Diesel prices have been high for some time, and Farm Credit Canada (FCC) quantified its impact across various parts of the supply chain, from the farmer, to transporter, to consumer.
For the Saskatchewan farmer's perspective, FCC used the price of diesel quoted in the Saskatchewan Ministry of Agriculture's 2026 Crop Planning Guide from January of $1.18 per litre, and compared it to a hypothetical 80 per cent price increase to $2.13 per litre. Those prices were then applied to canola margins in the black, dark brown, and brown soil zones to see how much the cost per acre was affected.
The result is the black soil zone went from a per acre cost of $27 to $48, the dark brown soil zone increased to $38 per acre from $21, and the brown soil zone's per acre cost went up to $31 from $17.
FCC Senior Economist Graeme Crosbie said the numbers may look small but they are substantial.
"When you consider total costs, excluding land range, based on the province's estimates, anywhere from $430 to $550 an acre," he said. "But when you look at it at a total dollar value, it'll look and feel bigger for sure, especially when you're paying at harvest time."
The report estimates a 5,000 acre farm "would see an increase in its fuel bill between $68,000 and $106,000 in 2026 based on this difference in diesel prices."
It also looked at the cost per acre in Ontario.
The Ontario government also provides a cost of production report, but estimate costs based on tillage system. The diesel price is also different – $1.28 per litre from the beginning of 2026 compared to the 80 per cent increase to $2.30 per litre.
FCC also looked at the cost per acre for corn and soybean crops and the result was increases between $16 and $30 per acre.
The fuel cost for conventional farming of corn was up from $37 per acre to $67, while no-till was up from $20 to $37.
For soybeans, the fuel cost for conventional was up from $27 to $48 and no-till increased to $37 from $20 per acre.
"Regardless of how one looks at it, the bottom line is that at a time when margins were already tight heading into 2026, increases in diesel prices can and will erode margins further," reads the report. "Note that these are just direct fuel costs; drying costs will increase if/when propane or natural gas prices rise and higher trucking costs will find their way onto producers’ income statements as higher expenses."
Rail transportation and trucking were other aspects examined in the report.
Regarding railways, FCC notes grain freight rates for the 2026-27 crop year were shielded by the spike in diesel prices, citing the Canadian Transportation Agency already establishing the key regulatory measures that govern prices for most Western Canadian grain movement, "including the inflationary adjustment used to update the Maximum Revenue Entitlement (MRE)."
With the adjustment, the increase amounts to only 0.7 per cent
Crosbie said the immediate impact of higher diesel prices won't be imminent compared to the 2022-2023 crop year when prices surged, and the MRE increased by 12 per cent, following Russia's invasion of Ukraine in February 2022.
"And so the impact, if these prices are sustained for the rest into 2027, and there's good reason to believe that they will, it's the following marketing year when we'll probably see that adjustment increase." he added.
As for the trucking industry, it has resorted to fuel service charges more often to protect margins from higher diesel prices. The report states the fuel surcharge has increased by nearly 45 per cent since February.
"And so that is going to increase the cost of moving anything by truck, whether that's to an elevator, cattle to a plant, inputs delivered to the farm for 2027, right down to the food on your grocery shelf. Those charges are going to add up over time" Crosbie said.
As for the consumer, one would think food prices are affected by diesel prices since the latter touches everything from farms to trucking to retailers.
However, Crosbie explained there is a six to twelve month lag between cost pressures and food prices going up and we're currently in the lag.
The impact on food inflation from diesel prices is a bit of a mixed bag historically, he said, as its dependent on the value of the Canadian Dollar.
There were instances where an appreciating dollar protected consumers from rising prices, making it relatively cheaper to buy imported goods and food, but there have been times when the Loonie depreciates in value, goods become expensive.
The year-over-year period of April 2005-2006 is one example of an appreciating Canadian Dollar keeping food inflation in check even as diesel prices rose. The Loonie rose 2.3 per cent as food inflation rose slightly higher at 2.4 per cent and diesel prices rose 25 per cent during that time.
The opposite occurred between August 2008-2009, when the Loonie dropped 13 per cent, resulting in food inflation rising 6.3 per cent and diesel prices 21 per cent.
In the present, Crosbie believes the chance of an appreciating dollar offsetting the rising price of diesel and slowing down food inflation is unlikely based on the dollar losing value "in the last six weeks."
"Therefore, we do expect those charges and fuel surcharges we were talking about earlier to slowly make their way into the final price consumers pay at the grocery store in the next few months." he said.
The full report can be found on Farm Credit Canada's website.
