NCGA’s
Rockhold Testifies on Effects of Rising Natural Gas Prices (9-22-04)
Brent Rockhold, member
of the National Corn Growers Association (NCGA) Ethanol Committee
and past president of the Missouri Corn Growers Association, testified
today before the House Small Business Subcommittee on Rural Enterprise,
Agriculture and Technology on the effect of high natural gas prices
on corn production and profitability.
“Increased natural
gas prices have already had an adverse effect on farmers due to
higher production costs, and will continue to do so in the future,”
said Rockhold, adding high natural gas prices affect the cost of
producing important fertilizers that farmers rely on for crop development.
Fertilizers account for
more than 40 percent of the total energy input per acre of corn
harvested, Rockhold said, and most of that energy is consumed in
the production of nitrogen fertilizer. Retail prices for fertilizer
rise sharply when natural gas prices increase. “Nitrogen fertilizer
is a key input for the bountiful yields achieved by U.S. corn farmers,”
Rockhold said. “Nitrogen fertilizer in northeast Missouri
has increased $25 per acre since 2000. For my 600 acres of corn,
it cost me $15,000 more in 2004 to use nitrogen fertilizer on my
crops. My total fertilizer costs have increased $24,000 since 2000.”
According to the U.S.
Department of Agriculture (USDA), farm gate prices for fertilizer
have jumped to near record-high levels. The largest cost component
of making all basic fertilizer products is natural gas, accounting
for more than 90 percent of the cash cost of production.
Rockhold noted growers
rely on affordable natural gas as feedstock for fertilizer, but
also energy for irrigation, powering farm equipment, drying grain
and producing ethanol. “Whether used directly as a feedstock
or for heat and power generation, reasonably priced natural gas
is essential to grower profitability,” said Rockhold.
“Rising natural
gas prices in the U.S. have caused domestic nitrogen fertilizer
producers to severely curtail production, increasing the difficulty
to compete with lower natural gas prices in Europe, Asia and South
America,” said Rockhold. “This is due in part to the
fact we are using natural gas for electric generation when we have
plenty of natural resources such as coal to produce electricity.”
Rockhold said natural
gas prices have jumped from $160 per ton in 2000 to $400 per ton
today. He warned subcommittee members prices are expected to continue
to rise into the foreseeable future. “Tight supplies and increasing
demand will continue to pressure producers’ margins and profitability,”
he said.
Citing USDA’s forecast
for the largest ever corn crop, Rockhold highlighted the volatile
relationship between natural gas and the production of ethanol.
He said natural gas accounts for nearly 65 percent of the energy
costs for ethanol production. “More than 10 percent of the
expected corn harvest will be converted to ethanol,” noted
Rockhold. “Higher natural gas prices will negatively impact
this country’s growing ethanol industry. The corn industry
becomes more energy efficient every year, but we still must have
adequate, reliable and affordable natural gas to fuel the industry.”
Government policy is
hindering the ability of farmers to be efficient and environmentally
friendly corn producers, Rockhold said. He said farmers will continue
to face significant obstacles if the United States fails to realize
resources such as natural gas and petroleum have limited supplies,
and alternative sources of energy must be developed.
“I am sure the
individual members of the subcommittee understand this,” Rockhold
said. “However, Congress as a whole seems unaware of this
fact. We can produce corn, but we need you to produce the kind of
policy that enables us to use the needed resources to do so.”
Rockhold concluded
his testimony by encouraging the subcommittee to continue working
toward a sound, comprehensive energy policy. “Your decisions
impact my farming operation and simply, farmers need access to reliable
sources of energy and raw materials so they can use the fertilizers
necessary to produce an abundant, affordable and healthy food supply,”
he said.
To read Rockhold's
testimony, click
here.