Posted on 03/30/2008 12:32:10 AM PDT by TigerLikesRooster
Electricity, diesel, fertilizer prices tough on farmers, ranchers
LUBBOCK, Texas (AP)--South Plains cotton producer Don Langston is eager for a "big rain."
Without it he'll have to keep irrigation pumps running to water thousands of acres of dusty, parched land so there's enough moisture to plant this year's crop in a couple of months.
He figures he'll spend as much as $50 more an acre than he did last year, when rainfall was plentiful, even by West Texas standards.
"We're going to have to have a good crop just to break even," Langston said. "I'm OK. Just need a big rain."
But for Langston and other agriculture producers across the U.S., electricity costs aren't the only concern. Diesel fuel and fertilizer prices are also weighing on them.
Last year, a farmer could buy a ton of fertilizer for about $450; the price tag is now closer to $1,000, American Farm Bureau Federation chief economist Bob Young said.
And when farmers and ranchers start up their machinery, their wallets will feel lighter.
Last year, 500 gallons of diesel cost between $500 and $800. This year it will cost about $1,500 to fill that same tank.
Most of the hikes in agriculture--as in other sectors--involve higher energy costs. Fertilizer is made from natural gas, for which prices have increased sharply.
"It's pretty difficult to figure out when it's going to stop," said Colorado City cotton producer Woody Anderson, a former chairman of the National Cotton Council. "Who knows when things are going to level off?"
Producers in West Texas and across the Midwest's Corn Belt also are feeling the pinch.
Billy Bob Brown, who will grow corn and cotton near the town of Panhandle, 30 miles northeast of Amarillo, said it's going to cost him 46 percent more to plant 700 acres of corn.
Most of that is fertilizer, he said.
By his calculations he'll get $1.98 back for every dollar he puts into his corn crop. That's up from the $1.33 he made last year for every buck he spent.
"You can see we're not making quite as much money as people think," the 69-year-old said. "The need for a risk management is extremely important because of our high inputs."
Langston said his electricity costs will go up again during the growing season as utility companies add a surcharge using pump engines' horsepower--during their peak usage months.
That's why early rain is critical.
"We could very well see a dry start which means producers will have to start watering from the time they plant, instead of having that bank of moisture," said Shawn Wade, spokesman for the Plains Cotton Growers, which serves 41 counties on the South Plain, the world's largest contiguous growing patch.
Brown's emphasis on risk management includes weather that's typical in West Texas during spring.
"If a fellow were to catch a hail storm and lose a crop you'd have one heck of a financial loss," Brown said.
Portions of Texas, the nation's leading cotton producing state, have moved back into drought conditions, in part because of a La Nina weather pattern that brings warmer and drier weather patterns.
A two-year dry period in Texas ended in 2007, the seventh wettest year on record and 10 inches over the normal average rainfall. Lubbock is currently about .75 inches behind normal, compared to 2.5 inches above normal this time last year.
The state was expected to plant half (4.8 million acres) of the nation's forecast 9.5 million acres. Texas' tally is a drop of 2.3 percent from last year; the U.S. number is a 12 percent decrease from 2007.
Producers also are wondering whether they'll see a completed farm bill any time soon. The cotton industry is pushing for a safety net similar to one in the bill that officially expired in the fall.
Congress voted to extend that to April 18, and there has been talk of extending it another year.
"That's the big question mark in all of our minds," Anderson said. "The uncertainty of not having a farm bill certainly adds to the anxiety."
Ping!
Most of the diesel used on farms isn’t taxed. This is what the red dye in off-road diesel means - no road taxes.
Right but the price farmers are paying for diesel is still at an increase over last year.
We can all thank the envirowacko’s and the rats for the high prices of fuel.
So..costs are up, but return on investment is up another fifty percent... Gosh, how that contrasts from the hard luck tone of the article.
Oh yea, don’t I know it.
When we bought diesel in 2000, we got off-road diesel for less than $1.00/gal.
