Eastern Ontario farmers brace for rising costs from U.S.-Iran war

Farmers in eastern Ontario ar warning that rising fire and plant food costs due to the U.S.-Iran state of war could shortly drive up the price of locally grown food.

The U.S. Military has initiated a blockade across the Gulf of Oman and the Arabian Sea, targeting vessels travelling to and from Iran. As of Monday morning, ships transporting oil and fertilizer products between non-Iranian ports can still pass through the Strait of Hormuz, but ships linked to Iranian trade could be stopped, searched or turned back.

Some 11,000 kilometres away at Richmond Nursery in south Ottawa, fields of strawberries remain under cover but the greenhouse is alive with tomato seedlings and flowers that will be sold across the city.

Owner Peter Rofner secured his spring fertilizer at the end of last season, but said these global price currents could soon create a "pinch" for producers who have no room for compromise.

"You can’t fertilize less," Rofner said. "[And] the ground needs to be worked up in the spring, so it’s not like you can save on tractor fuel.”

Michael Aubé, president of grain marketing, storage and trucking company Rutters Elevators, has been watching commodity markets and grain orders from his office in Chesterville, Ont.

He said farmers in the area are still recovering from last year's drought, and now this.

"Our growing season is so tight that we can’t miss a beat," said Aubé, who also sells fertilizer. "Reduction in supply for only a couple of weeks can have a ripple effect of a couple of years, let alone two months."

Aubé said most farmers had already locked in their fertilizer orders, but some might have to alter their plans or switch to less nitrogen-intensive crops this year.

"They may switch to soybeans instead of corn to offset that sudden jump in inflated prices," he said.

Sylvain Lavoie, president of fertilizer supplier SynAgri, said the conflict hasn’t yet hampered the supply for eastern Canada, which gets most of its nitrogen fertilizer from the Mediterranean, the Caribbean and the U.S., but it could eventually push prices up amid a dwindling supply from the Persian Gulf.

"We are in a situation now that the risk is very high, not only for the importers, but the risk is also high for the growers," he said.

Leigh Anderson, a senior economist at Farm Credit Canada, said most regions have enough nitrogen fertilizer on hand to avoid shortages, though some shipments may be delayed later this month.

He said urea prices have climbed nearly 50 per cent since the start of the war.

"It made a tight situation on global supplies even worse," Anderson said. "About a third of global fertilizer trade goes through the Strait of Hormuz."

That can have a big impact on profitability, Anderson said, especially since fertilizer accounts for 20-25 per cent of the cost of growing some crops.

Anderson said some farmers may cut down on how much fertilizer they use, and may try to adapt by switching crops. He said the magnitude of the shift from corn to soy among North American farmers is a "wild card" that could eventually affect prices in the grocery store.

With diesel prices rising about 33 per cent since the war began to well over $2 a litre, the wider industry is already under pressure.

"Everything has wheels under it," Aubé noted. "Every article that we buy in, all our inputs, even our sales.… The tractors that we use to put the seed and the fertilizer, the sprays, that must account for at least 20 per cent of our expenses."

Coloured diesel used for farm equipment is already exempt from road taxes, but some farmers are facing fuel surcharges for transporting their goods.

CN Rail has added a surcharge for hauling bulk grain and fertilizers, based on U.S. On-highway diesel prices and calculated monthly.

"Like all transportation companies, CN is affected by fluctuations in fuel prices. To account for this variability, we apply a fuel surcharge to freight shipments,” the rail transport company said in a statement.

"It is a standard industry practice that has been in place for a long time and helps ensure rates remain fair and reflective of current operating costs."

Back at Richmond Nursery, Rofner is hoping Canadian consumers will keep this complex web of factors in mind when they see their grocery bills.

"Farmers are resilient people, but I think we need to be respected too because we've seen people that just don't respect the cost of our food," he said.

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