New Calculator Helps Farmers Evaluate Longer-Haul Profit Opportunities

Farmers, especially those caught short and having to replenish fuel supplies, are challenged to stay profitable in the face of skyrocketing diesel prices. The expense of that input is cutting into farm profitability, according to the executive director of the Soy Transportation Coalition.

“We've seen a really dramatic escalation in diesel fuel costs throughout the course of this year, where we now see diesel well above $6 a gallon,” Mike Steenhoek told the South Dakota Soybean Network, adding that that figure for over-the-road diesel has a detrimental impact on the whole economy, including agriculture.

“It is one of those costs for farmers that really can't be deferred,” said Steenhoek. “When your harvest is ready, you don't say, ‘Well, I'm just going to wait a number of weeks to actually harvest my crops because I hope that diesel fuel costs will relax and mitigate a bit.’ When harvest is ready, it's game time. And so, you actually need to be out in the fields. It's the culmination of your work throughout the course of the year.”

There’s some relief in the fact that for the time being, farmers are allowed to use red-dyed off-road diesel to power over-the-road semis for a temporary savings of the taxes paid for clear diesel.

“Now, it's important to note that the federal order that was issued by President Trump, as well as a number of state orders, they use the word ‘deferral.’ So, it's a deferral of the tax, So, what that means is farmers would have to pay it back unless there's some kind of legislative action that is taken to waive that obligation,” he cautioned. “So, farmers do need to keep that in mind.”

Although many farmers have laid in diesel fuel at prices before the steepest increases, some are considering the potential to reevaluate their options for delivery locations of commodities. To help in that regard, the Soy Transportation Coalition now maintains an online calculator to help farmers decide whether a longer haul for a higher price-per-bushel will pay off.

“While the cost of fuel is not the only factor determining a delivery location, it most certainly is an influential one,” said Steenhoek, in a news release about the online calculator, at https://soytransportation.org/calculator/. “As we know, farmers must not only be mindful of the price offered, but also the costs associated with transporting their soybeans, or other commodities, to market.”

Steenhoek noted that the online calculator works equally well for soybeans, corn, wheat and other commodities.

Add to the Iran war the lingering conflict between Russia and Ukraine, and chances increase for long-term fuel price escalation.

“I think there's definitely going to be some legs to these elevated fuel costs,” Steenhoek concluded. “Whether there's a significant mitigation to that in the near future, that remains to be seen. But I don't think the rubber band is going to snap back really quickly to $3.50 unless there's some other development that occurs that many of us aren't aware of.”