Strait of Hormuz

This graphic illustrates the major commodities impacted by the conflict in the Gulf and the closure of the Strait of Hormuz following the US-Israel invasion of Iran on February 28. The second-order effects will ripple through nearly every industry, as approximately 13% of all seaborne chemical trade transits this waterway. Natural gas, ammonia, and sulphur—the essential building blocks of fertilizer—are particularly vulnerable. Nitrogen, phosphate, potash, and sulphate prices have increased significantly over the last 20 days. This disruption poses a severe threat to an already strained global supply chain.

Chemical Production Affected in the Gulf

Illustration Source: Barron’s 20 Mar 26

U.S. Farmers Struggling

Some key takeaways from a recent article in Barrons titled, “U.S. Farmers Are Struggling. They Will Lose More in a Trade War, [according to Dan Basse, CEO of AgResource].”

1.     Declining U.S. Agricultural Dominance:

•  U.S. share in global agricultural trade dropped from 62% in 1979 to 11% today and the trade deficit is at a record $42 billion.

• Brazil now leads in soybean and corn exports, surpassing the U.S.

2.     Impact of Geopolitical Shifts and Trade Wars:

• The divide between G-7 countries and BRIC nations is altering trade patterns at the expense of U.S. farmers.

• China's pivot away from U.S. agricultural imports benefits Russia, Brazil, and Argentina.

• Potential retaliation from U.S. import tariffs on China, Mexico, Canada, and other trade partners.

3.     Economic Pressures on Farmers:

• Corn and soybean production costs are below current futures prices.  “Net farm income has dropped by 31% since 2022, marking the largest two-year decline on record.”

• High fertilizer and seed costs, further squeeze farmer profits.  Fertilizer costs continue to be affected by a volatile global supply chain and energy market.  Additionally, 30% of U.S. farmers rent their land.

• USDA data reports that 85 cents of every farm dollar goes to the middlemen (processing, packaging, and transportation).

• Beef producers benefit from record-high prices ($8.50/lb), partially supported by innovations in dairy-beef crossbreeding; “The first time the dairy industry is helping the beef industry get additional supply.”

Space Testing vs

Soil Testing

4.     Future of U.S. Agriculture:

• Enhanced understanding of soil and soil fertility should be a critical focus, leading to my favorite quote from the article:

“As I watch Elon Musk land spaceships, I think, we know more about what is 200 miles above our heads than what is two feet under our shoes.”  

Well said Dan!

#fertilizer #AgResource

(Source:  “U.S. Farmers Are Struggling. They Will Lose More in a Trade War, This Ag Expert Says”, Debbie Carlson, Barrons, 28 Nov 2024)