Red diesel price warning as cost hits 2018 high
© Tim Scrivener Farmers looking to secure fuel ahead of the harvest season are being warned to monitor rising diesel prices following increasing tensions in the Middle East.
The cost of diesel has jumped by up to 2.5p/litre in a week after President Trump’s decision to withdraw the US from an agreement to ease economic sanctions on Iran caused global oil prices to rise sharply.
The decision to force Iran, which can produce up to 2.5m barrels per day, about 3% of world demand, to keep its oil in the ground is the latest in a line of factors which have seen the price of Brent crude rise by 50% on the year.
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These include longer term issues such rises caused by the post-Brexit currency devaluation as well as short-term factors such as the Beast from the East in March, which caused prices to spike in March as demand increased for heating fuel.
By comparison, red diesel was costing as little as 35p/litre in December 2015.
The latest moves come as many farmers are looking to secure supplies ahead of the harvest season but merchants are cautious about advising forward buying more than 50% of the volume needed in case prices come back down.
Debbie Kay, sales office manager at northern fuel supplier Rix Petroleum, said the price of 2,300 litre of red diesel was 59.95p/litre (16 May), a rise of 2.5p on the week and 6p in the last month.
She said farmers looking to forward book fuel would need to commit to 30,000 litre, with the price locked at the day of ordering.
The fuel could then be delivered according to the customer’s needs, with a delivery charge based on the volume they could take at each visit.
She advised buyers to stay in regular contact to keep up-to-date with price changes as there were signals that prices could fall slightly in the next few days.
Anglian Farmers LPG co-ordinator Linda Carter said she had been taking an increased number of calls in recent days from farmers shopping around for prices.
She warned that the price of red diesel, as well as other fuels such as kerosene, were likely to continue to rise if uncertainty in the Middle East continued to concern traders.
Kerosene and red diesel prices normally follow each other, she explained, with kerosene typically 10p/litre cheaper than red diesel despite it being a more refined fuel.
Prices for a 5,000 litre delivery of red diesel to Norfolk were 59.45 at the time of going to press, up from 51.89p on 5 March, with the next price reduction available for customers buying 10,000 litre or more.
She advised farmers looking to forward buy fuel for the harvest season to hedge their bets by not committing to more than half of their requirements in the price falls.
Measuring fuel usage vital to analysing costs accurately
Monitoring fuel usage per operation has allowed one farmer to improve the accuracy of his enterprise costings.
Andrew Ward, of Glebe Farm in Lincolnshire, says fuel accounts for the biggest proportion of tractor running costs, something the vast majority of farmers don’t realise.
It makes up 42% of the total running costs of his Case Quadtrac, outstripping even depreciation.
He has his machinery operators record how much fuel a tractor is carrying as it enters and exits the field, the number of machine hours, and what job is being done.
This also allows him to apportion costs to each implement rather than just the tractor and make a more accurate assessment of whether each visit to a field is cost effective.
“It gives operators a real interest in the job by making them feel part of the business,” explains Mr Ward, saying that they are always trying to improve their figures compared with the previous visit.