DENVER — Rising commodity prices are not expected to offset higher input and production costs, and rural areas of the United States will be hit the hardest by increasing fuel and energy costs, according to the quarterly report from CoBank’s Knowledge Exchange released on April 8.
Fuel is a larger and less flexible part of daily life and the local economy in rural communities. Longer driving distances, limited public transportation and heavy reliance on diesel intensive activities like farming, freight and construction mean price spikes show up quickly in household budgets and business costs.
“Higher diesel prices also raise the cost of moving food and goods into rural areas, pushing up local prices and amplifying the economic hit compared with urban areas that have more alternatives and competition,” said Teri Viswanath, lead power, energy and water economist with CoBank. “More broadly, the effects of the closure of the Strait of Hormuz and the stepped-up attacks on energy infrastructure in the Persian Gulf could be long-lasting and have probably not been fully priced into US consumer markets.”
Grain and oilseed prices increased late last quarter, including a 12% increase in soybeans driven by the soybean oil rally. Corn prices climbed 4% and wheat prices rose nearly 22%.
These improved prices are not expected to offset fuel and fertilizer prices, which have increased 20% to 40% since the Iran conflict began.
“Ongoing supply chain disruptions for urea could re-create 2022-level fertilizer prices without 2022 crop price support,” CoBank said. “USDA had expected fuel, lube and electricity expenses to ease, but the sharp increase in diesel prices following the onset of the Iran war could add $2,000 in fuel costs per farmer and hundreds of thousands more for grain elevators.”
Input prices also are complicating spring planting decisions for some farmers. Soybean acreage will be expanding in 2026, according to the US Department of Agriculture’s Prospective Plantings report, as soybeans offer lower production costs and prices relatively higher than other crops.
Corn demand remains resilient, but planted acreage is set to fall to 95.3 million acres, down 3.8% year over year as farmers eye more profitability with soybeans. US farmers plan to drastically cut wheat acres, which are projected to fall to the lowest since recordkeeping began in 1919.
The long-awaited renewable volume obligations under the Renewable Fuel Standard were announced on March 27, clearing an outlook that had been clouded in uncertainty for months, CoBank said.
Biomass-based diesel was the biggest winner with a 62% increase over last year’s mandated level, although nuances of the final rule will limit the upside potential for domestic feedstocks, particularly soy oil.
The US Environmental Protection Agency (EPA) also adjusted its RVO to account for a 70% reallocation of previous small refinery exemptions. While the EPA issued E15 summertime waivers starting May 1, legislative action on a permanent solution remains stalled.