By Faith Parum
Key Takeaways
- Diesel prices are rising as harvest begins across the country. The national average on-highway diesel price reached $6.285 per gallon, up more than $2.50 from the same week last year. Farm diesel prices are also climbing, reaching $5.45 per gallon on Sept. 4, up from $3.02 a year earlier.
- Crude oil prices have increased about 14% since the beginning of September while inventories remain low.
- Higher fuel costs are compounding on already tight budgets. Even as the grain market rallies and crop revenues are projected to improve, increased production costs continue to keep major row crops below breakeven.
Diesel prices are on the rise as harvest begins across the country, adding another cost for farmers during one of the most fuel-intensive times of the year. On Sept. 14, the national average on-highway diesel price reached $6.285 per gallon, up from $5.97 the week before and up more than $2.50 per gallon from the same week last year, an increase of nearly 70% year over year.
Diesel used for farming purposes is generally exempt from the 24.4-cent-per-gallon federal highway fuel tax, with state tax treatment varying by state. Even with that exemption, farm diesel prices have climbed sharply. The average farm diesel price reached $5.45 per gallon on Sept. 4, up from $3.02 a year earlier, an increase of about 80%.
This increase, along with rising fertilizer prices, is due to several disruptions in the global energy markets. First, the closure of the Strait of Hormuz has limited a major shipping route for global oil markets. Additionally, attacks on infrastructure by Houthi rebels in the Bab al-Mandab Strait in the Red Sea, paired with limited refining capacity in Russia due to the ongoing war, continue to reduce global supplies. These major disruptions continue to push crude prices and diesel higher.
Farmers need diesel, especially during harvest season. Tractors, combines and irrigation equipment are all fueled by diesel, and once crops leave the field, it's critical to transportation throughout the agricultural supply chain. Higher diesel prices drive costs higher for farmers and throughout the supply chain as transportation gets more expensive.
This shock comes at a time when margins are already thin, and farmers are facing record-high production costs. USDA forecasts farm fuel and oil expenses at approximately $22 billion in 2026, up nearly 29%, or almost $5 billion, from 2025. Despite increased grain prices, farmers are expected to operate below breakeven once again. This could potentially carry over into the 2027 crop year as the disruptions continue.
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