High Fuel Prices Squeeze Farms And Ranches

Rising fuel prices are putting growing pressure on farmers and ranchers as they grapple with increased costs of growing food and fiber. USDA estimates show that the cost of fuel, lube and electricity is expected to increase 34% in 2022 compared to 2021. American Farm Bureau Federation economists analyze the factors contributing to rising fuel prices in the latest Market Intel.

The war in Ukraine has reduced availability of global crude oil and U.S. domestic production is down while demand is increasing in the United States and abroad. Diesel prices rose to $5.718 per gallon in June, up $2.432 per gallon, or 74%, compared to $3.286 per gallon in June 2021. The current high price of diesel is more than two times the price paid before 2020.  

“While some farmers are seeing increases in commodity prices, their gains are being eaten up by higher expenses,” said AFBF President Zippy Duvall. “Many farmers and ranchers are concerned they won’t be able to break even, much less make a profit. It’s not just on-farm costs taking a toll. High diesel and gasoline prices, among other increased costs, all affect the food supply chain, starting at the farm and continuing to the grocery store, which means all families are ultimately paying more to put food on their tables.”

Prices could potentially begin to decline, but the U.S. must increase domestic production and expand refining capacity. Farmers and ranchers will also be watching the weather as hurricane season ramps up. Severe weather could impact production if refineries or offshore sites are hit by storms.

Read the Market Intel here.