Posted on 06/13/2006 9:49:56 AM PDT by thackney
Summer is just around the corner. It is a time when families should be packing up their cars or minivans and heading out to a beach, national park or other destination for their annual vacation. But with gas prices skyrocketing and no decrease in sight, our nation’s interstates may be less traveled this summer by families who just can’t afford to be on the road.
Unfortunately, high gas prices are affecting a lot more than beach vacationing. Farmers and ranchers are feeling the pinch from fuel and natural gas prices. And since producers are price takers and not price makers, energy prices are dealing U.S. agriculture one swift blow.
Price takers, not makers
With farmers and ranchers having to absorb extra energy costs, many are wondering just how long they can stay in the game. Take for example Sylvania, Ga., farmer and former AFBF Young Farmer and Rancher Chair Ben Boyd. He spends more than $1,300 daily just fueling up his tractors. According to Ben, that’s twice what he was paying two years ago.
It is not just fuel costs that are hitting farmers in their wallets. Natural gas prices continue to take its toll on U.S. agriculture. Fertilizer costs for Ben have shot up 48 percent in the last three years, with an added cost of $54,000 per year. And it’s not just Ben facing the burden of increased energy costs, it stretches from farmer to farmer, impacting every commodity throughout the country.
What used to cost $36 dollars an acre several years ago to produce corn, now costs $64, which has many farmers thinking twice about how much they can absorb before calling it a day. And that, says Ben, becomes a matter of national security. “If people like being dependent on foreign oil, they’re gonna love being dependent on foreign food,” he says.
A Lot of Balls in the Air
So what is Congress doing to ease the pain at the pump and across the agriculture industry? In my opinion, not yet enough.
Opening the Outer Continental Shelf and the Arctic National Wildlife Refuge for energy exploration are two provisions Farm Bureau supports in any energy package. While there is no silver bullet to lower fuel prices, opening the OCS and ANWR would certainly help while lessening our dependence on foreign energy sources.
Congress needs to act sooner rather than later. With summer recess quickly approaching, it is leaving a lot of balls in the air, as well as families stuck at home. More importantly, without an energy package, farmers and ranchers are left scrambling to find ways to meet escalating costs of producing the nation’s food. And they’re coming up on empty.
maybe they should remove the required ethenol from gasoline as required by the EPA - as the shortage of ethenol is one of the main reasons for high gas prices, or maybe congress should lower the gasoline tax-
Most of society just ignores the agricultural community until there's no corn on the cob for the picnic. It's a shame. Their work is invaluable.
I don't care how much "adjusting for inflation" you do, gas is not "as cheap as it has ever been." Hydrocarbon fuel has been around for 100 years and it tood 95 years to get to the $1.00 gallon mark and 5 years to get to the $3.00 gallon mark. Has there been any major new production facilities built anywhere in the world in the past 5 years? NO. Any new refineries built that cost the production companies anything? NO. Any new major construction of pipeline networks? NO.
OK, no new overhead BUT the price has tripled? There is BS in the game, folks.
What used to cost $36 dollars an acre several years ago to produce corn, now costs $64, which has many farmers thinking twice about how much they can absorb before calling it a day. And that, says Ben, becomes a matter of national security. “If people like being dependent on foreign oil, they’re gonna love being dependent on foreign food,” he says.
Damn good point.
No - call your Reps and Sens and demand that they get the government out of the agriculture business. End subsidies, end price controls and tariffs, and let the free market reign.
Government distorts everything it touches.
And remember folks, farmers don't pay road taxes on gas or diesel, so they get much cheaper fuel that we all do.
Don't stop there - Ask the next question. Why don't the farmers simply charge more to offset their costs ?
Because .... the US government has its fingers in the sector with subsidies, price supports, and price caps.
Where did you get the information that ethanol is the reason for high gas prices????
That is complete BS and you know it.
Farmers are making ethanol from their corn because there is no profit in giving corn to Ethiopia. Or When a box of corn flakes costs 4 bucks and only uses 12 ounces of corn, and a bushel of corn (56 pounds) is bought for 2 bucks, the corn flakes people are making a killing. The farmers are being ripped off because they have to take all the risk of growing corn. I much prefer a 10% blend of ethanol in my gas over a lousy box of corn flakes.
Why not just drill in ANWR and the Gulf Coast and keep gas taxes the same? The whole reason gas is so high is because nutcase environmental wackos would rather we buy oil from terrorist supporting mullahs rather than drill in a place where 99.9% of humanity will never set foot near.
