War in Iran is affecting Oregon farmers as oil and fertilizer prices rise

The U.S. and Israeli war against Iran is not just driving oil prices up. It’s doing the same for fertilizer. A third of the world’s supply of fertilizer passes through the Strait of Hormuz, which Iran still has largely blocked.

Woodburn farmer Jon Iverson grows tulips, grass seed, wheat, and grapes, among other crops. Molalla nursery owner Jim Gilbert grows fruiting plants, among others. They join us to share how these price hikes are affecting them. We also hear from Alice Morrison, the co-executive director of Friends of Family Farms, who tells us what she’s hearing from their small and midsized members.

Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.

Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. The U.S. and Israeli war against Iran is not just driving oil prices up. It’s doing the same for fertilizer. A third of the world’s supply of fertilizer passes through the Strait of Hormuz, which Iran has largely blockaded. These price increases could have ripple effects throughout the economy, but we’re gonna spend some time right now getting different perspectives on what this means for Oregon farmers. We start with Jon Iverson. He’s a member of the third generation at Iverson Family Farms in Woodburn. Good to have you on the show.

Jon Iverson: Yeah, thanks for having me, Dave.

Miller: Can you give us a sense for the variety of crops that you grow there?

Iverson: We’ve grown a lot of different crops over the years. We used to grow a lot of vegetables: sweet corn, green beans, but we’ve shifted more to grass seed crops – tall fescue, perennial ryegrass for lawns, and then a lot of cover crop seeds, so clovers and a little bit of hairy vetch that will be used for cover cropping, mainly in the Midwest.

Miller: How much have you been affected by fertilizer price increases?

Iverson: Luckily so far, not much. I mean, the majority of our fertilizer’s gone on this last month as things are starting to wake up and starting to grow. My biggest concern is that if things don’t resolve quickly, those suppliers will have to buy fertilizer at some point again to refill their barns and that price could be a lot higher. Puts them in uncertainty. Do they buy now, thinking the price is going to go up further, or do they hold off thinking the price is going to come down?

It’s just a lot of uncertainty in the market makes it difficult to plan what you’re going to do, especially with the majority of the crop prices are down right now, so farmers are already feeling squeezed. It just adds some to a lot of anxiety of how you’re going to get through this year.

Miller: So, if I understand you correctly, you’re in slightly better shape right now because you’d already bought the fertilizer, most of what you need to use for this year you’ve already bought and have already applied.

Iverson: Correct. Again, the more crops we farm, we were fertilizing at the end of February, are starting to wake up, but we will do some fertilizing here in a month or two, and that concern of that price is going to be up, it’s definitely something we’re watching.

Miller: What about diesel or other fuel?

Iverson: That is the big, big factor, seeing what diesel prices are right now, that hurts the whole economy. Everything we buy is going to come on a truck. Our equipment all runs on diesel, and then shipping it back to the consumer again, it’s going to be hauled on a truck with diesel. Having a high diesel price really is gonna put the squeeze on us.

I think John F. Kennedy said it, the farmer’s the only person that buys their inputs at retail prices, sells their crops at wholesale prices, and pays the freight both ways. And when diesel goes up, that freight bill gets pretty big.

Miller: You know, I was interested in what you were saying earlier about people who are going to be having to buy fertilizer in the coming months and making some bets. It seems like there’s a ton of bets that you have to consider, about when to accept a price for your crops, when to buy in bulk, whether it’s fuel or fertilizer, guessing whether a bad price now might be better than a really bad price months from now. How do you think about looking at the future and deciding right now what might make the most sense?

Iverson: That’s something very difficult, something I’m looking at every day. I read a market report, I get an email every day and I follow up with what’s happening in the world market. I will say the one good thing that kind of happened when this conflict went on is commodity prices did increase. They’ve been horrendously low, prices that we haven’t seen since the ‘70s on a lot of crops, and there’s been a little bump here with uncertainty.

Now, is that going to be offset by higher diesel prices, higher fertilizer prices? I mean, it very well could be. So there’s a lot of uncertainty going forward, especially, like I said, a lot of farmers in the U.S. right now are already dealing with pretty tight margins, even negative margins in a lot of their crops. And the uncertainty of having higher diesel, higher fertilizer definitely has got guys pretty concerned.

Miller: Have you seen higher prices for what you’re selling as well, for various seeds?

Iverson: No, we’re actually down quite a bit. The last three years prices have come down quite a bit, and so that’s what’s making it very difficult. Usually there’s a crop in the valley here that we can actually do pretty well, and it just seems like across the board things are down at the moment. We’re definitely feeling the squeeze right now trying to figure out how you get through this season, what do you do with the ground, what do you plant when, like I said, markets just don’t look good on about anything.

