Rising diesel prices latest hurdle for Alberta farmers

Alberta farmers — already coping with soaring feed, fertilizer and pesticide costs — are now bracing for another hit to their bottom line: a surge in diesel prices.

Diesel is an important farm fuel, used by a wide variety of agricultural equipment. This is also one of the busiest times on the agriculture calendar with spring seeding.

But a jump in the price of diesel is making the work much more costly than usual.

Greg Sears, whose family farm is located just north of Grande Prairie, Alta., said his fuel costs have roughly doubled from this time last year. That will probably add about $50,000 in costs, he said.

"We're seeing it affect every part of our operation, not just the fuel we consume on the farm, but anything and everything that is shipped to us or shipped from us — we're seeing increases in those costs."

The hope is that the increased costs will be balanced out with a good crop and respectable prices, but there are few guarantees in the farming business.

Diesel prices have been climbing for the past year but have jumped significantly recently.

According to data collected by GasBuddy, the average price of diesel at Calgary gas stations was around $1.50 a litre in early March. On Monday, the price was around $1.88 per litre. A year ago, it was around $1.20 per litre. 

Alberta farmers do get some relief from those prices.

Sears, chair of the Alberta Wheat Commission, said fuel used for farm equipment and trucks is exempt from provincial fuel tax, worth nine cents per litre.  It's also not subject to carbon tax, Sears said. 

But even with those programs, there's no easy way to keep a lid on costs.

"We have probably rarely seen above $1 a litre for our farm fuel," Sears said in an interview Friday.  "I think the last tank I bought was $1.50 a litre."

That comes on top of other steep cost hikes farmers are experiencing.

"Every part of that supply chain is impacted by the cost of energy and we end up being the focal point for for all that," Sears said.  "It really raises the cost of our whole operations and places quite a bit more risk on our shoulders as producers."

Shane Strydhorst, a third-generation farmer from the Neerlandia area, northwest of Edmonton, said it seems like the cost of everything is up these days.

"Fertilizer is more than double the price of a year ago; certain pesticides are more than double the price or maybe even unavailable in some cases," he said, adding there's still uncertainty despite good commodity prices.

"There's potentially a very valuable crop to grow. It's certainly also the most expensive crop we've ever grown — so there's a great deal of risk this year," he said.

"A lot of these costs, like seed, fertilizer and the fuel to perform all these operations, are sunk costs. So if we do all this work in the spring, put the seed and everything in the ground, these costs, the only way to recover them, is to get a good crop out of it."

Strydhorst said he's noticed a lot of his neighbours have invested heavily in on-farm fuel storage, in part so they can buy fuel when it's a bit cheaper and also to manage availability.

The recent surge in diesel has been felt across the country by a variety of sectors.

The national average retail price for diesel has climbed to over $2.20 per litre, according to GasBuddy. By contrast, the average national gasoline price was $1.92 per litre on Tuesday.

Rising demand for fuel as the economy reopens in one factor for increasing prices.

But Russia's invasion of Ukraine — and how countries are curtailing shipments of Russian oil — are also having a significant impact, said Patrick De Haan ,GasBuddy's head of petroleum analysis.

"There has been a global challenge with diesel, especially in Europe, where a lot of the vehicles are not gasoline powered, but diesel," De Haan said in interview this month.

"Inventories there have been extremely tight. That has also pulled U.S. inventories down to their lowest level since 2008. So what has started over in Europe with a challenge on not enough distillate or diesel fuel now has spread to the U.S."

And the impact ripples out across fuel markets, including Canada.

"This is a very global market, whether you like it or not," Vijay Muralidharan of Kalibrate, which tracks fuel prices.

That'll make transportation of goods more costly, as diesel powers trucks, trains and even some boats and ships.

"This is going to impact our day-to-day life," Muralidharan said.