A United Arab Emirates navy ship sails next to a cargo ship in the Strait of Hormuz as seen from the UAE on March 11, 2026. (Photo: Altaf Qadri, AP)
War is simply bad for business everywhere
The recent U.S. led military action against Iran has dominated both news headlines and global markets since the air raids began.
While Canadian grain producers are relatively safe living half a world away from the hostilities, our businesses face both long-term and short-term opportunities and consequences as a result of this war.
The short term implications of war are generally good for commodity prices, including agricultural commodities. Wars cause inflation, and in a situation where the supply of resources or commodities could be drawn into question, nobody wants to get caught short.
Because the Persian Gulf is primarily an energy producing region, the biggest impact on markets as a result of the war on Iran has been in oil and natural gas. West Texas Intermediate oil traded at $65 per barrel on February 26, and as high as $119 per barrel on March 9. Thankfully, oil prices backed down from their peak value very quickly, but in the $90 range, crude oil prices are still more than 30 % higher than they were before the hostilities broke out.
Grain prices don’t move as far or a fast as the energy futures, but they still attract money when there is uncertainty in the global marketplace. To be clear, upheaval in the Middle East does not impact the world’s supplies of corn, wheat or soybeans, but investment funds will buy all of these things as a hedge against inflation, especially if it looks like higher oil prices will accelerate inflation levels across the globe. It’s also important to note that grain prices have not kept up to the rate of inflation over the past few years, (that’s an entire column topic all on its own), so if investment funds are looking for a commodity contract with the most upside potential to rally in a period of inflation, the grain futures have an attractive amount of upside potential.
In the early days of the conflict, Chicago soybean futures provided a great example of how the fund money flows impact farm product pricing. On February 26, (before the initial strikes on Iran), May soybean futures in Chicago were $11.45.
On March 12, that same futures contract hit a high of $12.39, and by March 17, March soybeans were back down to $11.45. (Granted, a little bit of this volatility had to do with U.S.-China news, but that has no actual impact on either global supply or worldwide demand). This movement was almost entirely fuelled by managed money in the soybean market.
On the day with the most price volatility in soybeans, March 16, there were 418,900 contracts of May soybeans traded in that single session in the Chicago Mercantile Exchange. That’s 56.9 million metric tonnes of soybeans in one futures contract in one day. The world only produces a little over 400-million tonnes of soybeans in an entire year. We all know that 13 % of the world’s soybeans don’t get bought and sold in a single day, so it’s abundantly clear that the fund money fuels the big swings in futures prices.
Farmers who use target orders to lock in grain prices have done really well in the first few days after the military action began in Iran. We actually saw a very similar thing occur in grain prices 4 years ago in the early days of Russia’s invasion of Ukraine. In the early days of the conflict as market prices react and potentially over react to a situation of uncertainty, we see sharp upward moves in prices as the market tries to cover off risk. As people come to terms with the war, and its potential to impact commodity values, the price swings will flatten out, and the excitement will die down.
The longer term implications of an extended war in the Persian Gulf are problematic.
In the very early stages of the war on Iran, it looked like a situation where there would be an intense period of targeted strikes on military installations like missile launcher and potential nuclear sites. Followed by some sort of negotiated step back, but as the days extended into weeks and the targets shifted from tactical installations to energy infrastructure, it has become clear that the flow of oil and liquefied natural gas will not be able to return to pre-war levels for a long period of time.
Higher energy prices are problematic for agri-business in a number of ways. There is the cost of the fuel used on the farm in tractors, combines and trucks.But then there is also the less obvious cost of fuel used in the trucks, trains and cargo vessels, which move grain to its ultimate market. In the case of high farm fuel costs, it will present itself as larger invoices at the end of each month, and in the case of higher freight charges, it will present itself as lower basis values, on sale transactions.
The more difficult problem created by higher energy prices is most closely connected to the corn industry. Nitrogen fertilizers are mostly made from burning natural gas and corn is a significant consumer of nitrogen. Drying corn also uses a great deal of propane or natural gas, and although we don’t yet know exactly what gas prices might be in the fall, it is certain that drying corn in the fall of 2026 is going to cost more than it has in previous years. What we do not know yet, is whether farmers will steer away from planting as much corn this year as a way of limiting their exposure to higher natural gas prices.
The most dire long term consequence of an extended armed conflict in the Middle East would be if higher energy prices led to a global economic slow down. If you look at the 2008 financial crisis’s impact on commodity values in 2009, there is a very clear example of what happens to prices when the volume of money simply exits high volatility markets. One of the short term opportunities for farmers in the market’s early reaction to the war has been money flowing into commodities in order to offset risk. But an extended global economic recession would have the opposite effect on prices.
It is far too early to suggest that the world’s economy is about to be brought to its knees over higher energy prices caused by the war in Iran, but it is fair to be aware of what impact such a situation could have on commodity prices.
Steve Kell is a Simcoe County crop farmer and handles grain merchandizing for Kell Grain, with elevators in Belleville and Gilford.
