Indiana farmers heading into harvest are facing a costly new threat: diesel fuel prices have surged to record levels, adding another major expense to an already challenging farm economy—and potentially pushing food costs higher for consumers.
Indiana’s statewide average for on-road diesel reached another record Friday at $6.53 per gallon, while off-road diesel is now running between $5.40 and $5.80 per gallon.
That comes at a particularly painful time for farmers. Harvest is one of the most fuel-intensive periods of the year, with producers burning thousands of gallons moving combines, grain carts, semis and other equipment across fields and roads.
Every additional dollar spent on diesel cuts directly into farm margins at a time when many producers are already dealing with elevated input costs and weaker commodity economics.
And according to Patrick DeHaan, senior petroleum analyst for GasBuddy.com, the diesel market is facing a series of global disruptions that could keep prices moving higher. He says Ukrainian drone attacks on Russian refineries have become a major factor behind the dramatic increase in diesel prices.
“It’s been these very effective Ukrainian drone attacks on Russian refineries. It’s been so impactful,” he says. “It’s pushed up global diesel prices. It’s causing headaches in Russia. Gas line rationing is happening in Russia, and as a result, there’s not enough diesel supply now, globally.”
That shortage is being felt far beyond Russia.
“And that’s why you and I are feeling the pain at the pump, especially because these drone attacks are knocking offline refining capacity,” DeHaan says.
Global problems, local farm costs
For Indiana farmers, the problem is especially significant because diesel is not simply another household expense. It is a fundamental production input.
Farmers need diesel to plant crops, apply inputs, harvest grain, transport commodities and keep farm operations moving. When fuel prices spike, the impact can ripple through virtually every stage of production.
And those costs don’t necessarily stop at the farm gate.
Higher fuel costs increase the expense of transporting grain, livestock, fertilizer, chemicals and other agricultural products. Eventually, those higher transportation and production costs can work their way through the broader food supply chain.
That creates the possibility of a double squeeze: farmers pay more to produce and move food, while consumers could ultimately pay more for the food they buy.
DeHaan says the United States is also vulnerable because the petroleum market is global.
“There are plenty of other escalations in the Middle East as well,” he says, pointing to conflict involving the U.S. and Iran, attacks involving the Houthis in the Red Sea and an attack on Saudi Arabia’s East-West pipeline.
“None of this is good news, but that’s about the worst possible news,” DeHaan says. “All of it is fueling what you and I pay at the pump, especially for diesel.”
The dependence on global refining capacity is particularly important for diesel.
“Diesel is very much beholden to Russian refineries,” DeHaan says. “Traditionally, Russia produces one out of every nine barrels of diesel globally, and now that number is zero.”
No room for error
The situation is further complicated by the limited amount of spare capacity among U.S. refineries.
“This is a global issue right now, and that is what we are paying more for,” DeHaan says.
“In addition, U.S. refineries have no slack right now. U.S. refineries have been operating at 98 percent of available capacity. In the Midwest, they’ve been operating at over 100 percent.”
DeHaan acknowledges that operating above 100% sounds impossible, but says refinery “process gain” allows production to exceed nominal capacity.
The important point, he says, is that there is essentially no cushion in the system.
“Meaning that there is no margin for error,” DeHaan says.
And there have already been problems.
“A couple of refinery issues did develop,” he says. “Also, other refineries are doing maintenance. Just about everything is going wrong that could potentially happen, and so the prognosis is not good.”
For farmers watching fuel prices climb as harvest approaches, the most concerning part may be what comes next.
“Gasoline and diesel prices are going to continue to advance,” DeHaan warns. “Diesel could hit even $6.50 or $7.”
DeHaan cautions that he doesn’t have a crystal ball and cannot predict how much worse the situation could become if additional geopolitical or refinery disruptions occur.
“But there’s just really nothing that looks good in the market right now,” he says.
For Indiana agriculture, that warning comes with particularly high stakes.
Harvest cannot wait for diesel prices to come back down. Farmers still have crops to harvest, grain to haul and bills to pay.
And with Indiana diesel already averaging more than $6.50 a gallon on-road, another run-up could put even more pressure on farm profitability—while increasing the cost of moving the food, feed and fuel that ultimately reaches consumers.
For farmers already operating under a tight financial squeeze, the fuel tank is becoming another place where the margin is disappearing.
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