How the US-Iran crisis rocked Scottish farming

Frothy white soap suds splatter the window of Jim Steel’s office. In the concrete yard outside, a red tractor is being washed.

Steel is the sales director for the Hamilton Ross Group, a family-owned outfit that’s been supplying vehicles and machinery to Scotland’s farms and construction sites for more than 90 years. Its nine depots stud the map from Campbeltown to Kelso, and here in Bishopton, Renfrewshire, a raft of tomato-bright Massey Fergusons and yellow JCBs are parked up out front behind a banner protesting the UK Government’s farm inheritance tax. 

The premises are just six miles from the land Steel works as a cattle and sheep farmer. He currently has a beef herd of 85 beasts – Aberdeen Angus – and around 50 ewes and lambs. He’s in the middle of a busy afternoon, though staff in the offices say that’s nothing unusual because it’s “always busy” there, and when he gets home to the village of Bridge of Weir he’ll be out with the animals.

But right now he has a pile of paperwork before him and a meeting minutes away. March was a big month, he says – possibly the busiest in the company’s history, thanks to more sole traders and partnerships now using the government’s preferred year-end of 31 March. Orders have been driven up by those seeking to mitigate their tax liability, he thinks. “There was quite a determination to spend as much money as they could spend to negate paying this current government as little tax as possible on the back of the new farm inheritance tax,” he says.

But he now wonders “if it’s going to be lean times ahead because of costs: red diesel, fertiliser, the whole shebang”. “Because of geopolitical instability, the price of oil and raw commodities is increasing. We are now seeing increases being levied against machinery costs across the board. One of our major suppliers has put their prices up by two percent – that then goes to our customers and those same customers are paying a lot more money for red diesel, for fertiliser, for everything.”

The main problem has been the lengthy closure of the Strait of Hormuz, through which passes one-fifth of the world’s oil and gas shipments, and the same percentage of ammonia and urea supplies. The channel – one of the world’s busiest – has been at the centre of tensions between the US and Iran for months, with thousands of vessels stuck where they don’t want to be and tonnes of goods prevented from transit. Of the estimated 750 ships to make it through since the end of February, most are thought to be linked to China, India or Pakistan. 

The impact on stocks of raw materials has been a real source of worry for Scotland’s farmers who need red diesel for their vehicles and machinery, and ammonia and urea for fertiliser. And it’s driven costs up significantly: where red diesel cost 67p per litre pre-crisis, it went up to 130p.

And while the prime minister’s promised cut to the rate of tax on the fuel has now come into play, that reduction – taking the tariff from just over 10p per litre to 6.48p per litre – runs only until the end of the year. 

Though Washington and Tehran now seem to have found a way forward, the pair have come to only a temporary agreement and will have 60 days to settle on terms that it is hoped will lead to lasting peace. A ceasefire was breached by both sides but agreement to stand down has now been reached.

And while the Scottish countryside is a world away from the dispute, it has none the less revealed just how exposed our rural economy is to global shocks.

“It’s had a massive impact,” says Andrew Connon, president of the National Farmers’ Union Scotland (NFUS). “We just seem to go from one crisis to the next.

“Our clear message has been from the start that this crisis is not just about fuel and fertiliser, it is about food supply and food security. Farmers are making hard choices. In the autumn, going into 2027, it’ll impact on the production of crops.”

Anything that’s a problem for farming is a problem for the economy. Initial estimates for 2025 put the total income from agriculture at a record high of £1.5bn. Higher profit margins were driven by an increase in output and more stable costs, compared with the previous year. There were increases in the price for milk, potatoes and cattle – and with beef still the largest part of the country’s farming sector, worth £1.1bn, it was good news for the rural and national economies. That’s despite an uptick in the price of labour and of seed, and a fall in cereal crop output. 

Julian Bell, principal business consultant at rural college SRUC and an adviser to the Scottish Government, has been poring over the detail. Bell grew up going to Edinburgh’s Gorgie cattle mart with his parents and well remembers the “buzz” of buying and selling livestock. He now specialises in agricultural economics, policy and market studies, and he says higher grocery prices are likely ahead. “They’re not happy,” he says of farmers. “Most of our food prices are closely linked to the world market. 

“If the cost of food goes up, farmers will probably keep fewer animals. Ultimately, they may be reducing output. They’ve seen higher costs, but they’ve not seen the same rise in the value of what they are producing.”

The Hormuz crisis broke out following a US strike on Iran and came just as Scotland’s planting season began. It may still be summer, but already thoughts have turned to harvest, and what it will cost to run the machinery used to gather and transport goods. Connon speaks of one “huge” producer using 12,000 litres of red diesel a week who saw an extra £2,800 put onto his monthly costs through fuel alone. The whole sector has been “worried”, Connon says, “that there should be any long-term prolonging of this”.

US-Iran relations are not the only problem facing the sector at the moment. The presence of African Swine Fever in Spain has caused an over-supply of pork products in Europe, forcing the price down and leaving Scotland’s producers to face “the worst crisis in years”, in Connon’s words. Prices dropped 40p per kilo below the cost of production, meaning a loss of around £500,000 for herds of around 400 sows. 

