U.S. Corn Farmers Hit With Fuel Shortages, High Costs
Fuel shortages in the U.S. Midwest are raising concerns corn farmers may have trouble harvesting their bumper crop this autumn.
Farmers planted the largest corn crop since 1944 last spring after prices hit a 10-year high of $4.37 a bushel in early 2007. The U.S. Department of Agriculture has estimated a record crop of more than 13 billion bushels.
But farmers said supplies of the ultra low sulfur diesel needed for harvesting equipment are running low, particularly in the corn-growing regions of Minnesota, Nebraska, and Iowa.
In Iowa, fuel shortages are anticipated as retailers report having only about 80 percent of their normal supply, said John Scott, a corn and soy farmer in west central Iowa.
"Worse case scenario is our crop stands in the field until we have fuel to harvest it," said Scott, who has stored about one week's supply of fuel in anticipation of shortages, but not enough to tide him over for the six-week harvest season.
Curt Watson, the President of the Minnesota Corn Growers Association, said the fuel terminal that usually supplies his area is dry. His supplier has to drive to another area, where long lines with a wait of four hours are not uncommon.
Experts blame a variety of refinery outages for the short supply, including a wave of maintenance shutdowns coinciding with peak harvest season from mid-September through October.
"That basically created a pulldown of inventories, more so than usual, before we entered the (harvesting) season," said Joanne Shore, an oil market analyst with the U.S. Energy Information Administration.
Although sporadic outages are common during the harvest, this year they may be more frequent than usual and retailers may spend more time "chasing the product," Shore said.
The high cost of ultra low sulfur diesel, a more environmentally friendly fuel which farmers are required to use for the first time this year, has also undermined the farmer's bottom line, experts said.
No Windfall Profits
The diesel problems are adding to overall farmer concerns about the skyrocketing costs of growing corn, which they say will erode additional profits from this year's high prices.
Rising fertilizer costs, driven by the soaring prices of the natural gas used to make it, is the main culprit.
Fertilizer has jumped from about $200 per ton to around $500 per ton over the last year, said Minnesota Corn Growers Association's Watson.
"This is beyond abnormal: typically you hear prices going up 2.5 to 3 percent," Watson said.
Overall input costs per acre of corn have gone up as much as 50 percent over the last year, said John Scott, who reported that his cost has increased from about $350 per acre to around $500 during the past year.
Despite rising costs, higher corn prices may mean that farmers will still be able to eke out slightly higher profits than last year, but not by much.
"I don't see any windfall profits by any stretch of the imagination," said Scott.