High Fuel Prices Squeezing Arizona Farmers and All U.S. Farmers
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.
“As diesel now has surpassed $6.00 per gallon, truckers who transport our farm products have stated that their associates are parking their trucks due to high fuel prices,” said Arizona’s Harold Payne, president, and owner of Agri Services, LLC, and technical consultant for Fort McDowell Farms in Maricopa County. “When that happens to a significant extent, grocery stores run short of food products, the public panic purchases cleaning out the shelves and chaos ensues. Some of the shortages currently and soon are caused by shortages of labor to manufacture and transport normal supplies, some are caused by delays in getting products off-loaded at the ports, compounded by the new regulations in California that only trucks that meet the new emission standards, which require the use of DEF, can enter the ports to load and unload. A visit to a local tractor dealership in Pinal County reveals bare spots on their shelves of familiar items such as hitches, antifreeze, electrical supplies, and other items commonly seen at their stores.”
The war in Ukraine has reduced the 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.
Arizona Farm Bureau assessed too how production costs are outpacing commodity prices for farmers and ranchers in Arizona.
American Farm Bureau Federation economists analyze the factors contributing to rising fuel prices in the latest Market Intel.
“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.