Elsewhere, potato prices are at “rock bottom” and grain has been “suffering” as demand from the whisky sector has fallen. Bird flu has led to the culling of poultry in the tens of thousands in recent months, though the temporary avian influenza prevention zone has now been lifted.

And while all this is happening, ministers in two governments are trying to lower grocery prices through targeted interventions. For the UK Government, that has meant lifting tariffs on 250 foodstuffs including biscuits and chocolate and organising supermarket sector talks aimed at agreeing voluntary price caps. For the Scottish Government, it has meant working towards legislation that will temporarily cap price rises on up to 50 “essential items” on public health grounds. 

“It has been a huge topic of conversation,” says Connon, and the union, which has “huge concerns”, is “keeping a watching brief” on the situation.

NFUS says “cheap food comes at a cost” and warns that a focus on driving prices down risks “eroding the very foundations of our domestic food production system”, which is already under strain. 

The Scottish Parliament, like the rest of the country, is waiting for details on what all of this will look like. But in some of the first sessions of the term, members raised concerns about the mounting problems faced by farmers. “Family farms need certainty, fairness, and practical support if we are serious about food security and sustaining rural communities,” said Angus South MSP Lloyd Melville, asking for details of action to support growers, crofters and agricultural businesses “in light of the reported rising input costs, pressure on farmgate prices, increased employer National Insurance contributions and concerns regarding changes to agricultural property and business property relief”.

That’s before further potential hikes to fertiliser costs thanks to C-Bam, a climate policy rule which will see EU imports of goods with the highest risk of carbon leakage, including fertiliser, subject to emissions-related costs. 

The Scottish Government held roundtable talks with affected sectors earlier this year, and rural affairs secretary Gillian Martin has said she’ll try to meet with her UK counterpart in the coming weeks to discuss what it means for Scotland’s farmers, and what can be done to assist them.

The UK is probably one of the most vulnerable countries to things like this because we have got no buffer

“We remain committed to supporting our farmers and crofters by giving them certainty through our support to active farming food production with direct payments and have brought forward payment dates to pay farmers and crofters at the earliest possible opportunity to assist with cash flow and give them certainty that is lacking in other areas,” she told parliament. 

According to Bell, the Scottish Government is “generally doing more to try and keep [subsidy] money channelled towards farmers producing food” than the UK Government, which has put a major focus on nature recovery. 

According to the latest reporting, support payments accounted for 40 per cent of profit from all farming in 2025. Over the previous decade, those payments made up around 64 per cent of profit from farming on average.

Years of World Trade Organisation deals have limited what’s possible through state support, Bell says. But he suggests that a return to the stockpiling of select goods – grain, milk, even meat – could help both the domestic market and the makers. “There used to be huge stocks of food,” he says. “Given this uncertainty in food production prices, you wonder if the government should step back in. 

“Finland has incredible food reserves, as does China,” where authorities can more comfortably “sit back and wait for [a crisis] to sort itself out”. “The UK is probably one of the most vulnerable countries to things like this because we have got no buffer,” Bell says, highlighting that the government keeps just three days of gas supplies. “It’s complete madness. These things are just going to keep coming. And we don’t know what it’s going to be from one year to the next.”

It’s an argument Connon agrees with. “We need to look at resilience; we need to have food stocks and fertiliser stocks – we need a supply of that,” he says, and the union’s told government as much. “The ‘just in time’ thinking… we are relying more on other countries to provide us with fuel, fertiliser and even food. We can’t be in that situation; we need to be in control.” 

Of course, Bell says, “if you do more to encourage domestic production, you do more to mitigate price rises”.

Agriculture minister Jim Fairlie agrees that more domestic production is “the best way to have food resilience”. But he’s concerned that, for some foodstuffs, prices are “standing still or going backwards, and that’s a problem”, even as other issues complicate business. 

“There are things that we can do; there are things that we can’t,” he says of the Scottish Government. “For an oil and gas producing nation, being bound by global events putting up the cost of red diesel is hellish frustrating.” It’s part of the argument for independence, he says: “If the UK Government isn’t prepared to step in and do something on oil and gas, then give us the powers.”

Scottish Government direct support payments give a measure of certainty to the agriculture sector, he argues, with the level set “at least for this parliament”. And he cites the decision not to follow Climate Change Committee advice and cut livestock numbers by 26 per cent to meet emissions targets as evidence that the administration is working with the sector. The climate savings will have to be found elsewhere in agriculture, he says, which will take collaboration. “The best that we can do is continue to fund [farmers] in the most direct way possible while at the same time asking them to do a bit more for the climate and biodiversity, which is a perfectly reasonable ask.”

Back in Renfrewshire, Steel is sceptical about the extent to which politicians overall really ‘get’ farming. “I think politicians, like most of the public, think food comes from the supermarket,” he says. “It comes from farms. Our self-generation of our own food is at its weakest for a long time. We are so reliant on imports.

“The average age of farmers is now over 60 and the current government is now causing farmers to more or less not really expand, because they think ‘what’s the point?’ The younger generation’s not naturally following on from their parents because it’s too much work. Farmers pay themselves buttons, often less than the minimum wage. It’s a way of life – it’s not a way of making money. 

“All we ask is a fair return for our products and it’s getting harder. Farmers are keepers of the land. Fields don’t grow and get green on their own, it’s because they are looked after.”