Agricultural sector to see relief from recent plunge in fuel prices

Agricultural sector to see relief from recent plunge in fuel prices

Lower fuel prices may allow farmers this spring to plant more energy-intensive crops such as corn or rice.

Livestock producers in the Midwest and vegetable growers in the Sun Belt alike are reaping the immediate benefits of the recent plunge in fuel prices. According to a Jan. 24 Associated Press (AP) news report, the recent plunge in fuel prices have been a welcome relief across the agricultural sector, helping ease the pain of low grain prices for growers and boosting profits for cattle ranchers.

With average retail gas prices for 2015 forecast to be about $1 lower than last year, farmers this spring may end up planting more of energy-intensive crops, such as corn or rice, as the cost to irrigate and cultivate drops.

“Every movement we make in farming takes fuel,” Kansas cattle rancher and hay grower Randy Cree said. “We are hoping that for the first time in a long, long time to have the burden of high fuel prices off our backs — so we can maybe make a little bit of money this year.” For years, Cree hasn’t been able to afford to fill the fuel tanks at his farm west of Lawrence, Kan.

The AP reported that on-road diesel prices nationwide are forecast to average $1.86 a gallon this year — well below the $2.81 per gallon in 2014. And looking into 2016, prices are forecast to average $2.30 a gallon for on-road diesel, according to the U.S. Energy Information Administration.

Despite the enormous help lower fuel prices are bringing to farmers, consumers shouldn’t expect to see lower prices at the supermarket. Transportation costs constitute only a small slice of those prices, and it takes months, if ever, for cost savings at the farm level to trickle to the shelf sticker.

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