Diesel prices in Canada reached record highs this autumn and, despite recent stability, remain historically elevated. Prolonged periods of high prices are having widespread impacts, from the farmer to the processor to – potentially – what consumers pay for their groceries. We unpack the farm-to-table fallout from high diesel prices in this report.
Already tight farmer profitability will be squeezed further
The Government of Saskatchewan released its 2026 cost of production guide in January (notably before the war in Iran began) which provides us a starting point to assess costs for the three major soil zones in that province. If we shock the price per litre used in the guide by 80%, we see that canola margins are compressed anywhere from $14 to $21 per acre, all else being equal (Figure 1). We get a similar range for different crops in different soil zones. Keep in mind this is at the extreme end of scenarios, given we assume all diesel used for the entire growing season is priced at today’s higher price; some relatively cheaper diesel may have been used earlier in the year.
Considering that total costs range from $430 - $550 per acre, excluding land, these numbers may look relatively small. However, at a total dollar value, they will look and feel bigger. For example, we estimate a 5,000-acre farm would see an increase in its fuel bill between $68,000 and $106,000 in 2026 based on this difference in diesel prices.
The Government of Ontario also provides cost estimates for the year, but rather than breakdown by soil zone, they estimate costs based on tillage system. We apply the same 80% shock to the pre-war diesel price in that province and get a margin compression estimate ranging from $16 to $30 per acre
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