Are you one of those envirowackos? Your lame arguements sound like some ignorance from the Dumb Underground.
"And remember folks, farmers don't pay road taxes on gas or diesel, so they get much cheaper fuel that we all do."
Yeah, a dime a gallon is really cheap! Really justifys the interest on a thousand acres of land and a few hundred thousand dollars of equipment to do the job don't it?
There has not been a free market in agriculture for over 50 years. The Chicago Board of Trade sets all commodity prices on a daily basis. They get their production information because government makes farmers report their livestock and crop holdings. Failure to do so is a major violation of the law. So the CBT knows how much pork, beef, corn, soybeans, rice, peanuts, tobacco etc is available at any given time. Other considerations are for weather patterns and foreign crop estimates.
I once knew a farmer who lost his land in the 1980's because of double digit interest rates and high inflation, severe drought that killed his crops he had borrowed thousands of dollars to plant. His take on the situation was that he should have taken his money to Las Vegas and gambled. At least he would have had more fun losing the money than working his butt off and still ending up with nothing.
Ethanol may not only save a lot of farmers by giving them a higher return on their investment, but ethanol will indeed cut our dependence on foreign oil.
Oh and our government is the cause of high oil prices.
Environmental wackos have stopped drilling for known sources of domestic oil. The same idiots have kept refinerys from being built for 30 years.
Why can't people understand that?????
"Don't stop there - Ask the next question. Why don't the farmers simply charge more to offset their costs ?
"
The only farmers who are in charge of the price they get for their crops are truck farmers who sell at farmers' markets.
You don't know much about farming, do you? Farmers don't set prices...they take what the price is for their crops.
They save a lot more than a dime a gallon in PA.
Going out of business is the name of the game if you can't make money on your livelihood. Every other business is subject to the same constraints; only farmers take $10 billion a year from the federal trough. (OK, maybe airlines feed at a federal trough too.) Point is, they need to figure out how to make a profit or go out of business.
Ethanol pushes Houston-area gas prices to highest in Texas
Though ultimately gasoline prices react to oil prices, for now there are also concerns about the cost of the ethanol coming from the Midwest.
The Houston area and the Dallas-Fort Worth area share the distinction of having the most expensive gasoline in Texas. In both places service stations are required to sell a gasoline blend with 10 percent ethanol that is designed to reduce emissions in these cities with air pollution problems....
The ethanol industry didn't have time to significantly expand its production when Congress changed environmental laws last year prompting the switch, said Robert White, deputy director of the Jefferson City, Mo.-based National Ethanol Vehicle Coalition.
Ethanol futures for July were selling at $3.725 per gallon on Friday afternoon, compared with MTBE, which sold at about $1.99 per gallon at the end of May, the last time Tom Kloza, an analyst with the Oil Price Information Service, followed sales of the chemical. In early May, ethanol futures stood at less than $2.70 per gallon.
Yes, I live in a rural area and all my neighbors are farmers.
You confirmed my point - you said farmers take the price set. Set, you said - by whom ?
My neighbors grow corn, soybeans, winter wheat, hay and straw, for the most part. I have horses. I can tell you that the prices for hay and straw go up and down with the year and the weather, and the expenses of production.
So if wheat, soybeans and corn can't be sold at a price that recovers their expenses, they have the ability to leave land fallow and taxpayers pay them for producing nothing. Additionally, unless you think we live in the USSR or China, they have the freedom to switch crops to make more money on something else. I had one neighbor switch to strawberries and cutting flowers and is doing quite well. Another is growing Christmas trees and pumpkins.
So please, don't cry about farmers. They need to adjust to changing conditions, as does every business in every type of market. They just get more locked into the status quo because of massive government intervention. They need to get off the taxpayer teat and run their farms like a business.
I would love to own my fathers 280 acres. For $1000 an acre (going price for land in that area) thats $280,000. At 6% interest, the interest alone would be nearly $16,000 the first year with hardly nothing on the principle.
I have schemed and run the whole scenario about how to keep the farm in the family. (Dad is 73)
There is a few acres of marginal crop land, mostly hay. Balance is timber and pasture. I could sell a few logs.
Making hay takes equipment so that would have to be purchased or the work contracted out would be more appropriate than owning a bunch of machinery to do the small acreage of hay. Livestock would be good but that is an additional investment in animals, feed and equipment to handle and feed the livestock.
