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High diesel prices putting strain on farmers

Getty/iStockphoto Combine harvesting  field of corn
AFBF President Zippy Duvall calls on President Biden to bring more domestic supply online.

The average price of diesel is $5.32 per gallon, more than $1.50 above the same time last year. While prices are below the $5.81 peak in June, the high cost of fuel is hitting farmers hard as they navigate the fall harvest season. American Farm Bureau Federation economists analyzed the factors driving up fuel prices in the latest Market Intel report.

A ban on U.S. imports of petroleum from Russia, lower domestic production capacity, and seasonal demand are all contributing to higher costs. Russia provided 20% of the petroleum imported into the U.S. in 2021, but that was halted after Russia’s invasion of Ukraine.

“Russia’s invasion of Ukraine has had significant impacts on global markets for crude oil and petroleum products, not just U.S. markets,” the report noted. “These disruptions have created unusual marketing opportunities for producers of oils and fuels and resulted in some unusual product flow. The result for the U.S. diesel market is a net decrease in distillate trade, further tightening U.S. supplies.”

Beyond the impact of Russia, AFBF said that since 2019, domestic diesel production capacity has dropped by 180,000 barrels per day. Several plants closed during the coronavirus pandemic and are not yet back online.

Stocks of diesel fuel are currently down 17% relative to a year ago, although regional analysis reveals that the decline in diesel stocks is more pronounced in some parts of the country than others. AFBF relayed that East Coast stocks are down 37% compared to last year, Midwest stocks are down 15%, and the West Coast and Rocky Mountain regions are down 11% and 9%, respectively. The Gulf Coast region, on the other hand, is up 1% relative to the same time last year.

AFBF President Zippy Duvall has sent a letter to President Biden, calling on the administration to bring more domestic supply online, reducing costs to all Americans.

“Our nation’s food supply is driven by diesel,” President Duvall said in the letter. “Every input that arrives on our farms and ranches is transported by a diesel engine, whether that is by boat or barge, rail or truck. Our crops are planted by diesel engines and harvested by diesel engines. High diesel prices are severely impacting our farmers and ranchers, causing increased costs to consumers, and adding to food insecurity.”

He continued, “With roughly 25 days’ worth of diesel stocks and prices well over $5 per gallon, Farm Bureau also encourages your administration to explore all options, including removing any regulatory barriers that limit the supply, production and distribution of diesel fuel.”

National diesel prices are expected to average $4.86 per gallon through the end of the year, according to government projections, and $4.29 per gallon in 2023.

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