Price swings in green diesel leave contractors counting the cost
Volatile green diesel prices have become a major headache for contractors this year.
As the industry looks ahead, will 2027 offer greater stability or more of the same?
Two Munster-based agricultural contractors spoke to Agriland about the challenge to maintain profitability and balance inflated fuel prices.
Both contractors have similar business models and offer similar services and also own livestock but they both had very different outlooks on the current price of green diesel and what that might mean for their future operations.
Cash flow
According to the south Co. Tipperary contractor, the price hike will have a "big impact on cash flow".
"You're only six months into this high diesel price, but you're not going to really get the effects of it.
"The effects of it aren't really going to hit you for another 6-12 months.
"It's the cash that's the problem, it's going to take cash flow out of businesses, and that'll have a knock-on effect because people are charging whatever they're charging," they said.
The south Co. Tipperary contractor was also keen to point out that while the price of diesel is rising so are other costs.
They feel that many contractors have not felt the full effect of the Strait of Hormuz crisis because many had bought their resources before the conflict began.
The south Co. Tipperary contractor added: "Let's say that contractors' diesel bills are going to be €10,000 extra for example.
"At the end of the day, that €10,000 is gone out of cash flow and profitability.
"The priority all year was to get the work done, to get to everyone, and that's the issue with it; people had diesel bought and it fluctuated in price.
"When people go down at the end of the year and do their books, that's where the real issue is going to be, the sustainability of a lot of things will be no longer viable," they said.
The contractor said for example fertiliser and plastic for bales were bought before the Strait of Hormuz crisis.
This contractor told Agriland that they are currently assessing their services and will decide what they will focus on next year.
"There are going to be major changes for 2027 in my business.
"I'm eliminating cutting paddocks, I won't cut paddocks in future, and on top of that I won't be doing small jobs where I'm putting out seven or eight bales.
"Spraying will only be done when the sprayer is on the tractor and it suits me," they said.
They said that they do not plan to do jobs "just to please people".
Co. Limerick contractor
According to a contractor based in west Co. Limerick the hike in fuel prices has created a "cash-flow" issue for agricultural operators.
According to the contractor, they are not so much worried about customers trying to pay, but more so customers' ability to pay.
"We're passing the increased cost onto our customers, but they have nobody to pass it on to, they're stuck carrying the extra cost," the contractor said.
They also warned that if prices continue to rise, contractors may be forced to carry more of the cost of business.
"10,000L of diesel before (the Strait of Hormuz crisis) roughly translated to €10,000; now that's somewhere between €12,000 and €14,000.
"Everything across the board has gone up, from a bag of chips to plastic, everything is gone crazy," they added.
"A good day with us, we'd burn 3,500L of diesel, there'd be no day we don't burn 1,000L," the contractor said.
The west Co. Limerick contractor added that he was thankful that they did not have to consider closing down the business at this time.
According to this contractor the most pressing challenge is whether customers will be able to pay, as opposed to if they want to or not.
"I'm dreading the back end of the year," they added.
In November and December last year the contractor found that "farmers wanted to clear their bills".
But they do not believe this is going to happen in 2026.
"What you're worried about is that it's just not adding up when you do the maths," they said.
The west Co. Limerick contractor also said that some contractors may have to raise their prices in line with current inflation rates.
"I don't know where it's going to end, but we're all foolish; we should be all parking up, the cost is just too high".
Although this west Co. Limerick contractor is currently maintaining their business, they are concerned about the future of the industry and its financial viability.
Future outlook
Although both contractors agree that current economic issues are a threat to their businesses, both also view this differently.
While one sees the dangers it poses to profits and future work prospects the other also viewed this as a major issue across the agricultural sector and how this may impact on whether farmers can afford to hire contractors.
Both contractors see that there will be no end in sight in relation to higher fuel costs until the conflict in the Middle East is resolved.
An independent fuel provider told Agriland that average green diesel prices were in the region of €1.44/L by the close of last week.
