Energy crisis slams US farmers

0:00Across the American corn belt, farmers are getting ready for the spring planting season. It's a familiar rhythm this time of year to plant soybeans and corn farmers have to finish preparing the soil, spreading fertilizer on fields, and making sure their equipment is ready. But what they weren't quite ready for was a war in the Middle East driving up their costs. Scott Gaffner, a farmer in Greensville, Illinois, has been keeping track and a call to his supply cooperative to ask for fertilizer pricing left him stunned at how quickly the prices were moving. He wrote the figures down for that day. And so we called, and his statement to me was this, he goes, you know, 20 minutes ago on Anhydrous ammonia, it would have been $970. He said, but now it's going to be $1,020. For that same commodity, it changed within a 20 minute period of me calling him this morning before you got here. The American Midwest may be 10,000 kilometers from the Middle East, but farmers here are taking an economic hit from the war there.

1:01The closure of the Strait of Horwuss and spiraling attacks on energy infrastructure have driven up diesel and fertilizer costs. The waterway carries a fifth of the world's oil and a third of its fertilizer. Most farmers were actually able to lock in their fertilizer orders before the war started, but they're already looking ahead to what could be a longer period of higher input prices that could squeeze their margins for years to come. It's extremely difficult to have a lot of uncertainties because you always want to kind of know what you need to do as far as what crops you need to produce, what the prices are going to be, what your input prices are going to be. And the problem lately, and as we're talking about with the conflict with Iran and the shedding down of the straits of Harmoos, it affects everybody. The longer this goes on, it will start to affect us more. A seven-hour drive away in Hampton, Iowa, April Hems is preparing her farm for the planting season, too. To her, this current energy and supply shock is just the latest in a string of crises for farmers.

2:03We used to say, what's the black swan event? I go, there's no more blood, they're all black swans now, so I'm just looking for a white swan somewhere to raise the flag. US soybean exports to China until last year's trade war, the number one buyer of US soybeans have yet to fully rebound. Record harvests worldwide, meant commodity prices were pushed down, and tariffs on imports farmers need, whether on chemicals or on equipment, hit budgets, too. The effects of the war in the Middle East are further compounding an already difficult cost situation. Our commodity prices really haven't kept up with inflation, with the price of our inputs. So our margins are very, very small. So what we're doing now is just, you know, you watch the markets and plan as much as we can. And if we have to sell, you know, we have to sell even at a loss because, you know, we'll have another crop coming on and need room in the bins. So that, you know, that's farming, you just hopefully your bankers understands and sticks

3:07with you. In these parts, farmers make up a close-knit community. A five-minute drive takes April to fellow farmer Mark Guy. Their families have been friends for generations. Mark Guy has some complicated accounting ahead of him as well. Well, the week before the war started, I did a fuel inventory and figured out how much I would need to buy and was on the verge of calling my fuel broker, and I just didn't get to it. So that little mistake was going to end up costing me substantially. I believe the fuel I will need to buy this spring will be in the 30% higher than before the war started. And anytime farmers plant, it requires a lot of fuel and how soon prices will drop remains uncertain. We have two planters like this and tillage tractors, fertilizer application tractors. We will burn, you know, 300 gallons a day, maybe up to 500 when we have all those machines

4:14in operation. And that spring work season will go on for, you know, a month, not obviously not every day is fit to run that amount of equipment, all the tractors. But gosh, I'd have to do some math to think how many thousand gallons of fuel will use this spring, but it's substantial. Across the Midwest, farmers are calculating how much longer they can absorb the cost of decisions made in Washington. Like many here in this largely conservative farming area, Scott Gaffner is a supporter of President Trump, but says patience is wearing thin among the farmers around him. We may look at this in a year and say, you know what, that was the best thing we did because we now took a regime that was very volatile, that we now have the straits open and we can bring more products through it and now we can just have more free trade everywhere. And maybe a thing we're like, this is the greatest thing that's ever happened, but right now we're very anxious because it's hitting us in the pocketbook and it's very, it's very hard.

5:15The government is sending help, but the $12 billion package announced in December was meant to aid farmers in the fallout of the trade war with China. A further $15 billion in relief to help cushion the impact of the war in the Middle East is reportedly in discussion, but what these farmers say they want most of all is not a bailout, but stability and open markets. In the absence of both at the moment, they're doing what they've always done, planning, then planting, to the best of their ability.