In the fertile soil of the Red River Valley along the Minnesota-North Dakota border, Tony Pulkrabek operates an agricultural business that most independent farmers would envy. He owns his land outright. He owns all of his machinery. He even holds direct stock in his cooperative, ensuring he doesn’t have to split profits with joint-venture partners.
By all traditional metrics of financial stability, Pulkrabek should be thriving. Yet, as he looks toward the upcoming season, his projected profit margins have dwindled to a razor-thin 5% — leaving virtually no safety net if a single piece of equipment breaks or fuel prices tick up even a fraction of a percent. The culprit is a volatile cocktail of global geopolitics and skyrocketing input costs thousands of miles away that is actively gutting his bottom line.
To understand how the reality for boots-on-the-ground farmers like Pulkrabek connects directly to the prices consumers pay at the grocery store, The Packer synthesized insights from a broad spectrum of industry specialists. Together, their insights reveal an industry operating on borrowed time: a multilayered market where immediate on-farm crises are being masked by corporate cushions, setting the stage for a delayed economic reckoning.
Primary Drivers: A Transport and Fertilizer Crisis
Rising fuel and fertilizer costs have transformed general inflation into a tangible operational wall for the fresh produce sector.
Unlike row crops such as corn, soybeans or wheat, which can be stored in grain bins for months while farmers wait for favorable shipping rates or market rebounds, fresh produce is entirely bound to the clock. Perishable fruits and vegetables require an immediate, unbroken cold chain from the field to the retail shelf.
“This is still mostly about inputs. It’s not getting any better,” says Missouri farmer Will Westmoreland, executive director of The Back Forty. “There’s no sun on the horizon. There’s no silver lining. It’s just not getting any better ... You’ve got gasoline prices that are still going up, diesel fuel prices that are still going up. So, that’s a primary driver, and for produce, I think the one thing a lot of people don’t understand, even farmers that don’t grow produce, is how dependent the produce market is on fuel.”
Westmoreland stresses that this dependency magnifies every tick of the oil market.
“You’ve got trucking, you’ve got refrigeration, you’ve got fertilizer as your normal inputs and then you’ve got to have rapid transportation ... You can’t let it sit there like you can a lot of the other row crops, until, you know, maybe fuel price drops or you get a higher price on the market.”
Compounding these fuel costs is an unprecedented spike in global fertilizer markets. Westmoreland notes that “in produce, fertilizer inputs have gone up 50% on average,” and for specialty or intensive crops, that number is often much higher.
Red River Valley: Why Low Margins Leave No Room for Error
The real-world manifestation of Westmoreland’s input warning is precisely what Pulkrabek is navigating in Minnesota. When global events triggered sudden spikes in energy markets, the impact hit his invoices instantly.
“Right now their urea is selling at over $1,000 a ton,” Pulkrabek says, recounting how rapidly his costs shifted midseason. “[We] got into the $580 stuff, ran out of that, and then got invoiced for $940 a ton, which I believe the vendor actually probably gave us a deal on because we bought so much from him ... I did ask him where the current market is, to buy from him, and he said it’s over $1,000 a ton.”
Pulkrabek notes that the economic catalyst was almost instantaneous.
“Between when the U.S. and Israel decided to bomb Iran, and then they shut down the strait, that affected the urea market, the map market or the phosphate market — and the potash market, not so much. It’s gone up, but not like urea has gone up,” he says.
Operating under a baseline where fertilizer has doubled from historical averages, Pulkrabek confirms the structural squeeze.
“Well, I mean, margins have always been very tight,” he notes.
Westmoreland warns that running a commercial farm on a 5% margin under these conditions places the entire operation on the precipice of failure.
“That’s why their profit is only going to be 5%, because they’re taking that increase completely out of their profit,” Westmoreland says. “Now look at that. They’ve only got 5% to play with; if fuel goes up 1%, the fertilizer inputs go up, pesticides go up — any of that can eat away at the remainder of that profit and cause it not to be profitable. So, here we are again, farming for subsidies and farming for crop insurance.”
Geopolitical ‘Two-Punch’ and the Pre-Booking Divide
The crisis Pulkrabek faces is verified on a macro scale by the American Farm Bureau Federation. According to its latest Fertilizer Availability Survey, countries surrounding the Persian Gulf and the Strait of Hormuz account for roughly 49% of global urea exports and 30% of global ammonia exports. Westmoreland points out that despite international maritime efforts, intelligence suggests regional forces “still got 70% functioning missile capacity in the strait” along with small-boat capabilities, causing ongoing instability for cargo vessels transporting these critical elements.
The true operational danger, however, lies in who bears the brunt of this volatility. Frank Kenney, vice president of GTM at Cleo, explains that the agricultural landscape has split into two distinct tiers based on the capacity to hedge, or pre-book, seasonal costs.
“It’s all about hedging, and it’s all about having the size and the depth of treasury teams that can go in and pre-hedge on things like fertilizer and things like oil,” Kenney says. “And so the largest farms, certainly the largest American agricultural companies, had pretty much already locked in their 2026 fertilizer cost and prices ... The largest farmers and the largest agricultural companies are not going to be hit as much as the smaller farmers.”
For independent, family or midsized farmers who buy closer to the season, the scenario is dramatically different.
“When you move from what is it, $350, $400 bucks a ton of fertilizer to $600 ... $900 ... the smaller guys can’t do anything with that, and they can’t pay it,” Kenney says. “Those guys are going to go bankrupt, and that’s exactly what’s happening.”