Anyway my point is, at least with this farm and probably thousands of others, generating $4,000 of income a month to pay the interest and principle, pay interest and principle on livestock, and eek a meger living off the property appears to be impossible unless I raised a hundred acres of marijuana. It is unfortunate that there is no legal way of purchasing the property unless I was already independently wealthy. And some rich city guy will probably end up owning it for a space to hunt.
Property is a good investment if you can pay for it and hold on to it for 20 or 30 years.
But you tell me how in this day and age I could buy a farm and pay for it, while making an average median income, and I will forever be indebted to you.
And if American farmers go out of business who will supply our food? Will there be a opec style food cartel dictating the price of eggs and tomatoes? If we think it is bad that foreign countries have control of our oil supply, just think of how much worse it could be if they also control all of our food??
I am all for removing government from business. That task is more monumental than farming. Any ideas there?
"You confirmed my point - you said farmers take the price set. Set, you said - by whom ?
"
Depends on the crop. My parents are citrus farmers in California. The price they are paid is set by the packing cooperative they are part of. They don't even find out how much they will get until six months after the crop is picked.
There is price-setting all the way up the chain of middlemen. The farmer gets what's left after everyone else gets theirs.
As for subsidies, there are subsidies for some crops, but not all. If my folks don't have their crop picked, they still have the expenses of the farm to pay, and no subsidies.
So, they take what they get for their oranges. They're too darned old to pick and pack their farm themselves and haul it to a farmers' market.
It's not all that simple.
I can't get this image of 535 pairs of disembodied testicles being flung in the air the way that graduating students fling off their caps just before the mad dash for the exit gates at session's end.
Farmers rarely have understood the subsidies, price supports, and price caps. They know just enough to get by and fix their current situation. For a kid to spend two years at some agricultural college...and take 3 or 4 classes in business management...he comes out way ahead from where his dad was 40 years ago.
When viewed over decades instead of only the last few years, wages have kept up with the price of gasoline.
Consumer Price Index, Average Price Data
In 1980, the average wage for a worker was $6.33, leaded regular gasoline cost $1.19. It took 10.4 minutes to earn a gallon of gasoline. It took more time in 1981.
In May, 2006 the average wage for a worker was $16.59. According to gasbuddy.com, the average price for gasoline today is $2.904. The takes 10.5 minutes to earn a gallon of gasoline now. When you combine the improvements in mpg since then, it becomes even cheaper to drive to work today compared to then.
Hydrocarbon fuel has been around for 100 years and it tood 95 years to get to the $1.00 gallon mark
In December 1979, the nation's average price of leaded regular gasoline was $1.018. Unleaded regular reached $1 several months earlier.
and 5 years to get to the $3.00 gallon mark
In 5 years the price has about doubled, not tripled.
Has there been any major new production facilities built anywhere in the world in the past 5 years?
There have been many.
Any new refineries built that cost the production companies anything?
There have been several. Including the expansions and upgrades of refineries in the US.
Any new major construction of pipeline networks?
New pipelines have been built from new areas of production. Pipelines from Alberta continue to be added and expanded.
no new overhead BUT the price has tripled?
Oil produces must continue to drill new production wells just to keep even. Rig rates have doubled and tripled in some areas. The price of steel has similiar risen over the last 5 years.
Here in Missouri Ethanol blended gasoline is the same as regular or cheper by two to four cents a gallon.
And I payed $2.66 a gallon for gasoline this morning.
Houston is the refining capital of the USA. Being at the head of the pipeline used to have some advantages over being on the end like we are in Missouri.
Perhaps the balance of energy production is shifting more to the corn belt?
Ethanol has been in production in the corn belt for over 30 years while the rest of the nation ignored the potential reductions gained by alternative fuels like ethanol. In fact they just installed an E-85 pump up the road from me. Thats 85% ethanol, 15% gasoline.
I can't burn it in my vehicles. But a lot of the new ones in the area are flex fuel engines.
When MTBE was mandated a few years ago for the pollution, it was already known that ethanol had the same pollution reducing benefits, but few of the environmental consequences of MTBE. So Texas is finally switching to ethanol and not letting the oil companies dictate additives like they have in the past? I think that is good news.
Short term you may pay more for gas with ethanol because you are at the end of the ethanol pipeline like we are on the gas pipeline. But in the long term you will be better off as ethanol plants locally offset the transportation costs. Local energy production is the least expensive.
Since we can't drill for oil in ANWR and the Gulf of Mexico I guess local energy production will have to shift to the alternatives of ethanol and bio diesel.
Do you believe American Agriculture is capable of producing the volumes required to replace 10% or more of the nation's fuel demand?
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