Cost of Fuel an Additional Stressor for Farmers and Ranchers

Increased fuel prices for farmers and ranchers come at a time when all other inputs are higher, impacting their bottom line. Micheal Clements shares more on what they can do to help manage the issue.

Clements: USDA estimates show that the cost of fuel, lube and electricity is expected to increase 34 percent in 2022 compared to 2021. American Farm Bureau Federation economist Shelby Myers says farmers are feeling the pinch.

Myers: They’ve been facing these price increases all throughout the spring and they’ve been working to get what could be one of the most important crop years planted. And for growers, they’ve expressed a lot of concerns about availability and delivery of the diesel fuel for when they needed it most, especially as we face some of these delayed planting times. So, that window to plant crops this year was smaller than usual, so it meant that fuel delivery had to be timely, but that also meant it came at a cost.

Clements: US fuel supplies have traditionally declined in the spring and summer with increased demand, but Myers says there are additional factors this year.

Myers: What’s making this even more difficult is that the US does not have the same amount of additional supply being produced or even coming into the country that would supplement this increased demand. And so, we continue to see evidence where the US economy is trying to play catch up, all those production slowdowns and interruptions that were created by COVID-19, and we’ve added in additional hurdles like Russia’s invasion into Ukraine, it’s really impeded the ability for the supply chain to catch up with demand.

Clements: Should price increases continue, she urges farmers to consider what options they may have to seek relief.

Myers: It’s really about managing the risk to the price increases and that uncertainty of price increases and finding ways to reduce cost creatively. There are crop insurance products that are available that can help insure against input prices for farmers that would include diesel and fertilizer, but it’s really limited to a few states and only corn, soybeans, rice and wheat. But it’s also a really good opportunity to have conversations with local fuel retailers for the opportunity to price hedge and utilize on-farm fuel storage.

Clements: Read more on the Market Intel page at Michael Clements, Washington.

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