Fuel spike bites from farm gate to freight yard

Farmers and transport operators say rising fuel prices are already reshaping decisions on the ground, with pressure building across the entire rural supply chain.

Uncertainty is the word coming through loudest from rural New Zealand as fuel prices climb sharply off the back of the Iran conflict.

Mid Canterbury farmer and Federated Farmers arable chairperson David Birkett says the impact is immediate - and far-reaching.

“The vibe is uncertainty -everyone knows that fuel affects the cost of everything.”

From fertiliser and freight through to processing and distribution, he says rising fuel costs are expected to push up nearly every input farmers rely on.

“All of our inputs are probably going to go up. The question is by how much, and how do we recuperate those costs?”

For arable farmers in particular, the pressure is acute. Unlike other sectors, many are locked into fixed contracts with no ability to adjust pricing mid-season.

“At the moment we don’t have any mechanism of recuperating that costs, it just all sits on the farmer.”

That imbalance is now coming to a head, with discussions underway about introducing fairer systems to share rising costs across the value chain.

Logistics under strain

Further down the chain, transport operators are already dealing with the practical realities of a volatile fuel market.

Mark Wareing, director of Philip Wareing Ltd, says what was once routine has become a daily exercise in planning and risk management.

“We used to be able to go anywhere in New Zealand and fuel up. Now we have to make sure where we’re heading actually has diesel before we send a truck there.”

With a fleet of around 270 trucks on the road, that means constant communication with suppliers and real-time coordination across the business.

“It would be hopeless arriving somewhere and finding out there’s no fuel for 24 hours.”

While fuel supply remains available, Wareing says panic buying and demand spikes are creating gaps  and driving up prices at pace.

“The issue isn’t so much supply, it’s what the price is going to be in a month’s time. It’s going to keep going up.”

That presents a major cashflow challenge for transport operators.

“Transport runs on low margins, high turnover. If fuel jumps dramatically, you’ve got to pass that on pretty quickly.”

While alternative technology is often talked about as part of the long-term solution, Wareing says it’s not yet a realistic replacement for diesel in heavy transport. His business has trialled an electric truck, but says the limitations are clear.

“It’s got a range of about 120 kilometres, then it needs to be charged for nine hours and that’s only carting a couple of tonne,” he says.

“We’d run New Zealand dry of power if we ran our whole fleet on electricity.”

For now, he says, diesel remains the only viable option for moving freight at scale,  leaving the sector exposed to exactly the kind of fuel shocks now playing out.

Mark Wareing with one of Philip Wareing Transport’s electric trucks at this year’s Methven A&P Show. While the technology shows promise, he says it’s “not even close” to replacing diesel for heavy freight, with limited range and long charge times still major constraints. Claire Inkson

A shared pressure - for now

Despite the strain, both farmers and transport operators say there is a strong level of understanding across the sector.

“They’ve been very good,” Wareing says of farmer clients.

“They understand we didn’t push the button to start the war, and we’ve got to survive.”

Birkett agrees, saying relationships between farmers and contractors remain constructive-  but warns the system itself is under pressure.

“Farmers should be able to pass those costs up the value chain as well, that’s been the biggest challenge over the years.”

Ripple effects building

Industry groups say the current fuel spike is likely just the beginning.

Rural Contractors NZ says some members are already seeing fuel costs rise by as much as $5,000 a day, warning those increases will need to be passed on.

At the same time, transport leaders are signalling broader supply chain risks.

National Road Carriers chief executive Justin Tighe-Umbers says the sector has no choice but to pass on fuel increases, while urging government to prioritise visibility and confidence in fuel supply.

Diesel prices have already risen sharply, climbing by more than $1 a litre this month alone, creating what he describes as “severe cashflow pain” for operators.

Consumer disconnect

Both Birkett and Wareing say the biggest disconnect remains between the farm gate and the supermarket shelf.

“The consumer doesn’t understand what the farmer’s costs are,” Wareing says.

“By the time it ends up in the supermarket, it’s 10 or 20 times greater than what the farmer got paid.”

Birkett agrees, saying farmers are often wrongly blamed when prices rise.

“When you see supermarket prices go up, people think the farmer is making extra money. The reality is it’s very rare that that increase comes anywhere near the farmer.”

Both warn that higher fuel costs will inevitably flow through to consumers in the coming months.

“The consumer’s going to get this in two months’ time,” Wareing says.

“The cost of food is going to increase dramatically.”

What farmers can do

For now, the message from Federated Farmers is simple: plan early and communicate often.

“Communication is the key,” Birkett says.

That includes talking to fuel suppliers about upcoming demand, closely monitoring on-farm fuel levels, and planning ahead for fertiliser requirements heading into spring.

“If you know you’re going to run out of fuel in three days, get on the phone early -they’ll do their best to make sure you can keep operating.”

Looking ahead

While fuel supply remains stable for now, uncertainty continues to dominate.

“This is bigger than COVID,” Wareing says.

“It’s a steeper spike and we still don’t know where the peak is.”

For Birkett, the concern is not just fuel, but the broader cost environment facing farmers.

“While New Zealand’s got a cost of living crisis, farmers are probably at a cost of farming crisis.”

And with no clear end in sight, the pressure is likely to keep building -  from the freight yard to the farm gate, and ultimately, to the supermarket shelf.