The Middle East conflict has pushed energy prices higher over the past couple of months, with elevated oil prices beginning to spill over into everyday expenses.
Oil has climbed by nearly 40% since the war started at the end of February, when the price hovered closer to $67 a barrel. Gas prices have followed, rising to over $4 per gallon in many areas, with diesel well over $5 per gallon. But fuel costs are not the only everyday household budget item to watch.
Roughly one-third of the world’s fertilizer moves through the Strait of Hormuz, and the months-long closure has raised concerns about supply. Farmers are warning of fertilizer shortages and price increases as the spring planting season gets underway.
How geopolitical tensions can impact fertilizer prices and farming
In a survey of 5,700 farmers, the American Farm Bureau Federation found that fertilizer affordability is becoming an issue within the farming industry. About 70% of farmers report they cannot afford the fertilizer they need, attributing the challenge to rising fertilizer and fuel costs.
Fertilizer is one of the largest operating costs for farmers, according to the USDA, Economic Research Service’s (ERS) Commodity Costs and Returns data, and energy prices play a key role in determining how much they pay for it.
Natural gas is a primary input in the production of nitrogen-based fertilizers like ammonia and urea, so when gas prices rise, production costs increase, and fertilizer prices can increase as well.
Higher oil prices can also drive prices up indirectly by increasing the cost of transporting and distributing fertilizer.
“Fertilizer sits upstream of the global food system, so when geopolitical disruptions hit energy markets or key shipping routes, the effects move into agriculture quickly,” said Hunter Swisher, CEO of Phospholutions, an agricultural technology company that focuses on creating more sustainable fertilizers.
“The impact is already playing out at the farm level,” Swisher said. “Growers are making real-time decisions this planting season based on higher and more volatile input costs.”
Agriculture Secretary Brooke Rollins said about 80% of farmers had already secured their fertilizer for this year’s crop last fall. She said efforts were underway to ensure the remaining farmers were being supported. Farmers told PBS recently that they’re concerned prices will stay elevated for a while.
“The reality is, we’re not breaking even,” one farmer told PBS. “We didn’t break even the last two years.”
All of this comes as the impacts of the U.S.-China trade war, including tariffs and retaliatory measures, have cost the agricultural industry billions of dollars since 2018.
What this means for your grocery bill and how to trim your costs
Higher operating costs for farmers and supply chain issues in the agricultural industry can indirectly affect food and grocery prices, though this likely won’t happen overnight.
In fact, the most recent CPI indicated that food prices were unchanged over the month. However, the food at home index did rise 1.9% over the 12 months ending in March, with the fruits and vegetables index increasing 4% — indicating that prices are indeed increasing and continued tensions could keep the momentum going.
Experts say it could be some time before Americans see the true impacts of the war on their grocery bills.
“This report shows just the initial impacts of the war, but more widespread impacts could be on the way in future reports,” said Angela Hanks, chief of policy programs at The Century Foundation and former Consumer Financial Protection Bureau official. “Potential shortages of petroleum, helium, and fertilizer threaten to drive higher prices on everything from dishwashers, to cars, to groceries.”
Shoppers are not at a total loss, though. There are ways to trim your food costs even as everyday goods become more expensive.
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Buy in bulk: If you have a larger family or there are nonperishable items you tend to use on a regular basis, buying items in bulk can help you save money over time. However, be sure to calculate the price-per-unit (that’s the total number of units divided by the cost of the item) to ensure that you’re actually getting a good deal.
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Use a rewards credit card: There are several rewards credit cards that offer cash back and bonuses for purchases made at supermarkets, as well as retailers, restaurants, gas stations, and more. Using a rewards card for grocery purchases can earn rewards on purchases you were planning to make anyway.
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Swap name brands for generic: Name-brand products don’t always guarantee a better quality product; however, you can almost always count on a higher price tag. One easy way to cut grocery costs is to opt for a generic version of an item instead for a fraction of the cost.
