How Bad Is $6 Diesel for the Farmer?

How Bad Is $6 Diesel for the Farmer?
May 13, 2022

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By Andrew Frankenfield and Dwane Miller

Maybe you are like me and thought back in mid to late April the $4+ diesel price was too high to fill the farm tank. I decided to re-evaluate the situation in another week or two to fill it and the price jumped a dollar or more in just one day! Now we are looking at $6+ and I still have not filled it. I guess it was wishful thinking that fuel wouldn't double in price when fertilizer has nearly tripled.

How much fuel does a farm use in a year? A better question is how much fuel does a farm use per acre? A cash grain farm using no-till and conventional fertilizer probably uses less than 3 gallons per acre to grow and harvest a crop of corn or soybeans. Trucking is additional and varies by distance. Farms that do tillage and/or those that spread manure will have higher fuel usage per acre.

Another consideration is to factor in the energy needed to produce the nitrogen fertilizer, as well as the gas and electric required to dry the corn at harvest. Figure 1 shows equivalent fuel usage per acre for corn and soybeans. It also shows what we know about the costs associated with producing corn compared to soybeans. For more information on these calculations visit this Iowa State website. I am not trying to throw corn under the bus, my point is that we have been paying the cost of high energy prices already to grow our 2022 crop. The price to fill our fuel tank just hits closer to home and is a reminder every time we drive past a gas station.

 farmer


Figure 1. Relative energy requirements (gallons of equivalent diesel fuel energy) per acre for corn and soybean production. (Assumptions: 125 pounds of commercial N fertilizer applied per acre on corn; 5 percentage points of moisture removed from 175 bushel corn; full-width tillage operations for both crops.) Photo Credit: Iowa State University fact sheet: "Farm Energy: Energy consumption for row crop production".

Without question higher diesel prices will increase your cost of production slightly. A price of $3/gallon and a fuel usage of 3 gallons per acre costs you $9/acre in diesel costs. Double that to $6/gallon and you are up to $18/acre, a $9 increase. For a farmer with 500 acres of no-till corn and soybeans, that would mean an additional $4,500 in fuel costs to produce the 2022 crop.

 farmer
Diesel fuel price map as of May 9, 2022. Photo Source : TCI Business Capial current freight trends

Turning to fuel prices, the latest Energy Information Administration data shows the national average diesel price is at $5.51 per gallon, a $.35 increase from one week ago, and $2.37 higher than one year ago.

Hay growers have similar figures:
According to Iowa State it takes about 1.25 gallons of diesel fuel to cut, rake and bale per acre. If your fuel cost last year was $3.00/gallon and this year it is $6.00/gallon. It will cost you about $7.50 per acre per cutting, compared to about $3.75 per acre per cutting last year. If you harvest 2 tons per acre first cutting, it is only $3.75 more per ton.

The increase in fuel cost will have more impact on your cost of transportation. The cost per mile has gone up about $0.65 due to the nearly doubling of the fuel price in the past year. Consider that in your updated crop enterprise budget for 2022. Also, the increasing fuel price will continue to impact the cost of inputs used in agriculture and all industries for the foreseeable future.

Yes, everyone's talking about high fuel prices. The fuel price, in addition to all other escalated costs, will impact the bottom line for your farm. Take time to understand and evaluate all your costs with each crop you grow.

Source : psu.edu

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