Mike Miller, who grows wheat near Ritzville, sat around a council table Thursday as his cohorts at the Washington Grain Commission spoke about, among other things, soaring diesel prices.
“It changed the way we farm,” Miller said. “Diesel is double what it was last year. We try to limit the hours on a tractor. We have no idea where this will take us. »
Farmers from Washington to Iowa to Ukraine are grappling with soaring diesel prices and an unstable supply, forcing them to spend unprecedented amounts on fuel in a chaotic market and raising concerns about the fall harvest.
In the United States, where corn and soybean farmers are rushing to plant after rains and cold temperatures forced delays, filling a tractor tank daily is now costing some farmers $1,000, or the double what it was a year ago. And the most intensive part of the agricultural season is yet to come.
“We’ve never seen this level of agricultural diesel price increases,” said Iowa farmer Chris Edgington, president of the National Corn Growers Association. The cost per gallon jumped to $4.70 from $2.20 a year ago, he said.
Miller, the local farmer, said it affected all growers, including those growing potatoes, hay, wheat or corn. With the price of wheat hitting all-time highs, farmers have months before combines hit the fields.
“It will be very expensive to harvest,” he said.
Marci Green, who farms near Fairfield, agreed, saying wheat prices are excellent if they hold.
She noted that with diesel prices more than doubling from last year, farmers are also facing the same fertilizer spike. The price of propane, which is a key component in the manufacture of fertilizers, also jumped.
“Any gain we make in (wheat) prices is eaten up by the cost of inputs,” she said.
In Ukraine, a breadbasket country, three months after the start of the Russian military invasion, producers tend to the fields amid brutal bombardments of storage sites. A grain farmer said he had enough fuel to last two months. He’s nervous about diesel supplies ordered weeks ago that haven’t arrived.
“If you have to wait so long every time, you slowly wear yourself out,” said Kees Huizinga, who farms 37,000 acres in Ukraine. Crops needed to feed dairy cows are days away from harvest, and if the delays continue, bigger problems could pile up for corn and sunflowers in the fall.
With Russia and Ukraine being the major wheat producers, the war created a global shortage of wheat, which caused prices to spike. However, Green noted, Washington growers primarily produce soft white wheat for most Asian customers.
“There are markets that could use our wheat, that got wheat from Ukraine or from the Black Sea region,” she said. “But I have no idea who is going to fill that void.”
In the United States, with grain supplies dwindling and inflation continuing, diesel is in short supply, especially on the East Coast.
Many U.S. farmers are nonetheless well positioned for another year of profits, as war and global weather challenges have prolonged the rise in prices for 2021 crops.
Wheat recently hit an all-time high and corn and soybeans are trading near record highs. Yet they fear prices will crash as the cost of diesel and other farm necessities remain high.
US diesel prices are the highest on record, with warnings of shortages, particularly in the eastern US. Russia’s invasion of Ukraine has tightened the world’s fuel supply. While the situation in the Midwest is not as dire, wholesale prices in Chicago are still up 75% from a year ago.
“Diesel is the lifeblood of agriculture,” said Ben Riensche, an Iowa corn and soybean farmer whose fuel costs have risen from $35 to $70 per acre.
Fertilizers, grain and machinery parts cannot move through the system efficiently without diesel, which is also needed for its huge earthmoving equipment. In fact, diesel is just a fuel problem.
The price of propane has almost doubled compared to last year. It is used to heat farmers’ homes and electric dryers during harvest to reduce moisture in corn and make the grain suitable for storage and sale.
This will likely be important this season for growers battling heavy rains and flooding in northern US states and the Canadian prairies. In addition, soaring gas prices at the retail pump could increase further during the summer driving season.
“As the milk is transported, there’s a fuel surcharge on that,” dairy farm owner Jon Patterson said. “I have no way of passing this on to the next person. Right now the price of milk has gone up to help offset some of that, but what will happen when fuel and all those other inputs stay high and the price of milk goes down? »
Patterson is investing in bigger equipment to pump fertilizer more efficiently and using GPS to avoid covering the same terrain twice, which wastes precious fuel. Illinois farmer Matt Bennett, co-founder of commodity brokerage firm AgMarket.net, notes that growers with “any crop” should be able to absorb greater energy costs with Chicago wheat futures up 66% year-to-date, corn futures 35% and soybeans 25%.
“The big problem I see is when the pendulum swings,” he said. “I don’t know when that is, but when commodity prices go down, inputs are likely to stay high.” It has helped clients hedge risk by buying New York Harbor diesel and natural gas futures in recent months. “When transportation costs go up, they don’t come down so easily.”
Bloomberg News reporters Kim Chipman and Megan Durisin contributed to this report.