Harvest Squeeze: Record-High Diesel Prices Negate $6 Corn

With $6 corn finally within reach, farmers would typically be celebrating. Instead, a record-breaking spike in diesel prices is hitting at the worst possible time as the fall harvest season ramps up.

On Sept. 3, Patrick De Haan, executive director of GasBuddy, reported that the national average for diesel had climbed to an unprecedented $5.82 per gallon, surpassing the previous daily record of $5.819 per gallon set in June 2022.

The very next morning, Bloomberg’s Lisa Abramowicz and AAA confirmed that diesel prices had surged even higher, peaking at $5.85.

Prior to the most recent price spike, one Texas farmer told Farm Journal his diesel bill went up $23,000 in just one month.

Many farmers chose to wait closer to fall harvest to buy diesel, hoping prices would come back down. Kinser Jensen, a corn and soybean farmer from north-central Iowa, is one of those farmers.

“Although we’ve been taking the wait-and-see approach, we’re just going to have to bite the bullet and start buying fuel,” says Jensen, who farms 3,400 acres. “There’s little things we can do, but at the end of the day it’s not going to change the big picture. I can’t change enough to mitigate that increased cost.”

What’s Driving Record Diesel Prices?

There are multiple contributing factors to a record-high increase in diesel prices. The U.S. Energy Information Administration’s data shows distillate fuel oil stocks, including diesel and heating oil, were at 103.4 million barrels for the week ending Aug. 21, a record-low for this time of the year.

The war in Iran – specifically the closure of the Strait of Hormuz – is helping drive the surge in diesel prices. However, De Haan says the war between Ukraine and Russia has had more of an impact on diesel. Ukraine has severely damaged Russian oil refineries in recent weeks, disrupting global diesel supplies.

“That’s very problematic. Russia’s one of the largest producers of diesel to the global market. One in nine barrels of diesel produced globally comes from Russia,” De Haan says. “Now they’ve banned exports of diesel. So suddenly the global market for diesel is extremely tight.”

Unfortunately, prices could climb even higher in the coming weeks. Traditionally, diesel prices experience strong seasonal upward pressure throughout the fall due to harvest and the fact that home heating oil is a refined “cousin” to diesel. As colder weather approaches, heating oil consumption experiences a sharp seasonal ramp-up. According to the Energy Information Administration, U.S. consumption of the critical distillate fuels increases by an average of 4% between September and October.

“Until there is enough global refining capacity, we probably will continue to see diesel prices rather elevated for at least the next few months,” De Haan says. “If we continue to see new attacks going into the winter, it’s certainly possible we could see diesel prices climbing even closer to $6 a gallon across the country.”

U.S. Exports Adding Pressure

Since the start of the war with Iran, weekly U.S. exports of total distillate have increased. At the end of February, exports totaled 1,228,000 barrels per day. At the end of August, that number hit 1,735,000 barrels per day.

While Russia is attempting to quickly repair damaged refineries, De Haan says the damage is significant. For now, farmers such as Jensen will have to absorb the hit and hope global supply chains stabilize before spring planting.