NCGA
Leaders Troubled by Rising Fuel, Fertilizer Prices (4-15-04)
The price of corn is up – but so is the cost
of production. As corn growers head into the fields for the spring
planting season, higher fuel and fertilizer prices threaten to significantly
increase operating expenses for the second year in a row, according
to Dee Vaughan, president of the National Corn Growers Association
(NCGA).
The U.S. Department of Agriculture (USDA) estimates
farmers and ranchers will spend at least $8.4 billion on fuels and
oils this year, about the same as last year and a 29 percent increase
over 2002 expenses. And spending on fertilizer and pesticides is expected
to increase $500 million over last year’s levels, according
to USDA forecasts.
The nationwide average for bulk diesel, the predominant
fuel used in production agriculture, is up 14 cents per gallon compared
to the same time last year and natural gas prices are nearly double
what they were in 2002, according to U.S. Department of Energy statistics.
Experts say fuel prices are likely to creep even higher as demand
increases and OPEC-determined crude oil prices continue to rise.
Vaughan said higher prices for corn and other commodities
will help farmers absorb some of these rising energy costs, but increased
production costs put growers in a precarious position.
“We are fortunate this year that crop prices
are higher,” said Vaughan, who farms near Dumas, Texas. “Better
crop prices will buffer the higher production costs, but there are
still problems. When energy prices increase, it affects our costs
for irrigation, grain drying, grain hauling, fuel for machinery and
vehicles, fertilizer and other inputs.
“Higher production costs translate into higher
risk, and if a producer loses a crop to weather in July or early August
when most of the production expense has already been accrued, the
outcome could be devastating.”
Last year’s high input expenses, coupled with
hail damage and persisting drought, caused many younger producers
in Vaughan’s area to get out of the farming business.
“Last year we were in a very tight situation
because natural gas for irrigation was at record levels and diesel,
gasoline, lubricants, fertilizer and other inputs were at near-record
levels,” Vaughan said. “In this area last year, we knew
that anything short of a good crop would mean significant losses.
Several farmers between the ages of 30 and 45 quit simply because
they didn’t see any reason to be optimistic in the short- or
long-term.”
Growers in the central Corn Belt, where the price
of diesel fuel has risen 13.5 cents per gallon since last April, are
facing similar challenges. Martin Barbre, president of the Illinois
Corn Growers Association, said nearly every facet of his operation
near Carmi, Ill., involves the use of petroleum-based products.
“Just about everything we do requires some type
of fuel, lubricant, oil or petro-chemical,” he said. “A
lot of these things aren’t high-dollar items, but when you add
it all together, it takes a big chunk out of your bottom line. You
also have to think about the added expense of higher gasoline prices
for our vehicles. We do a lot of running around, so that affects us
too.”
Barbre said many producers in his area are feeling
the sting of higher fertilizer prices as well. Anhydrous ammonia fertilizer
is produced using natural gas, the price of which has increased more
than 50 percent since 2002.
“Not using fertilizer is just not an option,”
he said. “You have to use fertilizer, so you don’t have
a choice about paying the extra money for it.”
Vaughan said some innovative growers are trying new
production techniques to stretch their dollar a bit further. Some
row-crop farmers are now using minimal, no-till or strip-till practices
to avoid the expense of turning over entire fields each year.
“Farmers naturally strive to be very efficient,
and difficult times increase the requirement to be even more frugal,”
Vaughan said. “Growers have pushed the envelope on fertilizer
efficiency to new levels. And strip-till is quickly becoming the standard
in this area because it saves water, reduces diesel use, and lowers
labor and machinery costs.”
Less dependency on foreign energy sources would help
to curb the escalating U.S. energy crisis, Vaughan said. Corn growers
should urge their elected officials to enact sound energy legislation
that addresses the need for reliable domestic energy stocks, he said.
“The United States needs a comprehensive energy
plan that develops all of our energy resources – coal, natural
gas, oil, renewables and nuclear,” Vaughan said. “We have
the ability to secure our energy future – it just takes action.
“Will we be able to stop importing oil in the
foreseeable future? No. But we can move toward that goal in a decisive
way by developing our own resources in a responsible manner. By developing
all of our resources wisely, we can have affordable energy not only
for agriculture, but for the United States as a whole.”
Barbre agreed, stating, “We’ve got to
have a comprehensive energy policy – that’s the most important
thing for us right now. There are a lot of energy infrastructure problems
in the United States that desperately need to be taken care of.”