Rising input costs could impact yields, margins for North American grain farmers

Rising fertilizer and fuel costs stemming from the war in the Middle East are squeezing US farm margins, though the impact on corn and wheat prices has been muted so far as producers work through winter inventories, according to US and Canadian market participants.

The cost pressures could become more acute for the 2026-27 crop season if elevated input prices persist, potentially forcing farmers to reduce plantings or shift acreage to less input-intensive crops.

Corn farmers cut fertilizers use

According to an April 8 survey of farmers from the National Corn Growers Association, half of the farmers surveyed at that time said they wouldn't apply the full amount of fertilizers planned in the 2026 planting season, with 37% of the cases citing costs, 11% due to availability, and 2% because of drought.

Fundamentals have not changed in the first week of May, as a Colorado farmer said, "A high percentage of producers are definitely looking at using lower fertilizer amounts or trying to become more accurate with placement and usage".

The farmer added that nitrogen will have a major impact on yields if farmers reduce the fertilizer application, even though he believes that "corn varieties are more efficient at processing nitrogen in the plant and can produce the same yields at lower applied nitrogen amounts."

The NCGA said that 60% of farmers had fully secured their 2026 nitrogen needs. However, among those still needing sufficient supplies, roughly a quarter worried about availability.

Owen Niese, a farmer from Ohio and board member at the Ohio Corn and Wheat Organization, said that he bought his inputs a year in advance in the summer, nitrogen cost $315/ short ton, and now it is at least $100/st higher.

Platts, a part of S&P Global Energy, assessed Urea Ammonium Nitrate NOLA at $500/short tons the week ended May 8, up $177/st (about 55%) from $323/st the week ending Feb. 26, before the start of the war.

Corn futures for the harvest season have only increased by 6% over the same period, which could pressure farmers' crop margins. On May 8, the Chicago Board of Trade settled September (U) corn futures at $4.7765 per bushel, from $4.5275 per bushel on Feb. 26.

"As far as how that has affected my decision-making for this year, my crop cannot live without 70 to 80 gallons per acre of nitrogen, and that is just one input; the phosphate and potassium are out of control too," said Niese.

On the ground, farmers report a stark disconnect between official estimates and actual expenses. While US Department of Agriculture and NCGA data project a modest 3% annual increase in total production costs to $209.56/mt, producers say real-world inflation is at least 30% higher, led by diesel, fertilizers, equipment and insurance.

Nate Bair, another farmer from Ohio and board member at the Ohio Corn and Wheat Organization, identified diesel prices as the most pressing concern for the current planting season. However, he warned that fertilizer costs will become the critical issue for 2027, since purchases are typically made the previous summer, meaning decisions made in summer 2026 will determine next year's cost structure.

Wheat farmers dodge fertilizer crunch with early winter purchases

Wheat farmers in Canada shared a similar sentiment to their US counterparts, seeing minimal fertilizer constraints for the upcoming season. The majority of farmers purchased the fertilizer needed for their crops during the winter, before the Middle East war broke out in February 2026.

"It appears that a good portion of farmers bought their fertilizer prior to the price increases," a Canadian wheat trader said. "The question is if they will use it or just sell it and not put too much nitrogen this season."

The timing of winter purchases has insulated Canadian wheat economics from the immediate fertilizer cost inflation, though the decision to potentially reduce nitrogen applications carries risks. Adding nitrogen to the wheat crop helps to increase yields and overall crop quality, with a reduction in nitrogen application potentially impacting both.

Canadian wheat prices have seen minimal direct impact from fertilizer costs, with the 2026 crop largely shielded by pre-positioned inventories. Instead, weather concerns for US winter wheat and energy market rallies have driven a wheat futures rally, lifting flat prices for both Canadian and US wheat.

"A high percentage of producers have their supply locked in for the most part and will pull from supplies that are already in place across farm country," a US wheat and corn farmer said. "There are producers that are definitely looking at using lower fertilizer amounts or trying to become more accurate with placement and usage."

The real concern is for 2027 when farmers must replenish inventories for the next planting cycle, the farmer added. If fertilizer and fuel prices stay elevated, that season could see more significant impacts on margins and planting decisions for farmers.

Platts assessed Canada Western Red Spring Wheat 13.5% FOB Vancouver 30-45 days forward at $274.75/mt on May 7.