Rising diesel prices threaten farm output and a new wave of food inflation

The global surge in diesel prices is putting additional pressure on farmers just as harvesting and planting activity intensifies, raising production costs and risks for future food supplies. The increase has been driven by disruptions in the Strait of Hormuz and lower fuel output from Russian refineries.

In Australia, where farmers are starting to harvest one of the country’s largest grain crops in recent years, diesel prices are more than 50% higher year on year at around A$3/liter. For large farms, the impact is significant, with some operations using about 4 thsd liters of fuel per day during harvest.

Similar problems are emerging in other major agricultural regions. In parts of Brazil, diesel prices have risen by around 40% since the start of the US-Iran war, while farmers warn that unstable supplies could delay soybean planting. In the US, high fuel costs are also forcing growers to plan corn and soybean harvesting more cautiously.

In the UK, diesel expenses for major farming businesses have increased by around 40%, while transport companies are adding fuel surcharges to freight rates. High electricity, fertilizer and other input costs are adding further pressure.

European farm groups warn that prolonged increases in diesel and other production costs could lead to noticeable declines in agricultural output. If elevated costs persist, they could increasingly feed through into food prices and contribute to a new wave of food inflation.

Tags: prices, food inflation, fuel, diesel fuel, global market, diesel