The U.S.’s war in Iran could spike food prices, Jake Hanley, Chief Growth Officer, Director of Investments at Teucrium ETFs, told Benzinga.
That’s because higher crude oil costs affect farm operating costs. As a result, investors are piling into agriculture-focused ETFs tied to corn, wheat, and soybeans. “The linkage runs through three channels, and right now all three are firing simultaneously,” Hanley says.
“Energy is a direct farm input: fuel for equipment, natural gas for fertilizer, diesel for logistics,” Hanley said. “When crude runs, farm operating costs run with it. That’s a price floor getting repriced across every row crop.”
Biofuel Demand Lifts Corn, Soy Markets
Additionally, higher oil prices are increasing demand for biofuels, which directly impacts the prices for corn and soybean oil.
Hanley pointed out the fact that the corn used for ethanol alone absorbs about 37% to 38% of the U.S. total crop supply. And soybean oil has become a major feedstock for renewable diesel production.
“Both commodities now carry a demand floor tied to energy policy that didn’t exist 15 years ago,” Hanley said. “When crude spikes, that floor rises with it.”
Investors seeking exposure to soybean markets have also turned to funds like the Teucrium Soybean Fund (NYSE:SOYB).
Fertilizer Shock Raises Supply Risks
Meanwhile, disruptions around the Strait of Hormuz are tightening fertilizer supply chains, potentially affecting crop production in the coming seasons.
Corn may be particularly exposed because it requires large amounts of nitrogen fertilizer.
“If farmers cut acres or cut application rates in response, that supply reduction doesn’t show up in this year’s price,” Hanley said. “It shows up in next year’s yield.”
With Northern Hemisphere planting season approaching, investors are now watching crop reports and fertilizer markets closely for signs that tightening supply could push agricultural prices even higher.
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