.1% increase. Net cash farm income includes cash receipts from farming and cash farm-related income (including federal government payments) minus cash expenses. It doesn't include noncash items, including inventory changes, economic depreciation, and gross imputed rental income of operator dwellings. The average net cash farm income is forecast to increase 18.7% from 2025 to $135,000 per farm in nominal terms. Farm businesses are farms with annual gross cash farm income (GCFI), or annual income before expenses, of at least $350,000, or operations with less than $350,000 in annual GCFI but where farming is the operator's primary occupation. Farm households receive farm and off-farm sources of income. Median farm income is forecast at -$1,498 for 2025 and will increase to $1,161 in 2026. An increase by losing less. The real money for the median farmer is from off-farm income -- $92,123 for 2025 and forecast to reach $92,815 after inflation in 2026. Below is a chart of farm household incomes. Over the last five years, cash receipts for crops have been falling, according to the AFBF. Production costs have been rising. If farmers can't afford all the fertilizer they need, they will likely produce fewer crops. Reduce supply while demand stays high. There are ways to cut all sorts of costs, but food is a staple. People can't excise it from their budgets. Prices may seem normal for a while, but planting season is now. Market shocks will come later in the year. So will the impact on inflation.