Miller: So unlike an orchardist who is more or less stuck with what they have in the ground for a higher number of years, my guess is you have a little bit more flexibility year to year in what you can put in the ground. Are you thinking about changing what you might grow next year based on what you’re seeing today?

Iverson: Yeah, absolutely. Again, that’s something I think about or look at every single day. We’ve shifted some of our crops, like I mentioned, to crops that require a little bit less inputs. Like the clovers I’m growing for cover crop seed, the hairy vetch, they fix their own nitrogen, so I don’t have to go out and fertilize those crops. I know friends in the Midwest, this is one good thing with this is they’re looking at more cover cropping of, how do I get natural nitrogen instead of applying fertilizer to try to cut costs and increase yields and improve soil health? So high prices do force you to look for alternatives, but again, when you already feel like you’ve closed as tight as you can go and and you’re seeing these prices go up, it definitely doesn’t help the anxiety of trying to make it to next year.

Miller: Jon, thanks very much. Jon Iverson is a third generation farmer at Iverson Family Farms in Woodburn. If you’re just tuning in, we’re talking right now about higher prices for fuel and for fertilizer and what they mean for Oregon farmers.

Jim Gilbert joins us now. He is the owner of Northwoods Nursery in Molalla. It’s been around since 1979. They grow an enormous variety of fruiting trees and shrubs and vines. Jim, welcome to the show.

Jim Gilbert: Good afternoon, Dave. Nice to be with you.

Miller: It’s great to have you on. Can you give us a sense for just what you grow there?

Gilbert: Yes, we grow what I call common, unusual and unusual fruiting plants, and primarily ones that do well in this climate. We do some breeding work out here. We’re always focused on something that will do well in the Pacific Northwest because we have a pretty unique climate, everything from apples and pears, to peaches, persimmons, figs, and some things you probably never heard of.

Miller: When I looked on your website, there definitely were some things I’d never heard of, and I have a lot of questions that probably will have to wait for another day, because the big reason that we called you and Jon up is to talk instead about the economics of farming right now. How much have your costs gone up?

Gilbert: Well, at this moment, our costs are not too bad. We, as with Jon, purchased our fertilizer in the winter, so that particular cost did not change, although we’re very concerned about what’s gonna happen for next year. Our main concern is the shipping part of it. This is our shipping season, a lot of our plants are going away from the state. About 90% of Oregon’s nursery stock is shipped outside the state, so obviously the price of diesel, going up so much, we’re worried it’s gonna be a disincentive for our out-of-state customers.

So far, everything seems to be OK, but one of the things that we’re focused on a lot here is trying to find alternatives to fossil fuel, and we’ve been working on electrification a lot. We have an industrial cart that we use to move our trailers around the nursery with. It’s electric so we don’t have to use any diesel with it. We’ve been driving an electric car for several years. That’s, I think, the future, and we’re trying to do our best to move that way.

Miller: But as you’re saying, that is a local thing that you can do to electrify your work on the farm, at the nursery, and to become less reliant on fossil fuels. But overall, our transportation system is incredibly reliant on those fossil fuels and the higher fuel cost right now means higher shipping costs. How much of that increase do you think you can pass on to your customers? How much more do you think they’re willing to pay to get their persimmon sapling?

Gilbert: That’s a really good question. You know, thankfully what we grow is fairly unique and unusual, and we sort of carved out a niche for these more unusual types of fruits. So there seems to be a good demand for them, and one of the interesting factors, which it’s a sort of sad part of this, is that when things start getting tight in our economy, in some ways the demand for the plants goes up because people start thinking about wanting to grow more of their own food.

Of course, we may have to do some incentives and do different things to deal with this. I was just, for example, today… Another interesting thing is I checked out the price of biodiesel today, just because that’s something we try to use here when we can. It’s about $1 less a gallon than regular diesel right now for B99.

Miller: Because that’s a domestic product and hasn’t yet followed the straight diesel trajectory?

Gilbert: Yes, I’m sure that the soybean farmers that grow soybeans to make the biodiesel, eventually their fertilizer costs are going to go up and that’s going to be a bigger problem. But it is an interesting alternative. I think one of the small silver linings to all this is the incentive for innovation, and this definitely will push that because getting away from fossil fuels, I think, is the wave of the future.

And you know, even for large trucks, there’s a couple of large electric buses that run back and forth between Bellingham and Seattle and they’re all electric. So I think that there is definitely some small benefit to this problem.

Miller: What are your plans to weather this particular storm?

