Spillover Effects of Iran Attack?

The effects of the Middle Eastern conflict on energy and fertilizer markets have been well documented. Higher fuel and fertilizer prices and potential shortages have garnered heightened scrutiny because they are the most immediate and acute. However, the conflict could result in other potential impacts on agriculture. This week Tidbits explores different scenarios on how the conflict could affect the markets for corn, soybeans, and cattle. Please note, the exercise is not projections, merely speculation. Much depends on rapidly evolving events in the Middle East, how long the conflict lasts, and responses from elsewhere in the world.  

Futures prices for corn and soybean are higher today when compared to the conflict’s beginning. Higher energy prices and uncertainty pushed commodity prices upward. Several factors, though, will influence prices from here forward. Rising fertilizer prices and potential fertilizer shortages have raised speculation farmers might move acres out of corn, a more fertilizer intensive crop, to soybeans or other crops. Shifts, though, will likely be tempered as many farmers have already secured their fertilizer needs. A social media survey indicated 67% of farmers had 75% or more of their fertilizer needs secured while 16% had less than 25% of their needs lined up. Still, failure to deliver on fertilizer contracts by suppliers or supply shortages, if they materialize, could change plans. Corn acres in Nebraska last year more than doubled soybean acres. So even if shifting does occur, corn will still predominate the state. But to the extent changes occur nationwide, fewer corn acres could be supportive of corn prices and pressure soybean prices.

Charlie Bilello, a financial and market analyst, reported last week the average price of gasoline in the U.S. had spiked 30% over the last month, the biggest one-month spike in 30 years. Higher gasoline prices, if they continue, will undoubtedly cut down on summer travel, meaning less gasoline and less ethanol consumed. Kevin Van Trump last week noted ethanol production fell 33,000 barrels per day, the lowest seen in recent weeks. This could be evidence of slackening gasoline demand. Unless ethanol exports make up for the slack, less ethanol consumption could reduce the demand for corn putting a damper on corn prices. At the same time, higher diesel prices could mean renewable diesel is more attractive relative to conventional diesel. As such, the demand for soybean oil could rise offering support for soybean prices.

Higher gasoline prices will also cut into consumers’ discretionary spending. The more consumers spend at the pump, the less they will have to spend on other items like beef. Research has shown that beef demand is increasingly sensitive to overall macroeconomic conditions and consumer willingness to spend. Consumer expenditures are what ultimately determine the size of the pie of dollars available for participants in the beef supply chain, including feeders and cow-calf producers. Demand for beef has been incredibly strong in recent years, but a slowing economy and financial pinch for consumers might dampen demand which could dampen cattle prices.

Finally, the conflict portends of higher interest rates. Coming into 2026, financial markets were pricing in two rate cuts for the year. Not anymore. Now the market is pricing in one cut this year and one next. The reason—the prospect of higher inflation due to higher energy costs. The Kansas City Federal Reserve says average interest rates on farm loans have declined to around 7.5% from 2023 peaks but remain above the 10-year average. The Federal Reserve Open Markets Committee last week kept rates the same at 3.50%-3.75%. If the higher inflation is more than transitory, look for higher interest rates. But some observers are making the argument rates could fall if the economy stumbles. Meaning the Federal Reserve would place more emphasis on boosting the economy rather than worrying about inflation.

The above discussion doesn’t offer guidance on the which way the impacts from the Middle East conflict could fall for agriculture. Suffice it to say, the impacts will be many and varied. Producers should monitor the situation closely and adapt as best as they can.

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