Diesel Prices Hit Record High: US Farmers Strangled, Trump Faces New Challenges
Diesel prices in the United States have hit record highs, a development that could pose a significant hurdle for President Donald Trump. The average price for highway diesel in the US reached US$6.285 per gallon (approximately Rp29,400 per litre) at the start of this week, up from US$5.97 a week prior. This represents an increase of more than US$2.50 per gallon compared to the same period last year, a year-on-year surge of nearly 70%.
Diesel prices for agricultural use have also risen sharply. In early September, the average reached US$5.45 per gallon, up from US$3.02 a year ago, marking an increase of around 80%. While agricultural diesel is generally exempt from the US federal highway fuel tax of 24.4 cents per gallon, state tax regulations vary.
According to Reuters, farmers across various US regions are facing these record-high diesel prices in the midst of the harvest season. This situation is further squeezing already thin profit margins for farmers and has the potential to drive up food prices in US supermarkets. In northeast Missouri, for instance, Addie Yellen, a corn, soybean, and cattle farmer, operates two combines, three semi-trailers, and several tractors during the harvest season which runs from mid-September to late October. With diesel prices at record levels and a single combine requiring approximately 300 gallons of fuel, Yellen noted that the only available option is to cut other expenses.
A similar situation is experienced by Drew Peterson, a soybean, corn, and cattle farmer in southeast South Dakota. He estimates that fuel costs for a single combine could reach US$1,500 (approximately Rp26.5 million) per day during this year’s harvest, doubling the cost from last year. “You cannot simply say, diesel is expensive, so I will not harvest. You have to make it work within your budget,” Peterson told Reuters.
Rising fuel prices also have the potential to trickle down to consumers, particularly ahead of the US midterm elections in November. The cost of living is expected to be one of the primary issues concerning voters. The increase in diesel prices raises costs at almost every stage of the food supply chain, from the harvesting process on farms to transportation via trucks to stores and supermarkets. “The majority of our food is transported by trucks, and those trucks use diesel,” said David Ortega, an economist from Michigan State University, to Reuters. US consumer food prices themselves rose 2.7% year-on-year in August, according to the latest Consumer Price Index (CPI) data.
Farmers are beginning to cut expenditures. Although farmers have access to off-road diesel that is exempt from state and federal taxes, many are still paying significantly more than last year. Wayne Gularte, a vegetable farmer managing approximately 60’000 acres near Gonzales, California, stated that his fuel costs increased by about 40%, from around US$5 to US$7 per gallon. To save costs, he has even reverted to using several old petrol-powered tractors from the 1950s and has ceased using one of the farm’s diesel pickup trucks. “The only money we can make is the money we save,” said Gularte.
According to Purdue University economist Michael Langemeier, agricultural fuel costs have increased by approximately US$11 per acre for corn and US$7 per acre for soybeans compared to last year. While futures prices for corn, soybeans, and wheat have surged significantly since mid-August, reaching multi-year highs in early September, farmers’ profit margins remain thin compared to historical averages. Nick Paulson, an agricultural economist at the University of Illinois, warned that high fuel costs could also increase seed and fertiliser costs next year. “The concern is that diesel above US$6 per gallon is starting to create inflationary pressure on everything, even eroding the potential for increased profits,” he noted.
Many farmers have already implemented savings, leaving little room to absorb further fuel price hikes. Jon Paul Driver, a hay farmer near Spokane, Washington, and second vice president of the Washington Farm Bureau, stated that rising fuel costs are directly adding to farmers’ debt burdens. “Every increase in fuel prices currently represents additional debt for the farm,” he said.
US Senator Roger Marshall, a Republican from Kansas, has called on US Secretary of Agriculture Brooke Rollins to provide temporary assistance to farmers facing unexpected fuel cost surges. In a letter dated 11 September, Marshall requested government aid for farmers who must absorb these costs during one of the most diesel-intensive periods of the year. The US Department of Agriculture (USDA) stated that the government is “not leaving any option unexplored” to address high diesel prices. Rollins also indicated that further announcements regarding the matter would be made in the coming weeks.
The products most vulnerable to price increases are vegetables, dairy, and meat, as they require refrigerated transport which is heavily dependent on fuel. The cost of transporting apples and pears using refrigerated trucks from Yakima Valley, Washington, has reached a four-year high, even though the harvest is only halfway through. Meanwhile, the cost of transporting agricultural products from California has surged by 40% to 120% compared to last year. In some cities in California, diesel prices have even breached US$8 per gallon.