Key facts
- Farmers in the Midwest are facing record diesel costs during the soybean harvest.
- Record-high prices are attributed to the war with Iran, damaged refineries in Russia, and regional supply disruptions.
- Fuel costs could add an estimated $12,500 per 1,000 acres harvested.
- Diesel prices have jumped by more than $3 per gallon compared to a year ago in some Midwest states.
- A refinery outage in Illinois and a labor dispute in Indiana have impacted regional diesel supply.
- School districts are cutting jobs and limiting bussing due to rising fuel costs.
Farmers in the US Midwest are facing significantly higher operational costs due to record-high diesel prices as the crucial soybean harvest season begins. Joe Hamilton, who farms corn and soybeans on 2,500 acres in Indiana, anticipates a fuel bill of about 9,000 gallons for the upcoming harvest, using approximately 300 gallons per day during the roughly 30 harvest days.
The surge in diesel prices, impacting crop growers, trucking companies, and other fuel-dependent industries, is attributed to a combination of factors including the war with Iran, damaged refineries in Russia, and regional supply disruptions. Estimates suggest that these factors could add an additional $12,500 in fuel costs for every 1,000 acres harvested.
Kurt Lykins, a lecturer at Otterbein University, noted that the Midwest's lower number of oil refineries makes it more vulnerable in times of crisis compared to coastal regions. He also expressed concern over the Strategic Petroleum Reserve being at a 43-year low, potentially leading to greater price instability as winter, a high-demand season for diesel, approaches.
Beyond agriculture, manufacturers, trucking companies, and retailers are also dealing with the fallout of higher diesel costs, particularly as they prepare for the holiday buying season. Four of the five states with the highest weekly diesel price increases in September were in the Midwest, with prices jumping over $3 per gallon year-on-year. Specific regional issues include a recent power outage and flooding at an ExxonMobil refinery in Illinois and an ongoing labor dispute at a BP refinery in Indiana.
In response to rising costs, large diesel consumers are seeking ways to reduce expenses. School districts, for instance, are consolidating bus routes and cutting non-required trips. The Columbus school district, facing a significant financial deficit, has already cut jobs and closed schools, with bussing costs exceeding $70 million annually. Rural districts are expected to be disproportionately affected due to longer transport distances.
Farmers like Hamilton are also adopting methods such as no-till and cover crop farming to reduce machinery use. However, for the current harvest, paying elevated prices for fuel is unavoidable. Hamilton noted that his farm's limited fuel storage capacity will force him to purchase more diesel in the coming weeks, and nearly half of his harvesting fleet uses more expensive on-road diesel.