By Mike Krueger*
Market volatility went through the roof with the U.S./Israeli war in Iran. Energy prices soared when Iran blocked shipping through the Straits of Hormuz. Approximately 20% of the world’s crude oil flows through these Straits.
Iran is the biggest single supplier of oil to China. Obviously, there is a lot at stake at this tiny geographical check-point. Crude oil prices doubled briefly in the first two weeks of the Iran conflict, going from $60/barrel before the war to touching $120 and then quickly retreating to just below $90 on the hope the war would end quickly and the shipping lanes re-open.
That is all highly speculative as of this article’s writing during the second week of March.
The super rally in energy markets dragged agricultural markets sharply higher as well on the connection between energy and biofuels markets. May soybean futures traded at $12/bu for the first time in 22 months. Soy oil futures traded to nearly 70 cents/lb.
December corn futures almost made it back to $5/bu, a four-month high. Wheat also traded at the highest level in almost two years. Ag prices quickly retreated when crude oil backed off. The trouble is that no one knows for certain how and when the flow of crude oil will return to normal. That should mean more volatility lies ahead.
A residual impact of the closure of the Straits of Hormuz is that about 30% of the world’s fertilizer also passes through this bottleneck. World fertilizer prices have soared as well. The bulk of fertilizer from the Middle East is urea (nitrogen). Urea prices in some markets rose as much as 40 to 50%. This should not materially affect the cost or availability of urea in the U.S. and Canada. Most suppliers had their spring inventory in place before the conflict in Iran started. Some surveys also indicate that farmers had most of their spring urea needs booked before prices rose.
The USDA will release the planting intentions numbers on March 31. The strong opinion among analysts has been that U.S. farmers will plant three to four million more acres of soybeans and three to four million fewer acres of corn. The events in the Middle East could push even more acres to soybean because of the sharp rally in soybean prices. High urea prices could also pull more acres away from corn. Corn is the primary consumer of urea. Wheat acres are expected to decline, and sunflower acres should increase.
U.S. oil sunflower acres nearly doubled in 2025 from 2024. Acres should increase again this year based on strong prices and a very high crop insurance price guaranty.
New crop high-oleic prices are $23/cwt. Add a 10% premium for 45% oil content and the price becomes $25/cwt. That’s among the highest new-crop prices ever. The crop insurance guaranty has been established at $29.40, which is up 22% from last year.
Stats Canada recently released their planting intentions estimates. They forecasted a light decline in wheat acres (1.1%) and a slight increase in canola acres (1%). These changes should grow, based on the markets’ recent action.
Brazil is well past the 50% harvested mark on their soybean crop. It is another big one, likely setting a new record at 180 million metric tons (MMT) or more. The March USDA WASDE report pegged the crop at 180 MMTs, unchanged from their February guess.
In fact, the USDA made almost no changes to any of their supply and demand numbers. U.S. wheat, corn and soybean ending stocks estimates were unchanged from February.
Argentina’s corn and soybean production estimates were reduced slightly. Argentina is currently projected to export a record amount of wheat during this marketing year.
Price direction going forward will obviously hinge on developments across the Middle East (Iran) and any significant changes in the Russia-Ukraine war. Shipping disruptions will be important, especially as they impact energy prices. And then the focus will be on the weather across the Northern Hemisphere this new growing season.
* Mike Krueger founded The Money Farm, and is now a senior analyst with World Perspectives, a Washington, D.C.-based consulting company. While the information in this article is believed to be reliable, marketing involves risk, and the author and The Sunflower assume no responsibility for its use.