Gilbert: Well, we’re obviously watching what we do and making sure that the things we do are most efficient, as efficient as we can do them. It’s tough on the fertilizer issue. Jon was talking about legumes that you can plant to produce nitrogen in the soil. Most of our plants are produced in pots. So we use an artificial fertilizer, slow-release artificial fertilizer, and there’s no really significant way we’ve discovered to do that using alternative types, although we’re gonna probably be looking at that even more now.

Miller: Jim, thanks very much.

Gilbert: You’re very welcome.

Miller: Jim Gilbert is the owner of Northwoods Nursery in Molalla. He also produced a documentary on the history of the state’s land use system. You can watch it for free at anoregonstory.com.

For one more perspective on the agricultural effects of rising fuel and fertilizer prices, I’m joined now by Alice Morrison. She is the co-executive director of Friends of Family Farms. Alice, welcome to the show.

Alice Morrison: Hi, thank you very much for having me.

Miller: It’s great to have you on. Can you give us a sense for the kinds of operations that fall under your umbrella at Friends of Family Farmers?

Morrison: Yes. Friends of Family Farmers represents about 1,600 farms across the state, and we define our members as small and mid-sized, highly diversified and local market farmers. More than 90% of the folks that we work with have a direct-to-consumer sales outlet as part of their business model. So, the folks you see at farmers’ markets who have CSAs, who are doing farm stands, or any kind of operation where the person who’s eating the food is buying it directly from the farmer.

Miller: It’s a fair amount of geographic and operational diversity, but also some similarities in terms of distribution. Fewer middlemen, I guess this is a short way to put it, for a lot of the people who make up your organization. What have you been hearing from your members over the last month or so?

Morrison: I think that I can echo some of what the farmers on the call have already shared, that a lot of my members told me that they are not feeling these fertilizer price increases right away because they made bulk purchases over the winter, but there are some worries that this is going to be a delayed-release effect.

I think that folks who are interested in the community food system might brace themselves that these price increases could be felt later on in the season as folks are having to make those calculations that were talked about, about when to purchase fertilizer, when the costs are going to come up and down. And a couple of the farmers that I talked to shared concerns that once those prices go up and the fertilizer companies see that that price can be absorbed by their customer, that there would not be an incentive for it to go all the way back down or down at all when those prices drop. So some of my farmers are worried that these price increases will become permanent.

Miller: Oh, so even if there is some kind of diplomatic resolution to the current war in the coming weeks or months, the concern you’re hearing from some of your farmers is that the price increases that are either baked in or on the way could last much longer?

Morrison: Yes, and I think that that is something that they’ve been absorbing for a long time. Since COVID, prices of everything have risen year over year. I think all of the farmers in my network would agree that costs of inputs have been a climbing concern for quite a while now, and you can only absorb that to a certain extent, even in a direct-to-consumer market where you’re making a relationship with that person who’s eating the food.

There’s only so much price increase that folks can take, even if they’re not participating in commodity markets, where those prices are set outside of the farmer’s control.

When you’re in a market at all, whether that’s with a person or another company, there’s always a ceiling. And some of my farmers are telling me that they’ve been trying to absorb those costs. They know they can’t pass all of that cost to their customer, and they’re reaching that point where they’re just having diminishing returns when they can’t increase the price anymore.

Miller: I want to turn to the fuel piece in particular, because if a lot of your members have various versions of direct-to-consumer models, whether it’s CSAs, you know, community supported agriculture with delivery, say, to a couple of places in a nearby city or perhaps farm stands.

But for the CSAs in particular, I imagine that means a lot of driving, driving smaller amounts of product a couple of times a week as opposed to a big pickup where you’d have maybe more efficiency in terms of fuel. So what does that mean for your farmers as fuel prices skyrocket?

Morrison: Right, the fuel prices have been felt more acutely than the fertilizer price increases by the folks in my network. And that is spot on, that they have a sales model that means they are going where their customer is a lot of the time. And that means more driving in that aspect of their business, and they are responsible for making those markets. They’re going to multiple farmers’ markets a week, up and down the Willamette Valley in some cases. They’re trying to consolidate CSA pickup and drop off so that folks are coming to them and sharing the burden a little bit.

But although many of my farmers don’t have any practice requirements – we don’t have to be certified organic or certified any particular thing to work with us – many of my farmers have reduced fuel costs in other parts of their operation by implementing regenerative, sustainable or biodynamic processes. But when you’re making your own market, you are responsible for those transportation costs. So if fuel prices double, then the cost of getting to market doubles as well.

Miller: Alice, thanks very much.

Morrison: Thank you.

Miller: Alice Morrison is co-executive director of Friends of Family Farmers.

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