Iran War Helps Drive Michigan Diesel To Record High, Threatening Farms And Food Prices

Michigan diesel prices have reached a record $6.81 per gallon—84% higher than a year ago—as the Iran war and disruptions to Russian energy supplies tighten global fuel markets. The increase is hitting Michigan farmers during harvest while fertilizer costs are also rising, creating additional pressure on farm income, transportation expenses and food prices.

ANN ARBOR — Michigan farmers are entering the fall harvest with diesel prices 84% higher than a year ago and fertilizer costs also rising, as the Iran war disrupts Middle Eastern energy supplies and tightens an already strained global fuel market.

The statewide diesel average reached a record $6.813 per gallon Monday, according to AAA. That compares with $3.697 one year ago, an increase of approximately $3.12 per gallon.

The war involving Iran has disrupted oil and refined-fuel movements from the Middle East, one of the world’s most important energy-producing regions. Combined with continuing disruptions to Russian energy supplies from the war in Ukraine, the conflict has stranded millions of barrels of oil and diesel, reduced global supplies and pushed prices higher.

That international crisis is now reaching Michigan farms, trucking companies and grocery supply chains.

The timing is especially difficult for Michigan agriculture, widely described as the state’s second-largest industry. Michigan’s agriculture and food sector contributes more than $100 billion annually to the economy and supports hundreds of thousands of jobs in farming, food processing, transportation, retail and related businesses.

During harvest, farmers burn diesel in tractors, combines and other equipment. They then pay again when trucks haul corn, soybeans, sugar beets, potatoes, apples and other Michigan products to grain elevators, processors, warehouses and markets.

At the same time, farmers are confronting higher fertilizer expenses. Phosphate fertilizer prices nationally have reportedly risen nearly 50% from a year ago amid international supply disruptions.

Nitrogen fertilizer is heavily influenced by natural-gas prices because natural gas is a principal feedstock in its production. The Iran war has added volatility to global natural-gas markets as well as oil markets, intensifying concerns about fertilizer production and availability.

The combination of diesel, fertilizer and transportation increases could squeeze farm income while adding expenses at nearly every stage of the food supply chain.

Higher Farm Costs Can Reach Grocery Shelves

Consumers should not expect food prices to jump overnight—or by the same percentage as diesel. The farm value of a product is only one part of its final retail price. Processing, packaging, labor, refrigeration, transportation and store expenses also contribute.

But diesel affects many of those steps.

A Michigan crop may require fuel to prepare the field, plant, spray, harvest and transport it. A processor then needs trucks to bring in the crop and ship the finished product. Distributors move it to warehouses, and another truck delivers it to a grocery store or restaurant.

Fertilizer is another major expense, particularly for corn and other crops requiring substantial plant nutrients. Farmers generally cannot recover a sudden increase in fertilizer or fuel costs by simply setting a higher price for their crops. Commodity prices are determined by national and global markets.

That leaves farmers with fewer choices: absorb the expense, reduce fertilizer applications where practical, delay equipment purchases or cut spending elsewhere.

If elevated costs continue into the 2027 planting season, they could influence what farmers plant and how much they invest in each acre. Lower production or reduced yields, combined with higher processing and transportation costs, could eventually contribute to higher food prices.

One Truck Fill-Up Costs Nearly $400 More

The impact becomes clearer when diesel is measured by the tank rather than by the gallon.

A truck purchasing 120 gallons would have paid approximately $444 at last year’s Michigan average. The same amount at Monday’s price costs about $818—an increase of roughly $374 for one fill-up.

For a heavy truck traveling 100,000 miles annually and averaging 6.5 miles per gallon, fuel consumption would total about 15,400 gallons. At current Michigan prices, that represents an annual fuel bill approaching $105,000.

That would be nearly $48,000 more than the same amount of fuel cost at last year’s average price.

Some trucking companies can recover part of the increase through fuel surcharges added to customer bills. But those surcharges do not eliminate the expense. They transfer it further along the supply chain, potentially reaching food processors, manufacturers, retailers and consumers.

Smaller trucking companies and independent owner-operators may face the most immediate pressure because they must purchase fuel before receiving payment for completing a delivery.