Farmers and agricultural contractors are facing serious viability concerns due to the combination of huge daily fuel price increases coupled with supply issues.

The cost of Marked Gas Oil (MGO), more commonly known as green diesel, has now more than doubled since November 2021.

A well-known western supplier said: “The severe price hikes we’re seeing day on day over the past 10 days have been down to the sanctions placed on Russia.

“Our English fuel supplier traditionally sourced all of its crude oil from Russia before refining it in England and exporting it to us in Ireland.

Refineries are trying to find new sources of crude oil, which won’t happen overnight

“This supply chain has ultimately been cut off and the refineries’ supplies have dropped, causing demand to outstrip supply.

“Refineries are trying to find new sources of crude oil, which won’t happen overnight. And as long as the troubles continue in Ukraine, the outlook is bad.

“We’re being forced to limit most of our orders to just 500 litres. Today (Tuesday), we’re quoting 1.50c/l including VAT for green diesel. It will go up.

The worst I had previously seen was around the 9/11 attacks when fuel rose by up to 3c/l and 4c/l daily

“Any filling stations with lower prices are basing their prices on fills at older prices they would have gotten maybe seven to 10 days ago. Over the past week fuel has been rising by 7-10c/l daily.

“I’ve never seen anything like this. The worst I had previously seen was around the 9/11 attacks when fuel rose by up to 3c/l and 4c/l daily. Our capital expenditure as a supplier has now doubled. Fuel suppliers won’t be able to carry credit for the same volume of fuel going forward.”

Contractor fears

Speaking to genuine, established and well-known agricultural contractors over the past week, they are seriously worried whether they will get through the 2022 season unscathed. Contractor operational costs have soared, in the same way farmers’ costs have skyrocketed.

The daily fuel price increases and threats of shortages of supply are making it impossible for contractors to confirm rates for work, according to the Association of Farm & Forestry Contractors in Ireland (FCI).

The association added that these huge cost increases will mean that farmers will be forced to pay higher rates and lack of supplier credit will mean contractors will be forced to restrict credit levels to farmer clients.

The current crippling increases have brought a fuel-based operating cost increase from €260m to €455m since January 2022

The FCI said its members were being quoted a price of €0.75/l plus VAT with slight variations throughout 2021. In the past two weeks, the quotations have risen to over double that price to now average €1.40/l plus VAT.

This is the highest price for MGO ever quoted in Ireland. The contracting sector in Ireland consumes in excess of 350m litres of MGO annually.

The current crippling increases have brought a fuel-based operating cost increase from €260m to €455m since January 2022, a 75% increase in fuel costs which the sector won’t be able to absorb.

Silage rates

Many people are asking the question what will the rates be for cutting silage for 2022. Considering how fuel prices have shifted in a number of days, it’s impossible to forecast two months ahead.

Based on burning 3,000l/day to cut and harvest 100 acres of precision-chop silage, and fuel costs moving from 0.75c/l up to 1.50/l (including VAT), it will cost an additional €22.5/acre in fuel costs alone to carry out the same job.

According to the FCI: “Our member research has shown situations where a self-propelled silage harvester outfit consuming 120,000 litres of diesel in a silage season will be faced with an additional fuel cost of €115,000 in 2022 compared to the 2020 costs.”

With costs across the board soaring, these stark figures are seriously worrying for the industry as a whole, and are leaving many holding on to the thought of Government intervention as a last attempt to keep the show on the road.

Carbon tax

The additional carbon tax increase proposed for introduction in May 2022 will add a further cost to spiralling fuel prices.

This week, FCI has called on the ministers for agriculture, finance and transport, to immediately remove carbon tax from MGO used in agriculture and forestry by farm and forestry contractors for a period of five years.

The association explained this is to allow adequate time for the machine development and supply sector to provide alternatives to internal combustion engines that will meet the lower carbon climate objectives.