Rising Shipping Costs Add to Farmers’ Diesel Woes
Farmers are contending with rising costs on multiple fronts as diesel prices continue to escalate, impacting the fuel they need for their equipment. To compound the situation, railroads have recently increased their shipping costs just as the harvest season looms.
Over the past year, railroad fuel surcharges have more than doubled in response to diesel prices soaring above $6 a gallon. Railroads play a critical role in grain transportation, moving about 1.6 million carloads annually, which constitutes 24% of the nation’s grain distribution, according to the Association of American Railroads.
While it is common for railroads to adjust fees in line with fluctuating fuel costs, these surcharges often result in reduced crop prices for farmers. This insight comes from Mike Steenhoek, executive director of the Soy Transportation Coalition.
“Agriculture is a very competitive industry, and so what will often happen is if [grain shippers] try to pass those costs on to an importer from another country, what that importer very likely will do is say, ‘Well, I guess I’m going to buy more soybeans from Brazil or Argentina if you’re trying to pass these costs on to me,’” Steenhoek explained.
Grain shippers are reluctant to shoulder these costs, leading to farmers ultimately bearing the financial brunt.
“Farmers have options where they can sell to; maybe an elevator close by or a processor further down the road,” Steenhoek noted. “But there is kind of a limit to how many points of sale a farmer has access to. So a lot of times the farmer just simply has to absorb that cost.”
