100% diesel surge and shortages deny US farmers their ‘lifeblood’

Farmers from Iowa to Ukraine are grappling with soaring diesel prices and volatile supply, forcing them to spend unprecedented amounts on fuel in a chaotic market and raising concerns about the fall harvest.

In the US, where corn and soybean producers are rushing to plant with delays after rainfall and cold temperatures, filling a tractor tank every day is now costing some farmers $1,000, double what it was a year ago. And the most intense part of the farming season is yet to come.

“We’ve never seen a price increase like this for farm diesel fuel,” said Iowa farmer Chris Edgington, president of the National Corn Growers Association. The cost per gallon has increased to $4.70 from $2.20 a year ago, he said.

In breadbasket nation Ukraine, three months after Russia’s military invasion, growers are tilling fields amid brutal bombing of deposits. A grain farmer said he had enough fuel for two months. He’s nervous about the diesel supplies ordered weeks ago that haven’t arrived yet.

“If you have to wait that long every time, you get out of breath,” said Kees Huizinga, who farms 15,000 hectares (37,000 acres) in Ukraine. The crops needed to feed dairy cows are still days away from harvest and if the delays continue, major problems could pile up for corn and sunflowers in the fall.

Diesel is in short supply in the US amid shrinking grain reserves and persistent inflation, particularly on the east coast. Many of America’s farmers are nonetheless well-positioned for another year of profits as wars and global weather issues have prolonged the 2021 crop price rally. Wheat recently jumped to an all-time high and corn and soybeans are trading near records. Still, they fear prices will collapse while the cost of diesel and other key farming necessities remains high.

US diesel prices are at their highest ever, with warnings of shortages, particularly in the eastern US. Russia’s invasion of Ukraine has depleted global fuel supplies. While the situation in the Midwest isn’t as bad, wholesale prices in Chicago are still 75% higher than a year ago.

“Diesel is the lifeblood of farming,” said Iowa corn and soybean farmer Ben Riensche, whose fuel costs have risen from $35 to $70 an acre. Fertilizer, grain, and machinery parts cannot be transported efficiently through the system without diesel, which is also needed for its massive earthmoving equipment.

In fact, diesel is just a fuel issue. Propane has almost doubled compared to last year. It is used to heat farmers’ homes and power dryers during harvest to reduce corn moisture and make the grain suitable for storage and sale.

This will likely be of concern to growers dealing with heavy rains and flooding in the northern US states and Canadian prairies this season. The rising petrol prices at the pump can also continue to rise during the summer driving season. Related: Every single state in the US has gasoline over $4 a gallon. “If the milk is trucked away, there’s a fuel surcharge on it,” said dairy owner Jon Patterson.

“I have no way of passing that on to the next person. Right now the price of milk has gone up to offset some of that, but what will happen if fuel and all these other inputs stay high and the price of milk goes down? ?’

Patterson invests in larger equipment to pump fertilizer more efficiently and uses GPS to avoid going over the same soil twice and wasting valuable fuel. Illinois farmer Matt Bennett, co-founder of commodities brokerage firm AgMarket.net, notes that producers with “every crop” should be able to absorb higher energy costs as Chicago wheat futures are up 66% year-to-date, Corn futures 35% and soybeans 25%.

“The big problem I see is when the pendulum swings,” he said. “I’m not sure when that will be, but if commodity prices fall, inputs will likely remain high.” He has helped clients hedge risk by investing in New York Harbor diesel and natural gas stocks in recent months. bought futures. “When transportation costs go up, they don’t go down that easily.”

Bloomberg