Diesel Costs Continue To Add Input Pressure

DR. CHARLEY MARTINEZ

KNOXVILLE, TENNESSEE

This week, there was a mid-week rally, followed by a squeeze, indicating continued margin pressure. The USDA’s May report points to ample supplies across all major crops. Corn production is projected at 15.2 billion bushels with prices near $4.00–$4.20, while soybeans face global oversupply and prices around $9.20–$9.95, leading to tight returns near $460– $475 per acre in Tennessee. Wheat prices remain in the $4.80–$5.10 range, keeping profits slim, and cotton continues to struggle with prices in the mid-60 to low-70 cent range. At the same time, diesel costs around $5.66 per gallon, over $2.00 higher than a year ago, are continuing to add input pressure, reinforcing the need for strong cost control and marketing discipline in 2026. 

Additionally, the University of Tennessee is celebrating a new group of Vols for Life, congratulations to all the graduates. I’d also like to take a moment to personally congratulate my wife, Vanessa, on earning her Master’s in Plant Sciences. Wishing everyone a great weekend! 

USDA Reports 

The USDA National Agricultural Statistics Service Crop Production report released on May 12, 2026, provides the first official production forecasts for the 2026/27 marketing year and confirms that U.S. crop producers, including Tennessee farmers, face another year of abundant national supplies and challenging price margins across all four major row crops. For corn, USDA projects 2026 U.S. planted acreage at approximately 94.0 million acres with a trend-line yield of 181.0 bushels per acre, which would produce a crop of approximately 15.2 billion bushels, down from the record 16.7 billion bushels in 2025 but still the third-largest crop on record and more than sufficient to maintain ending stocks well above 2.0 billion bushels, keeping downward pressure on prices that are currently projected at $4.00 to $4.20 per bushel for the 2026/27 season- average (USDA-NASS, Crop Production, May 12, 2026; USDA-WASDE, May 2026). Tennessee corn producers, who plant approximately 800,000 to 900,000 acres annually at a state trend yield of roughly 182 bushels per acre, face the same margin squeeze as their Corn Belt counterparts. For winter wheat, the May report provides the first condition-based yield forecast of the season, estimating U.S. winter wheat production at approximately 1.25 billion bushels based on planted acreage of 33.2 million acres, down from 34.1 million the prior year, and a national average yield of approximately 52.0 bushels per acre, though yield prospects vary dramatically by region, with the Southern Plains wheat crop in Kansas, Oklahoma, and Texas facing severe drought stress (71% of Kansas under extreme moisture stress as of May 2026) while the soft red winter wheat crop in the eastern states, including Tennessee, is in generally good to excellent condition following adequate spring rainfall (USDA-NASS, Crop Production, May 12, 2026; U.S. Drought Monitor, May 2026). Tennessee typically plants 250,000 to 350,000 acres of soft red winter wheat, primarily as a double-crop ahead of soybeans, with state average yields of approximately 65 to 75 bushels per acre, above the national average due to favorable growing conditions in the mid-South, but at current wheat prices of approximately $4.80 to $5.10 per bushel at Tennessee elevators, wheat margins remain thin and the crop's primary economic value for Tennessee producers lies in its role as a double-crop companion to soybeans rather than as a standalone cash crop (USDA-NASS, Crop Production by State, various years). For soybeans, while the May Crop Production report focuses primarily on winter crops and does not yet provide a soybean production forecast (planting is still underway in May), USDA's March Prospective Plantings report projected 2026 U.S. soybean planted acreage at approximately 83.5 million acres, down approximately 4% from 2025, reflecting the unfavorable price environment, with the 2025/26 season-average price projected at approximately $9.95 per bushel amid ample global supplies, record Brazilian production exceeding 170 million metric tons, and continued trade policy uncertainty that has dampened U.S. export competitiveness (USDA-NASS, Prospective Plantings, March 31, 2026; USDA-ERS, Oil Crops Outlook, May 2026). Tennessee soybean producers, who typically plant 1.4 to 1.6 million acres (making soybeans the state's largest row crop by acreage), face local cash prices of approximately $9.20 to $9.50 per bushel after basis, which at a trend yield of 50 bushels per acre generates gross revenue of approximately $460 to $475 per acre, a level that barely covers variable costs and falls well short of total costs including land rent, making 2026 another year where soybean profitability in Tennessee depends heavily on above-trend yields, favorable basis, and effective use of crop insurance and forward contracting (USDA-NASS, Crop Production by State). For cotton, the May report estimates 2026 U.S. upland cotton planted acreage at approximately 9.8 million acres, down from 10.2 million in 2025, with production projected at approximately 14.5 to 15.0 million 480-pound bales based on a national average yield of approximately 850 to 880 pounds of lint per acre, though the crop is still in early development stages in most growing regions and the final production figure will depend heavily on summer weather conditions across the Cotton Belt (USDA-NASS, Crop Production, May 12, 2026; USDA-ERS, Cotton and Wool Outlook, May 2026). Cotton futures on the Intercontinental Exchange have traded in a narrow range of 64 to 72 cents per pound through the spring of 2026, pressured by weak global mill demand, competition from synthetic fibers, and comfortable world ending stocks estimated at approximately 80 million 480-pound bales, conditions that offer little price upside for U.S. producers in the near term (USDA-ERS, Cotton and Wool Outlook, May 2026; ICE Futures, Cotton No. 2, various dates). Tennessee cotton production, concentrated in the western counties along the Mississippi River (primarily Lauderdale, Tipton, Haywood, Crockett, Gibson, Dyer, and Obion counties), typically encompasses 150,000 to 200,000 acres with lint yields of approximately 900 to 1,050 pounds per acre, competitive with the Delta states, but at current gin-door prices of approximately 59 to 63 cents per pound, Tennessee cotton producers face negative returns over total costs once ginning charges ($0.08 to $0.10/lb), hauling, seed costs ($150 to $200/acre), and other inputs are factored in, making crop insurance and any available marketing loan or counter-cyclical program payments essential to managing downside risk in the current environment (USDA-NASS, Crop Production by State, various years; USDA-FSA, Marketing Assistance Loan Program, 2026). The overarching message from the May 2026 Crop Production report for Tennessee producers across all four crops is consistent with what the market has been signaling all year: national and global supplies remain ample, prices are below or near breakeven for most Tennessee operations, and the path to profitability in 2026 runs through disciplined cost management, maximum utilization of crop insurance and risk management tools, strategic forward contracting on any price rallies, and honest evaluation of whether marginal acres should remain in row crop production or be shifted to alternative enterprises, livestock, conservation programs, cover crops for soil health, or managed fallow, until the commodity price cycle turns. 

