Diesel fuel prices approach four-year high | Michigan Farm News

Diesel fuel prices approach four-year high

Category: People, Markets & Weather, Crops

by Farm News Media

diesel-pump-mfn-2018
While rates have yet to reach the fevered level of 2013/2014, the steady climb has growers concerned that prices may be headed in that direction.

For farmers who rely heavily on diesel fuel for raising and trucking their crops, the last five years have been anything but steady when it comes to predictable diesel fuel pricing.

In 2013, highway diesel prices typically exceeded $3.75 per gallon, and averaged nearly $4 per gallon.

However, once on-road diesel prices broke the $3.75 per gallon barrier in September 2014, rates fell steadily, hitting a five-year low in February 2016, at $1.98 per gallon.

Since that low point, diesel prices have been on a steady uptrend, according to USDA’s Agricultural Marketing Service’s weekly Specialty Crops Truck Rate Report. As of May 2, 2018, U.S. average price of $3.157 – a level last seen in January 2015.

While rates have yet to reach the fevered level of 2013/2014, the steady climb has growers concerned that prices may be headed in that direction. Since mid-January, on-highway diesel prices have exceeded the price paid during the same month in all of the last three years.

In recent weeks, according to the American Farm Bureau Federation, the increase over year-ago pricing has been even more dramatic, with the U.S. average on-highway diesel priced 22 percent higher at the end of April 2018 than the end of April 2017.

According to Michigan Farm Bureau (MFB) Horticultural Specialist Kevin Robson, highway diesel fuel prices play a significant role in setting the rates specialty crop growers must pay to get their product to market. For individual growers the impact of rising fuel prices depends on distance, perishability of their crop and method of transportation.

“Fuel is an absolute necessity, both as an on-farm raw input cost to produce the crop, and as a transportation cost for on-road diesel,” Robson said. “When input costs and transportation costs rise, it’s only appropriate for the cost of produce to rise as well. I would expect this to be the case this summer.”

Robson said there is a possible silver lining for Michigan specialty crop growers.

“Historically, we’ve seen our regional markets benefit because of high fuel prices,” he said. “Michigan’s current table-stock potato markets are performing quite well, for example, because of Idaho’s inability to ship fresh potato table stock into our eastern markets.”

If diesel fuel prices continue to rise into the fall, apple growers could see their markets remain strong with state-sourced product because of Washington’s inability to ship apples east, cost effectively.