Tom Murphy, a first-generation farmer near Chesterton, in January paid around $2.56 for a gallon of diesel to operate his tractors and combines. Today, that same gallon costs him about $5.23 — more than double from six months ago.
To make up for the higher costs, Murphy has cut back on using his tractor to spray fertilizer on the more than 4,000 acres of corn and soybeans on his farm in Northwest Indiana.
“You start burning two gallons of diesel an acre, it adds up quick,” he said. “You have to think for an extra few minutes before you decide you’re going to do something.”
Slumping corn and soybean prices this year already threatened to hit farmers’ bank accounts. Now, profit margins have become even slimmer after diesel and fertilizer prices skyrocketed in March following the U.S.-Israel attack on Iran.
From January to June, the price for anhydrous ammonia — a fertilizer critical for corn and wheat — jumped from $837 to $1,133, marking a 35% increase. Another essential fertilizer, liquid nitrogen, increased by nearly 30%.
Farmers who purchased fertilizer after the price spike now face the possibility they could earn next to zero from this year’s harvest, and some could end up losing money, explained Michael Langemeier, director of Purdue University’s Center for Commercial Agriculture.
To break even, farmers buying fertilizer and diesel right now need to earn around $5.25 for a bushel of corn and about $11.60 for soybeans, according to Langemeier. This week, in Indiana, rates on average hovered around $4.09 for corn and $11.19 for soybeans.
“It looked like a tough profit year anyway, and then this just added insult to injury,” he said.
According to Purdue University’s Ag Economy Barometer, which surveys around 400 agricultural producers each month, 51% said the cost of inputs such as fuel and fertilizer was their top concern in May. That’s the highest percentage since the survey began in 2016.
Brian Bays, a crop farmer near Anderson, said his farm purchased all its fertilizer and diesel last year and avoided the higher prices. But had they bought anhydrous ammonia now, it would have cost an extra $60,000.
Even so, Bays isn’t planning on earning much income this year as a large global supply of corn and soybeans keeps grain prices low.
“They’re really not at profitable levels,” he said. “They’re kind of at survival levels.”
Bays anticipates an even more difficult financial year ahead if negotiations between the U.S. and Iran to end the war drag on through the summer and shipping disruptions continue in the Strait of Hormuz. Much of the world’s fuel and raw ingredients for fertilizer flow through the seaway.
If prices remain high into the fall, Bays said, his farm will have to make some “serious decisions” whether to eat the extra expense or cut back on the amount of fertilizer they use, which could impact the health of the crop.
“There’s just total uncertainty in terms of supply and pricing,” he said. “I don’t have a crystal ball that can tell us what’s going to happen, but we are concerned about costs next year.”
Bays isn’t alone — nearly two-thirds of growers surveyed by Purdue’s Ag Economy Barometer also reported they expect the Iran war to have a negative or very negative impact on their farm’s net income.
Murphy, the Chesterton farmer, says the war, combined with other U.S. policies on tariffs and trade, is hurting his operation.
“If it’s not one thing kicking you in the knee, it’s another,” he said.
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FPI News reporter Carson Gerber covers pressing issues throughout the state and how local communities are tackling those challenges. Reach him at 756-204-4250 or carson.gerber@fpinews.org.
