We published a story recently in these pages stating that total U.S. agricultural production expenses in 2005 are projected to be up by 4 percent from this past year. Much of this increase, of course, is coming from rising fuel costs, which were up by more than 24 percent (from 2004) during the first half of this year.
Shortly after the story ran, a Southeastern farmer called to take issue with the USDA numbers. This particular grower's personal fuel expenses were up by more than 33 percent over last year, he said, and he had exhausted his annual fuel budget by this past August, before he had completed the expensive practice of turning the land in the fall.
This farmer is certainly not alone in his misery, and the USDA numbers are just that — numbers. They're cold, hard statistics that don't begin to adequately explain the current farm crisis being caused by rapidly escalating fuel costs.
Considering they've had a decent growing season, harvest should be a time for farmers to exhale, to enjoy the fruits of their hard labor. But this year's harvest, regardless of the yields, will be made difficult by fuel costs, with the price of diesel almost doubling in some cases. If a cotton producer penciled in about $12,000 for running his picker this year, that cost was closer to $20,000 to $24,000 by the time he cranked up the machine.
Rising fuel costs already had boosted expenses on everything from fertilizer to the cost of shipping crops to market. Then, skyrocketing diesel costs after Hurricanes Katrina and Rita hit just as farmers were beginning to harvest cotton and peanuts.
And what's even more distressing than the rising fuel costs are the feeble attempts by politicians to fix the problem. Federal government bureaucrats are considering temporarily lifting environmental regulations and other rules for farmers to help ease costs, but fuel costs have risen so sharply and affected so many aspects of farming that the changes will provide little help.
Senate staffers admit that they, along with USDA, are trying to find what, if any, regulations can be eased that might provide some help, but no one has found any substantial ways to offset rising fuel costs.
The long-term answer, of course, is a bold U.S. energy policy that would work to decrease this country's ever-increasing dependence on foreign oil. But none of our current elected officials have the courage to take such a bold step.
As a new farm bill takes shape, federal subsidies to growers already are under attack. But current farm programs aren't enough to make up for rising fuel costs, and it's difficult to imagine subsidies becoming even less in the near future. Farm programs are designed to offset losses from a drop in commodity prices, but they don't take into account rises in the costs of inputs.
Many of a farmer's inputs are tied, directly or indirectly, to fuel, says Danny Klinefelter, a professor and economist at Texas A&M University who specializes in agricultural finance. Fertilizer, much of it derived from petroleum, had gone up dramatically even before this year's hurricanes, he says, and the recent spike in fuel costs have hit hard in other areas. The costs of harvesting, fertilization and irrigation have gone up, as have the costs of drying crops like peanuts and tobacco.
“What I don't think most people realize is how pervasive fuel prices are in all the farm costs,” says Klinefelter. “It's just going to hit so many areas.”
And most economists agree that fuel prices aren't likely to drop anytime soon. A long, mild fall could help ease oil prices back from current post-Katrina/Rita levels. But odds are that little can be done to return U.S. gasoline, diesel and natural gas prices to the ranges farmers and ranchers were paying a year ago, says Matt Roberts, an energy economist with The Ohio State University.
With all the attention that hurricanes have brought to the energy markets, they are the effects, not the causes of tighter energy supplies, he says. Even before the storms, world energy markets were in a fundamentally very tight, demand-driven scenario, says Roberts.