This disparity is detailed in Farm Bureau’s national survey:
- The scale and regional gap — Fertilizer pre-booking rates varied drastically by region. While 67% of Midwestern producers reported securing their fertilizer purchases ahead of the season, only 31% in the West and a meager 19% of Southern producers did the same. Across all regions, smaller operations (1 acre to 499 acres) consistently lacked the capital or supply-chain leverage to pre-book compared to industrial-scale operations.
- Affordability — The financial pressure is widespread, with around 70% of total respondents reporting that they are “unable to afford all the fertilizer they need.”
- Worsening outlook — Driven by a 46% increase in farm diesel prices since the end of February, nearly six in 10 farmers reported worsening overall finances during the spring planting season, signaling an urgent need for economic stabilization.
Kenney notes that because major corporate agricultural entities are still insulated by their pre-booked, lower-cost assets, consumers have not yet seen the full force of the fertilizer spike on retail shelves. He calls this a looming “two-punch” economic event.
“Today, what we see in more expensive produce is, I think, more directly analogous to that, more directly a result of the guys that are in the middle, the logistics, the fuel cost of moving all of that stuff,” Kenney says. “We’re not going to see the results of this fertilizer until sometime next year, and you talk about the one-two punch, that’s the two-punch that comes in ... Now you’re going to be hit with the cost of the new negotiated fertilizer costs for the big guys that are out there; that’s going to be passed on to the consumer.”
Kenney emphasizes that specialty crop regions are already feeling the early operational heat.
“I live in Tampa, so Plant City, Fla., is right down the road, which means that’s the strawberry capital and blueberries, and all the rest of that,“ he says. “Those guys are all being hit because of the fertilizer costs ... I don’t think you see those things until 2027.”
Supply Chain Friction: Trucker Shortages and Perishability Trade-offs
Beyond fields and fertilizer plants, severe logistical friction is further driving up costs. The distribution network is handling dual pressures: a dwindling domestic driver pool and escalating material costs.
Kenney explains that structural policy changes have directly pinched shipping capacity, particularly for imports: “The cost of avocados coming in from Mexico is partially tariffs, but mostly fuel. And not just fuel, it’s a lot of the trucker shortage because of all of the change labor ... non-domicile CDLs and, you know, the big clampdown,” he says. “A lot of labor has left trucking because of a lot of the clampdowns and those types of things ... the current administration’s policy around trucking, there have been things that have been done that has really restrained capacity.”
Simultaneously, the industry is grappling with an unexpected crisis in packaging materials. As petroleum-based plastic containers become prohibitively expensive due to oil pricing, some distributors have tried pivoting to alternative materials — unintentionally triggering a rise in product spoilage.
“They’re kind of bouncing back and forth between using plastics and then using these biodegradable cartons,” Westmoreland says. “I think those are made out of paper and they’re not made out of petroleum, so there’s a cost reduction there. But the trade-off with that is that things rot quicker when they get into the grocery store. They don’t last as long, and all of that is just leading to higher prices.”
To fight this accelerated spoilage, grocery chains are increasingly forced to utilize chemical freshness sprays to keep items visually appealing on the shelf, adding yet another layer of cost to the distribution pipeline.
The Retail Illusion: Balancing Total Value and High-Volume Spikes
This compounding mountain of farm and supply-chain expenses stands in stark contrast to what consumers see when walking through the grocery store doors today. According to retail data from Circana, the produce section currently looks like a sanctuary of relative affordability.
Price per pound/volume in U.S. retail produce department is only up on average 0.2% for the latest 12 weeks ending April 19, 2026, versus the same period a year ago, says Jonna Parker, team lead for fresh foods for Circana.
“Further, produce’s average price per pound of $1.96 is the lowest consumer price-paid average of any food and beverage department. Not only is it not increasing, but it is also a value relative to other food and beverage choices,” she says.
However, Parker’s data reveals that this flat departmentwide average is an illusion that conceals significant price acceleration in high-volume, everyday dietary staples.
“The price acceleration that will most be felt by American consumers would be in categories with high sales; tomatoes, with more than $1 billion in sales, increasing in this period by 5.1% in price per pound and fresh lettuce — for example, salads and kits, a $800 million selling category — [up] 7.5% are more apparent,” she says.
Parker also points out that certain category price increases stem from structural shifts in how products are packaged and marketed, rather than baseline commodity inflation alone.
“Keep in mind, this is average price paid of an entire category across all retailers and products. I know, for example, in fresh garlic, we’re seeing more value-added products in that space and new size packages, both of which result in a higher price per pound national average for the category, more so than ‘same item inflation.’”
At the same time, lifestyle trends and shifting consumer preferences continue to drive category growth regardless of pricing.
“Overall, produce has opportunities to focus on demand-driving activities,” Parker says. “For example, this period we’ve seen incredible growth in fresh kiwis, even though they are a higher-than-average-price-per-pound fruit compared to other fresh fruit commodities, with big spikes in social media mentions for the fruit being part of the sales growth fuel ... While price is important to U.S. consumers in this era of affordability concerns, when it comes to produce, we should consider much more than just the price when talking about the space.”
Looming Convergence
The current retail landscape presents a deceptive calm. While everyday shoppers still benefit from stable departmentwide averages at a baseline of $1.96 per pound, this consumer value is being paid for by the diminishing margins of independent growers who lack the scale to hedge against a hostile input environment.
With nearly 60% of surveyed domestic farmers reporting declining finances, midsized operations facing liquidation and structural trucking constraints restricting transit, the agricultural safety net is wearing thin. As the corporate pre-booking protections expire over the next 12 to 18 months, the true cost of $1,000-a-ton fertilizer and global maritime friction will inevitably pass from the farm gate directly to the consumer’s cart.
