By Matt Reese
Diesel prices are taking big chunks out of farm profitability in 2022 and show no signs of dropping any time soon.
“Futures price for U.S. diesel have doubled in value since Dec. 1, 2021. Even more dramatic, the low in mid-2020 was $1.25 per gallon. Now, it’s nearly $4 per gallon — just on the board,” said Jeff Fichtelman, partner in JP2 Risk Management. “Diesel is a by-product of cracking crude oil. Based on this, if crude is more expensive to buy, diesel is likely going to be more expensive as well. July ‘22 crude futures are pushing up against new highs as well.”
Marc Erwin, of Erwin Brothers, LLC trucking company in Ansonia watches diesel prices closely. The high prices, along with troubling diesel exhaust fluid (DEF) shortages and supply chain issues, are impacting the nation’s trucking industry, which affects pretty much everyone.
“We specialize in the fuel delivery business and we own and operate two truck stops, one in Muncie, Ind., and the other in Greenville, Ohio. Then we also do fuel deliveries for some other companies,” Erwin said. “It has been tough. Most of our customers have understood the rate hikes for delivery. Because they’re in the business, they know fuel is going up so our price goes up. It hasn’t been too bad for me personally, for our company, but we have had to deal with some shortages. It’s hard to find sometimes at the fuel terminals themselves. It just makes it a little tougher and takes a little longer sometimes.”
This, of course, impacts the costs for just about everything.
“Of course, farmers need diesel fuel to put the crops out. We have been able to keep farmers supplied pretty decent but their costs went way up on fertilizer and fuel. They need more assets behind them to take care of this cost and hopefully they’ll get it back in the fall when crops come off,” Erwin said. “I think it’s going to be tough on the consumer as fuel prices keep going higher because everything gets transported by truck and the freight rates are going up. That just raises the price of everything. Everything just keeps snowballing. And as wages go up, it costs more to produce the fuel and production costs go higher. It’s just a vicious cycle and I think the consumer is the one that’s going to be hurt the most trying to keep up with inflation right now.”
No one is quite sure what the outlook for long-term diesel prices will be.
“From the analysts that I’ve been watching, one says it’s going to go up and down, but it’s going to be a year before it goes down. And another says it’s going to go up a little bit and it’s going to stay there. I don’t know who’s right, but I’m going to say it’s going to keep going up for now. This is just my opinion. I think it’s going to go up some more and then maybe this fall it will come down a little bit and it’s going to be there for a couple of years,” Erwin said. “Basically, we’ll just adapt as we go because there’s always something new that comes along. There’s always a new shortage, or problems trying to get parts for our trucks or equipment for the stores.”