Fuel 

Fuel prices remain relatively steady week-over-week but continue to run well above last year’s levels, keeping costs elevated for producers. Current averages show regular gasoline at $4.53 and diesel at $5.66, both essentially unchanged from yesterday and only slightly lower or flat compared to a week ago. However, compared to a month ago, most fuels have moved notably higher, regular is up more than 40 cents and diesel has held firm, suggesting a firm market heading into the mid-May. On a year-over-year basis, the increase is even more pronounced, with diesel up over $2.00 per gallon and gasoline categories roughly $1.30–$1.50 higher. E85 remains the lowest-cost option at $3.66, though it too has risen from both month-ago and year-ago levels. Overall, while short-term volatility has been minimal, the broader upward trend in fuel costs continues to pressure operating margins, particularly for fuel-intensive fieldwork. 

 Corn 

Across Tennessee, average corn basis (cash price-nearby futures price) weakened from last week at West, Northwest, West-Central, North-Central, and Mississippi River elevators and barge points. Overall, basis for the week ranged from 30 cents under to 26 cents over, with an average of 4 cents over with the May futures at elevators and barge points. Ethanol production for the week ending May 8th was 1.82 million barrels, up 65,000 barrels compared to the previous week. Ethanol stocks were 24.87 million barrels, down 1.15 million barrels compared to the previous week. Cash prices ranged from $4.38 to $5.13 at elevators and barge points. On Friday, September 2026 corn futures closed at $4.63, which is down 14 cents compared to last week. For the week, September 2026 corn futures traded between $4.62 and $4.91. 

Nationally, the Crop Progress report estimated corn emerged to be 23% compared to 13% last week, 26% year, and a 5-year average of 19%; corn planted to be 57% compared to 38% last week, 59% last year, and a 5-year average of 52%. In Tennessee, the Crop Progress report estimated corn emerged to be 73% compared to 62% last week, 48% last year, and a 5- year average of 45%; corn planted to be 92% compared to 87% last week, 74% last year, and a 5-year average of 75%. This week new crop cash contracts ranged from $4.48 to $5.06 at elevators and barge points. For the week of May 1-7, 2026, there were net sales of 684,800 MT for 2025/2026 were down 50% from the previous week and 52% from the prior 4-week average. Total net sales of 400 MT for 2026/2027 were for Honduras. Exports of 1,663,400 MT were down 19% from the previous week and 7% from the prior 4-week average. December corn futures closed at $4.81, down 12 cents from last week. 

