Diesel costs push rail and trucking rates higher

Trucking and rail operators in the Midwest are absorbing higher fuel costs, a trend economists say will soon raise prices for farmers and consumers. The pressure stems from a sharp rise in diesel prices earlier this year that has not yet receded.

Data from the USDA's latest Grain Transportation Report shows Class I railroad fuel surcharges have increased by 231 percent compared to April levels. These surcharges vary by rail line, with costs ranging from 61 cents to more than a dollar per mile according to economists.

Matt Wells, of the Mid-West Truckers Association, said the rising fuel expenses will move through the supply chain. He noted that in the agricultural sector, farmers will bear the increased costs. Wells described the situation as painful because a fundamental input price is rising.

Wells added that he does not expect fuel prices to drop rapidly in the near term. He explained that refining and reserve capacity must be rebuilt, a process that takes time even after refineries return to full operation.

Federal energy groups project retail diesel prices will fall to $4.50 per gallon sometime next year. However, transportation costs are expected to remain elevated until the fuel market stabilizes further.