Record US diesel prices squeeze farmers; food prices may rise

Addie Yoder is a farmer in northeast Missouri who grows corn, soybeans, and cattle. She uses two combines, 3 semi-trucks, and several tractors to harvest and transport the crops from mid-September until late October.

She said that with diesel prices at all-time highs, and only one 'combine' requiring 300 gallons, her best option is to try and cut other costs.

Drew Peterson, a farmer in southeast South Dakota who grows soybeans, corn, and cattle, is expecting to spend up to $1,500 a day on fuel for just one of the combines he uses to harvest his crops this year. This will be double what he spent last season.

He said, "You can't say that diesel is too expensive and I won't harvest." "You just have to work it into your budget."

Farmers in the U.S. are facing record-high diesel costs during harvest season. This is further tightening the margins that were already very thin. Prices are likely to rise at grocery stores in America ahead of the midterm elections this November, when cost of living will be a major concern for voters.

The U.S. and Israeli war on Iran, as well as the Ukrainian attacks against Russian refineries have squeezed global fuel supplies. According to Energy Information Administration, the average U.S. Diesel price reached a record high this week at $6.29 a gallon. This is up 68% compared to $3.74 per gallon a year earlier.

David Ortega, economist at Michigan State University, says that higher diesel prices increase costs throughout the entire food supply chain. This includes everything from harvesting food on farms to transporting it to supermarkets.

Ortega stated that "the majority of our food is transported by trucks, and these trucks use diesel."

Consumer prices for food rose by 2.7% in August, compared to last year's Consumer Price Index.

FUEL PRICES DOUBLE

Off-road diesel is available to farmers, and it's not taxed by the state or federal government. Even with the discount, however, many farmers still pay significantly more than last year for fuel.

Wayne?Gularte who grows vegetables on 600 acres near Gonzales in California said that his fuel costs had risen by about 40% from $5 to $7 per gallon.

He has put older gasoline-powered tractor models from the 1950s into service to save money and parked a diesel pickup. Gularte stated that the only money they can earn is what they save.

Michael Langemeier is an economist from Purdue University. He says that farm fuel costs have increased by $11 per acre compared to last year.

Futures for corn, soy, and wheat have all rallied since mid-August. They reached multi-year highs early in September. Nick Paulson of the University of Illinois agricultural economics department warned that farmer margins are still thin when compared with historical averages.

He said that he was concerned that a diesel price of $6 or more per gallon would start to exert inflationary pressures, even on some of the better profit potential.

Jon Paul Driver is a Washington Farm Bureau second vice president and hay farmer in Spokane.

Driver stated that any increase in fuel prices right now would be an additional debt to the farm.

U.S. Senator Roger Marshall of Kansas, a Republican, wrote to Agriculture Secretary Brooke Rollins on September 11, asking her to provide temporary relief for farmers who "absorb substantial fuel costs unplanned during one of most diesel-intensive times of the year."

A USDA spokesperson stated that the agency "is not leaving any stone unturned" in regards to high diesel prices. She referred to an interview Rollins gave to NewsMax on September 15, in which she said more would be announced on this topic in the coming week.

FOOD PRICES MAY RISE

Ortega stated that even though fuel is a relatively small part of the price of food, the consumer could still expect to see a rise in prices as the supply chain absorbs the higher fuel costs.

Ortega explained that the effects of fuel surcharges could take some time to manifest, because retailers might try to absorb any short-term increases in prices, or because contracts for freight at lower rates have not yet been reflected.

He said that the most vulnerable items to price increases are groceries like dairy, meat and produce that require fuel-intensive refrigeration trucking.

The rates for moving apples and pears out of Washington State’s Yakima Valley via?refrigerated tractors have reached a 'four-year high,' said Dean Croke. Principal analyst at DAT Freight & Analytics.

Costs to transport California produce outside the state have increased by 40% to 120% in comparison to a year earlier. Croke stated that diesel prices in some California cities have reached $8 per gallon.

Croke warned that independent truckers who pay upfront for fuel may be unable to handle further increases.

He said that the rising price of diesel would lead to bankruptcy for trucking companies.

(source: Reuters)