Iran war impacts U.S. agricultural loans: soaring costs, rising loan demand, and banks tighten oversight

(1) The Middle East conflict has caused fuel and fertilizer costs to soar, creating new challenges for American farmers after Trump imposed additional tariffs last year to curb agricultural exports. To cope with rising costs, farmers continue to increase their demand for loans. According to a Chicago Federal Reserve survey, agricultural loan demand increased year-on-year for the 10th consecutive quarter in the first quarter, while the loan repayment rate index declined for the 10th consecutive quarter.(2) Farmers are cutting expenses: reducing planting, switching to crops that require less fertilizer, or using less fertilizer to control costs, but this increases the risk of lower yields. Banks have noted that clients are spending more cautiously, with reduced new land purchases and equipment sales. Some banks saw an increase in overdue agricultural loans in the first quarter, with loans over 90 days past due rising and additional provisions set aside for this (such as $1.2 million to $1.8 million).(3) The Trump tariffs have already dealt a heavy blow to agriculture, with nationwide farm bankruptcies surging by more than 40% year-on-year in 2025. Now, the cost increases brought about by the Iran war may make matters even worse. Although government loans and subsidies offer banks some protection, lenders are closely monitoring their clients. Experts point out that soaring diesel prices will push up costs at every stage from planting and harvesting to transportation, and small farmers are especially sensitive to rising costs.