Thursday, July 7, 2022

Diesel’s 100% boom and shortage deprive US farmers of their ‘life givers’

Farmers from Iowa to Ukraine are grappling with rising diesel prices and volatile supplies, prompting them to spend unprecedented amounts of money on fuel in a chaotic market and raising concerns about an autumn harvest.

In the US, where corn and soybean growers are rushing to plant after delays caused by rain and cold temperatures, filling tractor tanks daily now costs some farmers $1,000, double what it was a year ago . And the most intense part of the farming season is still ahead.

“We’ve never experienced this level of price increases for agricultural diesel fuel,” said Iowa farmer Chris Eddington, president of the National Corn Growers Association. He said the cost per gallon has risen to $4.70 from $2.20 a year ago.

In Ukraine’s breadbasket nation, three months into Russia’s military offensive, growers are tending farms amid a brutal bombardment of storage sites. A grain farmer said he had enough fuel to last for two months. He is nervous about diesel supplies ordered weeks ago that are not visible.

“If you have to wait that long every time, you’re slowly running out,” said Kies Huizinga, who farms 15,000 hectares (37,000 acres) in Ukraine. The crops needed to feed the dairy cows are days away from harvest and, if delays continue, could pose major problems for corn and sunflowers in the autumn.

In the US, as grain stocks shrink and inflation continues, diesel is in short supply, especially on the East Coast. Many US farmers are still well positioned for another year of profit as war and global weather challenges exacerbated the 2021 crop price rally. Wheat has recently hit an all-time high and corn and soybeans are trading near record highs. Still, he worries that prices will fall, while the cost of diesel and other key agricultural necessities will remain high.

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US diesel prices are at an all-time high, with warnings of shortages, especially in the eastern US. Russia’s invasion of Ukraine tightened global supplies of fuel. While the situation is not as dire in the Midwest, wholesale prices in Chicago are still up from 75% from a year ago.

“Diesel is the lifeblood of farming, with fuel costs rising from $35 to $70 per acre,” said Ben Riensche, an Iowa corn and soybean farmer. Fertilizers, grain and machinery parts cannot run efficiently through the system without diesel. , which is also essential for their massive earth-moving equipment.

In fact, diesel is only a fuel problem. The price of propane has almost doubled over the past year. It is used to heat farmers’ homes and electric dryers during harvest to reduce the moisture content of corn and make the grain suitable for storage and sale.

This is likely to be important this season for growers who are battling heavy rains and flooding in the northern states of the US and the Canadian prairies. Also, the hike in petrol prices at retail pumps could be even higher during the driving period of summer. RELATED: Every single state in America that has gasoline above $4 per gallon ‘milk being turned away has a fuel surcharge on it,'” said dairy farm owner John Patterson.

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“I have no way of passing it on to the next person. Right now, the price of milk has come in to help offset that somewhat, but what’s going to happen when fuel and all other inputs stay high and milk the price drops?’

Patterson is investing in larger equipment to pump fertilizer more efficiently and using GPS to avoid visiting the same land twice, wasting valuable fuel. Illinois farmer Matt Bennett, co-founder of commodity brokerage AgMarket.net, noted that growers with “any crop” should be able to absorb the large energy costs with wheat futures in Chicago, which since the beginning of the year were 66 per cent. Corn futures up to %. 35% and soybean 25%.

“I see that the bigger issue is when the pendulum swings,” he said. “I am not sure when this will happen, but when commodity prices are low, inputs are likely to remain high.” He has been helping clients hedge risk by buying New York Harbor diesel and natural gas futures over the past few months. “When transportation costs go up, they don’t come back so easily.”

bloomberg

Nation World News Desk
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