Global Agriculture’s Triple Squeeze: Inflation, Tariffs, and Energy Costs 

Global agriculture is running into a cost problem that is coming from multiple directions at once. Input prices are rising. Trade flows are becoming less efficient. Energy costs are feeding directly into production decisions. The unfortunate result is a global system that still produces, but with thinner margins, more sensitivity to shocks, and added strain to the farmers and consumers alike. 
 

Inflation Is Resetting the Cost Base 

Farm-level inflation is broad, persistent, and hard to offset. Farmers are seeing higher costs across: 

• Seeds, chemicals, and crop protection 

• Machinery and repairs 

• Labor 

• Borrowing costs tied to higher interest rates 

• Storage and transport 

The FAO Food Price Index averaged 130.7 in April 2026, up 1.6% from March and marking the third straight monthly increase. That level is well below the 2022 peak above 160, when the Russia-Ukraine shock pushed markets to extremes. But it is still materially above the pre-2020 range of 90–100, when global food markets were relatively stable.  

Fertilizer prices highlight the trend: 

• Global fertilizer prices were up 11% year-over-year (y/y) in early 2025 

• Urea prices rose about 20% y/y 

• Diammonium phosphate prices climbed 36% in less than eight months 

When input prices rise faster than crop prices, margins tighten. That leads to slower investment and more cautious production decisions. 

Tariffs Are Reshaping Trade Flows 

Agriculture depends on global trade channels that balance production and demand across regions. Tariffs tend to disrupt that balance. The most recent data suggests that trade has continued, but with a lot more friction: 

• US agricultural exports to China fell 54% y/y in 2025 

• Wheat trade reroutes, especially after disruptions in the Black Sea, pushing buyers toward alternative exporters like Australia 

• Beef exports rebalance, as China increases imports from Brazil and Argentina 

• Vegetable oil trade shifts, with palm oil and soybean oil flows adjusting across Southeast Asia and India 

Energy Is Driving the Cost Spike 

As I discussed in my piece about US CPI, energy prices are surging. This adds more strain as it’s used a lot in modern agriculture. Fuel powers equipment and transport. Natural gas is critical for fertilizer production, accounting for 70% to 90% of ammonia costs. 

Recent moves in energy markets have fed directly into agriculture: 

• Natural gas prices surged as much as 167% y/y in 2025, tightening fertilizer markets since it accounts for most of the cost of nitrogen production.

• Diesel prices climbed sharply, with spikes pushing fuel toward $5 per gallon in some regions 

 
Albeit, fuel is a relatively small share of total farm costs, but it moves quickly when prices shift. A 30% jump in diesel can still push overall production costs higher, especially once transportation and field operations are factored in. 

The bigger impact runs through fertilizer. Its cost is closely tied to natural gas, so when energy prices rise, fertilizer becomes more expensive. Farmers often respond by scaling back usage or switching crops, which can lower yields in later growing cycles and tighten supply. 

Global Impact 

The effects of these pressures do not stay on the farm, like everything else; they move through the supply chain and show up at the checkout counter. Higher input costs lead to higher production costs. Less efficient trade raises transportation and sourcing costs. Energy prices add pressure at every step, from planting to packaging. 

That combination feeds directly into food prices: 

• Global food prices have already remained elevated compared to pre-2020 levels 

• In the US, food prices are still rising y/y, even after the peak inflation period 

• In many developing economies, food inflation continues to outpace overall inflation 

This is where it starts to show up for consumers:

• Grocery bills remain elevated, with prices still above pre-pandemic levels despite easing from 2022 highs.
• Price increases are uneven, with some products rising quickly while others stay flat or fall, and differences showing across regions.
• Staples feel the strain first as higher costs in grains, dairy, and oils show up early and then spread through the rest of the food chain.

There is also a lag effect. When farmers reduce fertilizer use or shift planting decisions today, the impact shows up in the following years harvest in the form of tighter supply. That can keep prices elevated even if demand remains stable. For lower-income households, where food takes up a larger share of spending, these cost increases are cutting deeper and stretching already thin budgets. 

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