Brazil farmers face diesel cost jump as Middle East conflict lifts oil prices

A spike in diesel prices is emerging as the first and most immediate threat to Brazil’s farm sector from the U.S.-Israeli attacks on Iran, raising costs for producers ​harvesting a record soybean crop and planting corn they cannot afford to delay.

Brazil ‌imports about 30% of its diesel needs, leaving farmers exposed as domestic fuel costs rise alongside global oil prices, representatives of major agricultural groups said.

The conflict comes at a sensitive time for Brazilian agriculture, when demand for ​diesel is at its peak. Farmers are hauling soybeans to market, harvesting remaining fields ​and wrapping up planting of the second corn crop, which accounts for most ⁠of the corn grown in the country.

Brazil is the world’s largest soybean exporter and a major ​corn supplier, making any disruption to farm operations significant for global grain markets.

Those activities cannot be ​postponed, industry officials said, nor can other fieldwork such as applying fertilizers and pesticides, which also depends heavily on diesel.

“Right now, the main issue is the price of diesel. We saw oil move from around $80 to the $100-per-barrel ​range, and that has caused alarm in the countryside,” Bruno Lucchi, technical director at farm lobby ​CNA, told Reuters.

Oil prices jumped above $119 a barrel on Monday before easing somewhat. By around 2 p.m. local ‌time, ⁠Brent crude was still up more than 7%, trading near $100 a barrel.

The rise in diesel prices is already being felt even though Petrobras, which supplies most of the market, has not yet changed its prices. Farmers have also reported diesel delivery problems in Rio Grande do Sul, with some ​suppliers allegedly restricting sales ​as higher oil prices ⁠push up costs.

Lucchi said higher costs or disruptions to nitrogen fertilizer imports from Iran, due to risks in the Strait of Hormuz, were manageable ​for now because farmers had already secured supplies for the current season ​and could ⁠delay new purchases.

Diesel, however, is an immediate problem. Cleiton Gauer, superintendent at Mato Grosso farm economy institute Imea, said producers need fuel now to keep fieldwork moving. Diesel and lubricants typically account for about ⁠5% of ​farm operating costs, he said.

Lucchi said he had received ​reports of pump prices rising by about 1 real per liter across Brazil’s center-west and southern regions, with some cases ​up as much as 1.5 reais.

Reporting by Roberto Samora for Reuters

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