Farmers worldwide struggle with rising fuel costs
Farmers worldwide are feeling the pinch as fuel costs rise to near four-year highs just as they plant and harvest their fields, eroding agricultural income already hamstrung by depressed crop prices.
The agricultural sector from the United States to Russia, and Brazil to Europe, is seeing profits harmed by the rise in diesel prices. The global oil benchmark, Brent crude LCOc1, touched $80 a barrel for the first time since late 2014 on Thursday.
Coupled with local economic issues, the increase is making it even harder for many farmers worldwide to turn a profit in the estimated $2.4 trillion agriculture industry, casting a cloud over future investments.
In the United States, fuel accounts for about five percent of farmers’ overall costs, and is hurting margins at a time when farm income is already half that of 2013. Massive harvests have depressed prices of staples such as corn, wheat and soybeans.
Diesel fuel is essential for planting, harvesting, and shipping crops to market. In the United States, farmers will spend an estimated $15.25 billion on fuel and oil in 2018, an 8 percent increase from 2017, U.S. Department of Agriculture data showed.
The price of ultra-low sulfur diesel used for farming equipment and transporting crops has not been this high in May since 2014. Heating oil futures, the proxy for ultra-low sulfur diesel, traded at $2.29 a gallon on Thursday.
Ron Heck, who grows soybeans in Perry, Iowa, said his fuel costs could go up $1,000 to $2,000 during the northern hemisphere’s spring.
“You feel the pain right away,” Heck said.