Farmers have been living through an on again/off again tariff environment – deadlines shift, rates change, and counterparties hesitate while they wait for the “final” rules. That policy volatility matters because it changes the economics of export demand, imported inputs, and equipment pricing, but just as importantly it changes confidence: when businesses can’t model landed costs or forward sales with conviction, they delay commitments and conserve cash.

Trade policy still matters, but it has been overtaken by a combination of energy volatility, logistics disruption, and weather stress, all interacting at once.

The Iran conflict has shifted from “shock” to “managed risk” — but volatility remains

The Middle East conflict triggered what the International Energy Agency has described as the largest oil supply disruption in history, driven by Iran’s effective closure of the Strait of Hormuz in March. As of late April, the Strait of Hormuz is technically open again, however shipping remains constrained and uneven. Vessel traffic is still well below pre conflict norms, and insurers and charterers continue to price in disruption risk. 

Oil markets have responded accordingly. Crude prices have come off their early April highs but remain structurally elevated and volatile, with Brent trading well above pre war levels and the EIA revising its 2026 price outlook sharply higher. 

For agriculture, the key takeaway is energy markets are now operating with a persistent geopolitical risk premium.

Rising fuel prices are now a direct, immediate margin pressure. Fuel is not an abstract macro input for farms – it hits immediately through fieldwork, irrigation, drying, and freight. Since early March, the U.S. on highway diesel price has surged from the mid $3 range to over $5.40 per gallon nationally, one of the fastest spikes since 2022. 

That increase is already flowing through:

• Fuel surcharges on trucking and rail, compressing delivered prices and widening basis.
• Higher custom rates and contract repricing, often with much shorter quote windows.
• Working capital strain, as suppliers demand quicker payment or impose variable surcharges.

The key issue isn’t just “high diesel,” but volatility. Rapid moves leave little time for crop prices or contract terms to adjust, meaning cost pressure often hits before revenue can respond. 

Tariffs still matter — but the rules of the game have changed

The core tariff issue remains uncertainty itself, which becomes a cost. Producers and agribusinesses can often adapt to a known tariff regime, but they struggle when timelines, authorities, and retaliation risk shift mid cycle. Historically, retaliation has concentrated in export heavy commodities and producing states, with USDA estimating earlier tariff rounds reduced U.S. agricultural exports by more than $13 billion annually.

What has changed materially is the legal footing of recent U.S. tariffs.

In February 2026, the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA), ruling that the statute does not authorize the President to levy tariffs. The decision invalidated the broad “reciprocal” and emergency tariffs imposed in 2025 and has already triggered a large scale refund process through U.S. Customs. 

From an agribusiness perspective, the Supreme Court ruling reduces one layer of uncertainty but does not eliminate retaliation risk, particularly as new tariff tools are deployed. 

Fertilizer: availability risk joins price risk

Fertilizer remains tightly linked to the same energy and shipping dynamics. During the peak of the conflict, Hormuz traffic fell from more than 130 vessels per day to single digits, disrupting flows of oil, LNG, and fertilizer feedstocks. Analysts estimate roughly a quarter of global nitrogen fertilizer exports normally transit the Strait, making the region a critical choke point. 

Even with partial reopening:

• Natural gas prices remain elevated, raising global nitrogen production costs.
• Fertilizer markets are pricing availability and timing risk, not just headline price.
• Producers face the prospect of higher costs and less flexibility around application windows.

This is fundamentally different from a normal tariff cycle: tariffs reshape trade flows, while fertilizer disruption threatens whether product is available when it is needed.

Drought adds stress and uncertainty

Layered on top of trade and energy issues is renewed drought stress across much of the West and South. As of mid April, more than half of the region is classified as abnormally dry to having severe drought, with meaningful acreage of wheat, hay, and corn already affected. Major cattle producing regions are also under drought conditions ranging from Moderate to Extreme. 

Key implications:

• Irrigation dependent operations face higher energy demand just as power and fuel costs rise.
• Water availability uncertainty compounds yield risk and complicate forward planning.
• For lenders and counterparties, weather risk now reinforces cost risk, rather than offsetting it.

The reconciliation law still helps – but it’s a shock absorber, not a catalyst

The 2025 reconciliation package meaningfully strengthened the farm safety net, with expanded ARC/PLC support, crop insurance provisions, and dairy programs. Those tools matter more in a world where input costs and logistics are moving faster than revenues.

But in the current environment, they should be viewed as resilience support, not expansion fuel:

• Program payments may soften revenue declines but won’t offset sudden diesel or fertilizer spikes.
• Stronger safety nets can support borrowing capacity if cash flow coverage is held under stressed assumptions.

The defining feature of the current environment is interaction. Tariff risk affects demand and pricing power; energy shocks raise the cost of producing and moving the crop; fertilizer constraints affect both cost and timing; drought tightens margins further in specific regions.

The practical response is to move beyond single variable planning and toward volatility planning:

• Stress test fuel, fertilizer, and freight together.
• Protect liquidity and working capital.
• Revisit procurement, contracting, and logistics assumptions.
• Tie capital decisions to demonstrable reductions in energy and logistics exposure.

With strategic reserves deployed, the Strait partially reopened, and the farm safety net strengthened, buffers do exist. But they work best for producers and agribusinesses that actively model uncertainty and preserve flexibility – rather than waiting for any one risk factor to resolve.

Despite elevated uncertainty, agriculture remains fundamentally resilient. Energy markets are stabilizing, policy risks are becoming clearer, and the farm safety net provides meaningful support during periods of repricing. Producers who focus on liquidity, efficiency, and flexibility today will be best positioned to take advantage of improving conditions when volatility subsides. History suggests that agriculture adapts – and often strengthens – through periods like this.