Key facts
- US farmers are experiencing record-high diesel prices, impacting their operational costs.
- The ongoing conflict involving Iran is disrupting fuel supplies and driving up crude oil prices.
- Diesel powers essential farm machinery for planting, fertilizing, and harvesting.
- Farmers' fuel-related expenses could increase significantly as a percentage of total input costs.
- US distillate fuel inventories have reached a 23-year low, suggesting potential for further price increases.
Rising energy costs are significantly impacting U.S. grain and soybean farmers, with diesel prices reaching record highs in key agricultural states. The ongoing conflict involving Iran and its disruption of fuel supplies through the Strait of Hormuz are primary drivers of this surge. Many farmers were already facing financial strain due to drought, high input costs, and the lingering effects of U.S. President Donald Trump's trade policies.
The conflict has pushed diesel prices in several Midwest states to new all-time highs during May, coinciding with critical spring fieldwork. Nationally, average diesel prices have climbed over 40% since the Middle East conflict began, with global crude oil prices also rising substantially. Diesel is essential for powering farm machinery used in all stages of crop production, from planting to harvesting.
Unlike other industries, most U.S. farm equipment is designed to run exclusively on diesel, leaving farmers particularly vulnerable to price volatility. Farmers are reporting that fuel-related expenses, previously around 3-4% of input costs, could rise to 5-6% if prices remain elevated. This comes at a time when crop prices have fallen sharply, further weakening farmers' bottom lines.
Some farmers are taking measures to conserve fuel, such as delaying soil preparation. Others are facing higher shipping costs for transporting their crops to market. Experts warn that fuel prices may continue to climb if the conflict persists, especially as U.S. distillate fuel inventories have fallen to a 23-year low.