Rising fuel costs hurt Iowa farmers’ profits
While Iowa farmers are enjoying high prices for goods, they may not be seeing higher profits.
With gas prices on the rise, agricultural producers are feeling the impact of inflation. Higher costs for fuel and fertilizer are shrinking profit margins for Iowa’s growers.
“It's not only the cost to run the tractor across the fields to plant and harvest the grain,” said Chad Hart, an economics professor at Iowa State University, specializing in crop markets. “There's a lot of fuel used to move our farm products down the supply chain line.”
The price of diesel has hit record highs in Iowa, currently sitting at just below $4.88. Kelly Garrett, who farms over 7,000 acres in Crawford County, said he’s watched as the price of diesel has almost doubled since last year. He said his planter tractors use at least 100 gallons of foreign fuel red diesel a day.
“It's gone up $1.50 or $2 a gallon,” Garrett said. “So, there's an extra couple hundred dollars a day to put your crop in just from a fuel standpoint.”
That’s not the only production cost impacted by rising fuel costs, Garrett said. He said everything from fertilizer to seed has become more expensive to ship to farmers.
Fertilizer prices have skyrocketed in the past year. Anhydrous ammonia has increased by 315 percent, while urea has seen a 214 percent surge.
“We're feeling the effects of the fuel prices all across the farm,” Garrett said. “The farmer buys everything. Everything has to be shipped to us, and the shipping cost effectively almost doubled.”
John Bentley, who operates a cattle feedlot in Pottawattamie County, said it’s difficult to avoid the increased spending on fuel. He said he runs three pieces of equipment across his 1,000 acres each day. His combine harvester alone burns around 25 gallons an hour.
“You don't have to use as much fertilizer, but you still have to put fuel in your tractor to get the crop in the ground,” he said. “Then, we’ve got to put it in trucks to get it to the consumer."
Bentley said high commodity prices have helped to offset this additional cost. But, he said he worries about how long those prices can last, as people spend more on gas and less on food.
“We're feeling the effects of the fuel prices all across the farm.”
Hart said farmers’ profit margins will be squeezed even tighter if that happens.
“The concern is that your prices can't maintain their rise. If prices do back off, costs will take a lot longer to back off,” Hart said.
Hart predicts that farmers will continue to feel the impact of inflation for several months to come.