Record US diesel prices squeeze farmers as harvest peaks, food costs loom

Farmers across the United States are absorbing record-high diesel prices at the peak of the harvest season, tightening already narrow margins and setting the stage for higher grocery bills.

The national average diesel price reached a new high of $6.29 per gallon this week, up 68% from $3.74 a year earlier, according to Energy Information Administration data. Global fuel supplies have been constrained by the U.S.-Israeli war on Iran and Ukrainian strikes on Russian refineries.

In northeast Missouri, farmer Addie Yoder runs two combines, three semi-trucks and several tractors from mid-September to late October. With a single combine consuming 300 gallons, she said her only option is to cut other expenses. In southeast South Dakota, Drew Peterson expects to spend up to $1,500 a day fuelling one combine — double last year's cost.

"You can't just say, well, diesel is expensive, I'm not going to harvest," Peterson said. "You've just got to make it work in your budget."

Even off-road diesel, which is exempt from state and federal taxes, has become far costlier. Wayne Gularte, who grows vegetables on about 600 acres near Gonzales, California, said his fuel costs have climbed roughly 40%, from about $5 to $7 a gallon. He has brought 1950s gasoline-powered tractors back into service and parked a diesel pickup. "The only money we can make is the money we save," he said.

Purdue University economist Michael Langemeier estimates farm fuel costs are up $11 per acre for corn and $7 per acre for soybeans compared with last year. Corn, soy and wheat futures have rallied since mid-August, touching multi-year highs in early September, yet margins remain thin by historical standards.

University of Illinois agricultural economist Nick Paulson warned that diesel above $6 a gallon could push up costs next year for seed and fertiliser. Jon Paul Driver, a hay farmer near Spokane, Washington, and second vice president of the Washington Farm Bureau, said any further increase amounts to additional debt for farms.

U.S. Senator Roger Marshall, a Republican from Kansas, asked Agriculture Secretary Brooke Rollins in a September 11 letter for temporary relief during what he called one of the most diesel-intensive periods of the year. A USDA spokesperson said the agency is "not leaving any stone unturned," pointing to a September 15 interview in which Rollins said more would be announced in coming weeks.

Higher fuel costs ripple through every stage of the food chain. Michigan State University economist David Ortega noted that most food moves by truck. Consumer food prices rose 2.7% year-on-year in August, per the Consumer Price Index, and Ortega said the full effect of fuel costs may take months to surface as retailers absorb short-term increases or freight contracts locked in at lower rates delay surcharges. Produce, dairy and meat — reliant on refrigerated trucking — are most exposed.

Freight data already reflects the strain. Rates to move apples and pears in refrigerated trailers out of Washington State's Yakima Valley have hit a four-year high with the harvest only half finished, said Dean Croke, principal analyst at DAT Freight & Analytics. Transport costs out of California are up 40% to 120% from a year ago, with diesel topping $8 a gallon in some cities. Croke warned that independent truckers, who pay for fuel upfront, may not survive further increases. "We're about to see diesel price-driven bankruptcies" of trucking firms, he said.