The 100% surge and rarity of diesel denies the “blood of life” of farmers

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(Bloomberg) — Farmers from Iowa to Ukraine are working on rising diesel prices and volatile supplies, forcing them to spend unprecedented amounts of fuel on chaotic markets, raising concerns about autumn harvests. Is causing.

In the United States, where corn and soybean producers rush to sow after rain and cold have been delayed, filling a tractor tank daily can cost $ 1,000, double that of a year ago. .. And the most intensive part of the agricultural season is still ahead.

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“We have never experienced this level of price increase in farm diesel fuel,” said Chris Esington, president of the National Corn Producers Association, a farmer in Iowa. The cost per gallon has risen from $ 2.20 a year ago to $ 4.70, he said.

In the Ukrainian breadbasket, three months after the Russian military invasion, producers take care of the fields in a brutal bombing of storage. One grain farmer said he had enough fuel to withstand for two months. He is nervous about the lack of diesel supplies ordered a few weeks ago.

Keith Huisinga, who cultivates 15,000 hectares (37,000 acres) in Ukraine, said: The crops needed to feed dairy cows are days away from harvest, and continued delays can cause major problems with corn and sunflowers in the fall.

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In the United States, grain reserves are declining and inflation continues, resulting in a shortage of diesel supplies, especially on the East Coast. Nonetheless, many American farmers are well-positioned to benefit another year as war and global weather problems have exacerbated the rise in crop prices in 2021. Wheat has recently jumped to record highs, with corn and soybeans trading at near-record levels. Still, while the cost of diesel and other major farm essentials remains high, they are worried that prices will collapse.

Diesel prices in the United States are the highest ever, and there are warnings of shortages, especially in the eastern United States. Russia’s invasion of Ukraine tightened its global fuel supply. The Midwest situation isn’t too dire, but Chicago’s wholesale prices are still up 75% from a year ago.

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“Diesel is the lifeblood of agriculture,” said Ben Lienche, a corn and soybean farmer in Iowa. His fuel costs jumped from $ 35 to $ 70 per acre. Fertilizers, grains and mechanical parts cannot move efficiently through the system without diesel. Diesel is also needed for his large civil engineering equipment. In fact, diesel is just one of the fuel issues. The price of propane has almost doubled from last year. It is used to heat farmer’s homes and power dryers during harvest to reduce the water content of corn and make the grain suitable for storage and sale. This could be important this season for producers fighting heavy rains and floods in northern US states and Canadian prairie. Also, soaring gasoline prices in retail pumps can be even higher during the summer operating period. Related: All states in the United States have more than $ 4 per gallon of gasoline. “Milk is carried away and it has a fuel surcharge,” said dairy owner John Patterson. “There is no way to tell that to the next person. Currently, milk prices are rising to offset some of that, but when fuel and all other inputs stay high and milk prices fall. What will happen? “

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Patterson is investing in larger equipment to pump fertilizer more efficiently and using GPS to avoid crossing the same ground twice, wasting valuable fuel. Illinois farmer Matt Bennett, co-founder of commodity broker AgMarket.net, said that producers of “every crop” saw Chicago wheat futures increase 66% from the beginning of the year, absorbing greater energy costs with corn futures. It says it should be possible. 35% and 25% soybeans.

“The big problem I see is when the pendulum swings,” he said. “I don’t know when that is, but as commodity prices go down, inputs can remain high.” He has been buying diesel and natural gas futures in New York Harbor over the past few months. Has helped clients hedge their risks. “If transportation costs go up, it’s not easy to get back.”

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