Market Morsel: Big fuel bill.

Inputs | 26th October 2021 | By Andrew Whitelaw

Market Morsel

At TEM, we cover off on inputs as they are an important factor driving profitability on farm. As you may have noticed, we have included an entire section on inputs in recent weeks that you can find at the top of the page (or clicking here).

In recent times the focus has been on fertiliser, but we have probably done that to death for this September and October. What about another input, that is probably of more immediate concern – Fuel.

Assuming that you are a regular reader of these articles, you will understand that high energy costs are the driving force behind the rise in glyphosate (here) and fertiliser (here). So its not a surprise to see higher diesel pricing.

Crude oil is the feedstock for diesel, and it has been travelling in an upward direction since the crash in prices during 2020. As you can see in the chart below, there is a strong relationship between both Australian diesel pricing and crude oil.

The second chart below shows the average cost of diesel in Australia for the seeding (April) and harvest (October) purchase periods.

Last year was the cheapest for harvest diesel since 2004 (in nominal terms), whereas this year has become the 2nd highest. The current October average is 149.12, versus 2018 at 152.11. The jump in pricing between seeding and harvest this year has also been the highest at a 23%  rise.

Energy prices are notoriously difficult to predict, but the general consensus is that energy is to stay expensive for the coming months as the northern hemisphere demand ramps up.

Sorry – but it seems like almost all inputs are liable to be more expensive this season.

Tags

  • Fuel