Fuel costs squeeze area farm budgets

Sunday, January 8, 2006

In December the USDA made providing energy cost relief to farmers a priority.

As farmers look to 2006 they can see a continued decline in the profitability of their operations.

Rising energy costs are expected to severely affect farming in the coming year, even more than they have in previous years. The price of diesel and gasoline to power tractors, combines, trucks and irrigation systems continues to rise compared to this time last year, as does the natural gas required to make nitrogen-based fertilizer.

Gerald Bryan, an agronomist with the University of Missouri Extension in Cape Girardeau County, said the high fuel prices pushed last fall's harvest cost up an estimated 20 percent over the previous year, and the trend shows no sign of stopping.

At the same time the cost of nitrogen fertilizer has doubled in the last two years, Bryan said.

"It is making the bottom line very hard to keep ... in the black," Bryan said. "And the thing is, as costs are going up, but commodity prices are not going up."

The result is a squeeze on farmers' budgets.

"I don't know that it's going to be enough to put them under, but it certainly affects their profitability," said Terry Birk, director of the Cape Girardeau County office of the USDA Farm Service Agency.

David Reinbott, an agriculture business specialist with the University of Missouri Extension in Scott County, has run the numbers. According to his estimates, the costs of drying corn will be up more than 20 percent, fuel and repairs will be up 25 percent and irrigation fuel will be up 60 percent.

"All of them are concerned one way or another," Reinbott said of the farmers he works with. "They're all looking ahead."

John Lorberg farms near Gordonville and estimates that his fuel in 2005 cost about $4,000 more than it did in previous years.

Last year he planted corn, but due to the high costs of fertilizer and fuel and a stagnant commodities market for the crop, he'll probably go to soybeans in 2006.

In his 43 years of farming, Lorberg said he's never seen energy prices have such an effect on operations.

The USDA has already taken action to try and address the problem. In December the USDA made it a priority to provide energy cost relief to farmers by directing funds to loans for farmers affected by high energy costs.

The impact is most felt on crops like corn, which requires fuel to dry and nitrogen fertilizer, and cotton, wheat and rice, all of which require nitrogen fertilizer. For those crops the price of fuel to power machines is compounded by the increase in fertilizer costs.

Bryan said these factors only point to one conclusion -- renewable fuels must be integrated into the farm economy. The use of fuels like biodiesel and ethanol may help greatly reduce costs in the future as the technologies become more technologically viable.

Other processes can also be used to save energy. Lorberg has been able to save on fuel for irrigation systems by using a system that takes advantage of natural springs around his farm.

The only fuel required is the gas he uses to drive his ATV to turn a valve and open the water flow.


335-6611, extension 182

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