June 7, 2022
Rising agriculture diesel costs are cutting into farmers’ profit margins. Jason Schwantz, CHS senior vice president of refined fuels, explains why diesel prices are on the rise and offers advice on how to minimize effects on the farm.
Recent farm diesel price surges are increasing costs for consumers and cutting into profit margins for farmers. Jason Schwantz, senior vice president of refined fuels at CHS, says there are a couple of factors contributing to rising fuel prices.
“Demand for fuel declined during the pandemic, so many refiners cut back on production, lowering fuel inventories. As COVID-19 restrictions eased, people began traveling more, and now we’re seeing strong demand for fuel. The war in Ukraine also contributes to increased costs at the pump because the U.S. is exporting fuel to Europe to support their needs. Domestic and foreign demand are both challenging U.S. fuel supplies, especially diesel supplies,” he says.
Demand for diesel drives prices higher
Refiners are doing their best to produce more fuel to keep up with the growing demand, but Schwantz says he expects fuel prices, including farm diesel, to remain high in the near term. “We will continue to see elevated fuel prices as the war in Ukraine continues. There could be some price breaks and opportunities to take advantage of price dips, but it could take some time before the fuel supply is balanced with demand.”
Planting windows have been compressed in many areas, where rain and cold weather have delayed fieldwork. Schwantz says that means the usual seasonal demands for agriculture diesel have been compounded because more farmers are fueling equipment at the same time. “Demand has been very heavy for the agriculture industry. We continue to look for ways to satisfy that demand.”
Farmers benefit from increased production
CHS, which operates two U.S. refineries, is maximizing diesel production to help ease the burden on farmers. “We run heavy, sour crude at our Laurel, Mont., refinery, which is ideal for making diesel fuel. Nearly half the fuel we produce is diesel because, as an ag-focused company, we want to get every drop of diesel fuel available to our owners so they have the supply they need when they need it,” says Schwantz. While there may not be relief from rising prices soon, Schwantz says thoughtful planning can minimize the effects felt on the farm. “Work with your local cooperative to take advantage of price dips. Get your fuel priced out and delivered to ensure you have the supply you need.”