Brazil's Farm Sector Faces Diesel Price Spike Amid Middle East Conflict

• A surge in diesel prices is emerging as the most immediate threat to Brazil's agricultural sector following 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 roughly 30% of its diesel needs, leaving farmers exposed as domestic fuel costs rise alongside global oil prices.
• The conflict comes at a particularly sensitive time, as diesel demand is at its seasonal 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. As the world's largest soybean exporter and a major corn supplier, any disruption to Brazil's farm operations carries significant consequences for global grain markets.
• These activities cannot be postponed, industry officials stressed, nor can other critical fieldwork, such as applying fertilisers and pesticides, which also depend 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," said Bruno Lucchi, technical director at farm lobby CNA.
• Oil prices jumped above $119 a barrel on Monday before easing somewhat, with Brent crude still trading near $100, up more than 7%, by early afternoon local time. The rise in diesel prices is already being felt even though Petrobras, which supplies most of the market, has not yet adjusted its prices. Farmers in Rio Grande do Sul have also reported diesel delivery problems, with some suppliers allegedly restricting sales as higher oil costs squeeze margins.
• While higher costs or disruptions to nitrogen fertiliser imports from Iran remain manageable for now, since farmers had already secured supplies for the current season, diesel is an immediate and pressing problem. Cleiton Gauer, superintendent at Mato Grosso farm economy institute Imea, noted that diesel and lubricants typically account for about 5% of farm operating costs. Pump prices have reportedly risen by about 1 real per liter across Brazil's center-west and southern regions, with some cases up as much as 1.5 reais.

(Source: Reuters)