Iran war fuel price shock hits Waikato farmers as harvest season costs surge

John Austin says he is paying an extra 50.9 cents on every litre of fuel at his Te Awamutu contracting company. Photo / RNZ, Evie Richardson

By Evie Richardson of RNZ

Farmers say the skyrocketing price of fuel couldn’t have come at a worse possible time.

The end of summer marks the beginning of harvest season for arable farmers, a time when they can use more than double the amount of fuel than at any other time of year.

The price of Brent crude oil is currently at US$104 (NZ$179) a barrel, up from around $70 before the US and Israel’s attacks on Iran.

With no way of knowing how long prices will stay so high, or even rise higher, farmers are facing an uncertain future and struggling to figure out how to mitigate the costs.

A huge fuel tank greets you at the top of the driveway of John Austin’s Te Awamutu contracting company.

It holds 40,000 litres of diesel, and in peak season, can get re-filled nearly every day.

When last Sunday’s delivery rolled in, Austin said the bill made for tough reading, an extra 50.9 cents on every litre.

“I actually heard from one of our customers that fuel was going up, I didn’t even realise or know.

“We were down, it was on a weekend, so our next shipment ... for every 10,000 litres was another $5000.”

The busy time of year means Austin’s company does work for up to 50 farmers a day, operating combine and forage harvesters, tractors and trucks to help with their harvests.

John Austin's Te Awamutu contracting company. Photo / RNZ, Evie Richardson

“It’s huge, one of our forage harvesters would use well over 1000 litres a day, probably 1500 litres.”

With weeks of the peak harvest still to come, Austin has had to think fast about how they’re going to cope with the massive price spike.

But with so much uncertainty, it is impossible to know how things will pan out.

“It’s very hard for the business to be fair to the customers and work with the customers when you’ve got such a huge input to the business like fuel when there’s uncertainty around supply and price.”

While some of the cost will be absorbed, the company can’t afford to absorb it all, and has put a fuel surcharge on to customers.

“It’s impacting them already, it’s costing them extra on their farm when they drive their tractors, when they drive to town, it’s costing them extra, and there’ll be lots of different ways our customers are impacted.

“It’s just not good for NZ, it’s not good for the world, it’s not ideal.”

Gordonton farmer Donald Stobie. Photo / RNZ, Evie Richardson

An hour north, at his Gordonton farm, Donald Stobie is preparing to harvest 200 hectares of maize and grain.

It’s a busy time of year, with all his machinery burning around 3000 litres of fuel a week, which he reckons is costing him an extra $1000.

But unlike contractors, he has no immediate way to offset the cost, and it is being absorbed by the business.

“The crop prices are set in the springtime at planting time, and then the crops grow for six or seven months before you harvest, there’s like two-thirds of a year there where if things change, you can’t do anything about it.”

Like many farmers, he is also worried about the cost of fertiliser shooting up, with the Middle East a critical supplier.

He has started stockpiling for the planting season later in the year, in the hopes of mitigating some of the price spikes.

Alongside fuel, he is concerned about what impact these costs will have on his business if this continues for some time.

“It’ll certainly chew away at our bottom line, and I guess that’ll mean we won’t have money for our repairs or maintenance or any capital projects we wanted to do.

“It’s not just fuel, there’ll be all sorts of other price increases affecting us too from all our suppliers at that, so there’ll be cost increases across the board.”

Business manager at contracting company, Gavins, Chris Paterson. Photo / RNZ, Evie Richardson

Down the road, the price spike has contracting company Gavins considering its options.

Business manager Chris Paterson said they have been forking out an extra $60,000 a week since prices went up.

While they don’t want to pass costs on to their customers, most of whom are farmers, they may be left with no other choice.

“A likely outcome as it stands today would be for us to suck it up a bit and some of our charge-out rates to go up a bit.”

Paterson said they are waiting to see how prices evolve over the next week or so before making any decisions, but the price rises are impossible to ignore.

“It is creating a dent today ... there’s a real impact immediately, we’re burning fuel each day, the impact is immediate, but the size or scale of it will evolve over time.”

- RNZ