Rising Fuel Costs for Ontario Farmers

By: Charlotte Cuthbert - Communications Coordinator for CFFO

Ontario’s farmers are heading into and finishing harvest with more than just weather and yield on their minds — fuel prices have become a material factor in both short-term harvest decisions and annual farm finances.

Ontario’s farmers are heading into and finishing harvest with more than just weather and yield on their minds — fuel prices have become a material factor in both short-term harvest decisions and annual farm finances. Diesel powers almost everything on the farm during harvest season; combines, grain carts, trucks, dryers and grain-storage equipment. When diesel and gasoline prices climb, those costs show up immediately in the field and on the year-end bottom line.

As pump prices rise, farmers pay more just to bring crops in and to dry and store them afterwards — and those are unavoidable costs during a short harvest window. This increases operating cash needs now when farmers are also trying to market and move large volumes of grain.  Rising custom-harvest and transport charges. Many producers hire custom harvesters or pay trucking firms to move grain. Those businesses face the same fuel pressure and typically pass some or all of it along through higher fees, increasing total harvest cost per acre even for farms that don’t fuel every machine themselves.

Input costs squeeze net income. Fuel is one component of the farm input price index that has been increasing; Statistics Canada and Agriculture & Agri-Food Canada data show operating expenses rising enough that they materially affect net cash income (NCI) for the sector. AAFC’s recent outlook shows NCI and average net operating income under pressure compared with record years — meaning higher fuel costs reduce what’s left for debt service, investment and family draws. Fuel isn’t the only pressure, but it interacts with others. Farmers have also faced higher fertilizer, machinery and labour costs in recent years. When diesel climbs on top of these other input increases, it amplifies the cost side of the ledger and forces harder decisions about cropping, machinery replacement and expansion.

Producers and agricultural service providers are responding in predictable ways: Tighter operating budgets and delayed purchases. With margins squeezed, many farms delay non-essential capital purchases or hold off on expansion until margins recover. Efficiency and logistics focus. Farmers make route and timing decisions to reduce empty miles, optimize machine widths and work hours to reduce fuel burn, and increase reliance on precision ag to squeeze more yield per litre. Forward contracting for fuel or services. Some custom operators and larger farms use fuel contracts or hedges to limit price volatility; smaller operators may have less access to those tools and are therefore more exposed.

Higher fuel costs raise costs across the value chain — from on-farm production to processing and distribution — which can feed into retail prices or reduce margins for processors and retailers. The farm sector remains a major contributor to Ontario’s economy, so sustained fuel-driven cost pressures can ripple into rural employment, investment and local economies.

Changes in levies and carbon pricing have been explicitly cited by farm groups as a component of higher pump prices. Those policy elements — combined with global crude market movements — help explain why Ontario diesel and gasoline costs can be comparatively high and why farmers say they feel the impact immediately at harvest.

Fuel price increases are not an abstract line item — they are a real, immediate cost during harvest that reduces margins, increases working capital needs and can alter business decisions for the coming year. For many Ontario producers the result is a tighter financial picture: higher per-acre costs at harvest, downward pressure on net cash income, and deferred investments that could otherwise improve productivity. If fuel price volatility continues, farms will rely more heavily on efficiency gains, risk-management tools and targeted policy support to protect profitability and preserve Ontario’s harvest capacity.

The CFFO Commentary represents the opinions of the writer and does not necessarily represent CFFO policy.