Soybeans 

Across Tennessee average soybean basis weakened compared to last week at West, Northwest, North-Central, West-Central, and Mississippi River elevators and barge points. Average basis ranged from 40 under to 16 over the May futures contract, with an average basis at the end of the week of 10 cents under. Cash soybean prices at elevators and barge points ranged from $11.53 to $12.59. September 2026 soybean futures closed at $11.63, down 22 cents compared to last week. For the week, September 2026 soybean futures traded between $11.59 and $12.09. 

Nationally, the Crop Progress report estimated soybean emerged to be 20% compared to 13% last week, 16% last year, and a 5-year average of 12%; soybean planted to be 49% compared to 33% last week, 45% last year, and a 5-year average of 36%. In Tennessee, the Crop Progress report estimated soybeans emerged to be 52% compared to 42% last week, 21% last year, and a 5-year average of 15%; soybean planted to be 76% compared to 69% last week, 43% last year, and a 5-year average of 36%. For the week of May 1-7, 2026, there were net sales of 102,100 MT for 2025/2026 (a marketing-year low) were down 28% from the previous week and 60% from the prior 4-week average. Total net sales of 80,800 MT for 2026/2027 were for Mexico. Exports of 671,200 MT were up 26% from the previous week, but down 2% from the prior 4- week average. The destinations were primarily to China (336,600 MT), Egypt (105,000 MT), Indonesia (73,000 MT), Mexico (54,200 MT), and Canada (24,400 MT). November 2026 soybean futures closed at $11.71, down 18 cents compared to last week. 

Cotton 

North Delta upland cotton spot price quotes for May 14th were up compared to last week. Prices were 80.94 cents/lb (41-4- 34), and 85.69 cents/lb (31-3-35), which made both up .94 cents compared to last week’s prices. 

Nationally, the Crop Progress report estimated cotton planted to be 29% compared to 21% last week, 27% last year, and a 5-year average of 28%. In Tennessee, the Crop Progress report estimated cotton planted to be 49% compared to 25% last week, 27% last year, and a 5-year average of 21%. For the week May 1-7,2026, there was a total net sales of Upland totaling 47,700 RB for 2025/2026 (a marketing-year low) were down 61% from the previous week and 66% from the prior 4-week average. Net sales of 29,700 RB for 2026/2027 primarily for Vietnam (13,800 RB), Mexico (8,800 RB), Bangladesh (4,400 RB), Guatemala (2,200 RB), and Indonesia (1,500 RB), were offset by reductions for Pakistan (2,200 RB). Exports of 290,300 RB were down 11% from the previous week and 12% from the prior 4-week average. For the week, December 2026 cotton futures closed at 81.91cents, down 3.55 cents compared to last week. March 2027 cotton futures closed at 82.55 cents, down 3.58 cents compared to last week. 

Wheat 

Wheat cash prices at elevators and barge points ranged from $6.14 to $6.60. 

Nationally, the Crop Progress report estimated spring wheat emerged to be 23% compared to 10% last week, 25% last year, and a 5-year average of 19%; spring wheat planted to be 53% compared to 32% last week, 63% last year, and a 5-year average of 51%. The report estimated winter wheat headed to be 61% compared to 49% last week, 51% last year, and a 5- year average of 45%. For the week of May 1-7, 2026, net sales of 133,500 metric tons (MT) for 2025/2026 were up 70% from the previous week and 10% from the prior 4-week average Net sales of 221,100 MT for 2026/2027 were primarily for Mexico (79,200 MT), the Philippines (66,500 MT), unknown destinations (27,200 MT), Costa Rica (16,000 MT), and Honduras (14,500 MT). Exports of 440,000 MT were down 7% from the previous week, but up 5% from the prior 4-week average. July 2026 wheat futures closed at $6.35, up 16 cents compared to last week. September 2026 wheat futures closed at $6.49, up 15 cents compared to last week.   ∆

DR. CHARLEY MARTINEZ

UNIVERSITY OF TENNESSEE