Input costs are limiting the profits for farmers when you compare them against the higher grain prices we have been enjoying. When these prices were increasing a few years ago, farmers knew that the high-profit margins were going to be short-lived. Many farmers we spoke to said one of two things were going to happen: either prices were going to go down back to the levels we saw earlier, or prices of their inputs were going to rise. Either way, their profits wouldn’t remain at the higher rate they enjoyed. In fact, when we saw concerns about propane, fertilizer, and other supplies in the past few years, that the farmers were right and that something was going to cause their profit margins to be cut.
As the combines, tractors, trucks, and trains start moving grain of America’s heartland, we will come to depend on the supply of diesel fuel to keep those vehicles moving. We know that many producers and other companies locked in their diesel prepays long ago, but that doesn’t mean that there isn’t going to be an uptick in prices for everyone buying it now. As the demand will increase for the fuel, so will the prices. Patrick DeHann, head of petroleum analysis at GasBuddy, says that the short-term outlook for diesel prices is not good.
DeHann says that there are other factors besides agricultural needs that are affecting the global markets for petroleum. These include lingering COVID-19 impacts and geopolitical affairs in the Black Sea.
One silver lining is that now gas stations will be seeing the switch to winter-blend gasoline with increased ethanol, which should lower prices at the pump.
