The American Farm Bureau Federation is out with some dramatic new figures on the toll fuel inflation is taking on producers and consumers. The cost of growing food and fiber is soaring, with no end in sight.
AFB Chief Economist Roger Cryan; “At the retail level, gasoline is up 50-percent from a year ago and fuel oil is up 100-percent from a year ago, quite a high-cost increase for farmers.”
Diesel prices are up 74-percent from a year ago as well. And what’s causing the record fuel prices? Cryan; “The strength in demand as the economy has recovered from COVID recessions, and the other is the massive disruption of so many markets from the war in Ukraine.”
On the production side Cryan says; “There have been some disruptions to U.S. refining capacity, which affects the market, we also need to see some increases in production if we’re going to make up the gap, resulting from the Russian shortfalls.”
Can farmers still make a profit?
“Farm prices are up for crops, but for crop farmers, those have been really cut into by higher fuel and fertilizer costs. Livestock, animal products, some of those prices are up, but those prices have been undercut, in terms of profitability, by rising crop prices, as well as fuel and fertilizer prices.”
Fuel prices could still come down, but experts say the US must boost domestic oil production and expand refining capacity, both of which require investment and regulatory flexibility lacking right now. Hurricane season could also hurt production squeezing tight supplies even more as the summer driving season kicks into high gear.
American Farm Bureau Federation economist Shelby Myers says farmers are feeling the pinch.
“They’ve been facing these price increases all throughout the spring and they’ve been working to get what could be one of the most important crop years planted. And for growers, they’ve expressed a lot of concerns about availability and delivery of the diesel fuel for when they needed it most, especially as we face some of these delayed planting times. So, that window to plant crops this year was smaller than usual, so it meant that fuel delivery had to be timely, but that also meant it came at a cost.”
Should price increases continue, she urges farmers to consider what options they may have to seek relief.
“It’s really about managing the risk to the price increases and that uncertainty of price increases and finding ways to reduce cost creatively. There are crop insurance products that are available that can help insure against input prices for farmers that would include diesel and fertilizer, but it’s really limited to a few states and only corn, soybeans, rice and wheat. But it’s also a really good opportunity to have conversations with local fuel retailers for the opportunity to price hedge and utilize on-farm fuel storage.”
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