War is simply bad for business everywhere
A United Arab Emirates navy ship sails next to a cargo ship in the Strait of Hormuz as seen from the UAE on March 11, 2026. (Photo: Altaf Qadri, AP)
War is simply bad for business everywhere
The recent U.S. led military action against Iran has dominated both news headlines and global markets since the air raids began.
The short term implications of war are generally good for commodity prices, including agricultural commodities. Wars cause inflation, and in a situation where the supply of resources or commodities could be drawn into question, nobody wants to get caught short.
Because the Persian Gulf is primarily an energy producing region, the biggest impact on markets as a result of the war on Iran has been in oil and natural gas. West Texas Intermediate oil traded at $65 per barrel on February 26, and as high as $119 per barrel on March 9. Thankfully, oil prices backed down from their peak value very quickly, but in the $90 range, crude oil prices are still more than 30 % higher than they were before the hostilities broke out.
Grain prices don’t move as far or a fast as the energy futures, but they still attract money when there is uncertainty in the global marketplace. To be clear, upheaval in the Middle East does not impact the world’s supplies of corn, wheat or soybeans, but investment funds will buy all of these things as a hedge against inflation, especially if it looks like higher oil prices will accelerate inflation levels across the globe. It’s also important to note that grain prices have not kept up to the rate of inflation over the past few years, (that’s an entire column topic all on its own), so if investment funds are looking for a commodity contract with the most upside potential to rally in a period of inflation, the grain futures have an attractive amount of upside potential.
In the early days of the conflict, Chicago soybean futures provided a great example of how the fund money flows impact farm product pricing. On February 26, (before the initial strikes on Iran), May soybean futures in Chicago were $11.45.
On March 12, that same futures contract hit a high of $12.39, and by March 17, March soybeans were back down to $11.45. (Granted, a little bit of this volatility had to do with U.S.-China news, but that has no actual impact on either global supply or worldwide demand). This movement was almost entirely fuelled by managed money in the soybean market.
On the day with the most price volatility in soybeans, March 16, there were 418,900 contracts of May soybeans traded in that single session in the Chicago Mercantile Exchange. That’s 56.9 million metric tonnes of soybeans in one futures contract in one day. The world only produces a little over 400-million tonnes of soybeans in an entire year. We all know that 13 % of the world’s soybeans don’t get bought and sold in a single day, so it’s abundantly clear that the fund money fuels the big swings in futures prices.
Farmers who use target orders to lock in grain prices have done really well in the first few days after the military action began in Iran. We actually saw a very similar thing occur in grain prices 4 years ago in the early days of Russia’s invasion of Ukraine. In the early days of the conflict as market prices react and potentially over react to a situation of uncertainty, we see sharp upward moves in prices as the market tries to cover off risk. As people come to terms with the war, and its potential to impact commodity values, the price swings will flatten out, and the excitement will die down.
The longer term implications of an extended war in the Persian Gulf are problematic.
In the very early stages of the war on Iran, it looked like a situation where there would be an intense period of targeted strikes on military installations like missile launcher and potential nuclear sites. Followed by some sort of negotiated step back, but as the days extended into weeks and the targets shifted from tactical installations to energy infrastructure, it has become clear that the flow of oil and liquefied natural gas will not be able to return to pre-war levels for a long period of time.
Higher energy prices are problematic for agri-business in a number of ways. There is the cost of the fuel used on the farm in tractors, combines and trucks.But then there is also the less obvious cost of fuel used in the trucks, trains and cargo vessels, which move grain to its ultimate market. In the case of high farm fuel costs, it will present itself as larger invoices at the end of each month, and in the case of higher freight charges, it will present itself as lower basis values, on sale transactions.
The more difficult problem created by higher energy prices is most closely connected to the corn industry. Nitrogen fertilizers are mostly made from burning natural gas and corn is a significant consumer of nitrogen. Drying corn also uses a great deal of propane or natural gas, and although we don’t yet know exactly what gas prices might be in the fall, it is certain that drying corn in the fall of 2026 is going to cost more than it has in previous years. What we do not know yet, is whether farmers will steer away from planting as much corn this year as a way of limiting their exposure to higher natural gas prices.
The most dire long term consequence of an extended armed conflict in the Middle East would be if higher energy prices led to a global economic slow down. If you look at the 2008 financial crisis’s impact on commodity values in 2009, there is a very clear example of what happens to prices when the volume of money simply exits high volatility markets. One of the short term opportunities for farmers in the market’s early reaction to the war has been money flowing into commodities in order to offset risk. But an extended global economic recession would have the opposite effect on prices.
It is far too early to suggest that the world’s economy is about to be brought to its knees over higher energy prices caused by the war in Iran, but it is fair to be aware of what impact such a situation could have on commodity prices.
Steve Kell is a Simcoe County crop farmer and handles grain merchandizing for Kell Grain, with elevators in Belleville and Gilford.