This spring, it will be $3.50/gal.
Worse than that is fertilizer. 11-52-0 used to be $245/ton. This spring, $900/ton.
It used to be that you could contract your fuel and fertilizer (and seed and other inputs) the fall before. You’d make the purchase, lock in your price, put down 50% and you’d pay up when you took delivery the next spring.
Now no one, for no input, will allow you to contract your inputs and freeze an price for more than a week.
What people who don’t farm don’t (and likely won’t ever) realize is that the risk has gone up considerably.
When you put seed in the ground, put down the fertilizer, pesticides, etc, you’re committed. The costs are now in the ground.
Now let’s say you have a hailstorm come over. Poof. In 10 minutes, you’re done. Game over. Early frost, tornado, whatever. Let’s not worry about the exact reason, just that it does happen.
In some states, you can purchase crop insurance. In others, you can’t. In no case will crop insurance make you whole, it merely helps lessen the loss, but in the end, you’ll still be in the hole. Thanks to inflation, you’re further in the hole than you’ve ever been before.
Ok, it's a business. They risk failure like every restaurant in America, like every card shop, etc. I don't get insurance if I have a bad Christmas. I don't get paid to not open my shop, or to sell stuff that people don't want.
Sorry, if you're trying to make me feel sorry for the farmer, it doesn't wash.
It’s Spring. Like Summer, Fall, and Winter, time for farmers to start whining for a handout.
Farmer Langston's comparison of this year's to last year's rainfall doesn't address the reality of farming in the dry zone, where rainfall(or the lack there-off) is measured on average over longer periods of time.
Also, irrigating from the Ogallala aquifer was always an expensive proposition, but as the level of the aquifer falls, it gets more expensive.
You don't understand the insurance. Only farmers that have to borrow money (95%) to operate have the insurance. They are forced to by their lender. It is extremely expensive insurance and will only cover roughly the amount of the operating loan. The farmer will be bankrupt either way, but the lender is covered at the expense of the farmer, who must purchase the insurance.
This is much like any other business. The lender will require insurance to cover assets that were purchased with the borrowed money.
The big difference for farming is that because its a government run and protected insurance monopoly on crop insurance, the premiums are unbelievably high compared to actual risk. And payout does not cover more than the cost. Put another way, imagine that your lender required you not only to carry insurance to cover the hard assets in your business, but that you were also required to purchase insurance to cover your inventory wholesale costs, operating costs, and owed interest, if you failed to sell it for any reason. (And you couldn't buy insurance to cover unrealized profits). In effect, the government has mandated increased protection of assets (decrease of risk) for banks who make agricultural loans. No farmer anywhere has ever made a profit from crop insurance.
Another misunderstanding put forth by the MSM. First, I agree that farm subsidies like all industry subsidies should stop.
However, subsidies designed to reduce tillage in no way help actual farmers. Farm land runs from $3000-$5000 an acre. The government will pay someone roughly $60 an acre, per year, not to farm it. That's about a 2% return or less, especially because the land must still be mowed. If the land isn't owned outright, its a loss, not even factoring in inflation. Bottom line, real farmers don't take such "don't farm" subsidies. Its a money loser.
What programs such as CRP have done, is to subsidize gentleman farmers and hunting clubs, sometimes retired farmers, which never intended to farm the land anyway. Would you agree to not open your shop for the day, if the government agreed to pay you $60 a day. I doubt it, as I assume that wouldn't even cover your costs. However, if someone wanted to buy your building and turn it into a private club, I'm sure they'd be happy to take the government money and agree not to use the building for the same use you did. The only affect for real farmers is to further drive up land costs.
What does the red dye do?
Why dont we just give them a bigger stimulus check?
There is one difference that I need to point out.If NVDave and I go bankrupt or don’t plant a crop-you don’t get to eat.Farming is more than just a business now,it’s a matter of national security.Nothing brings a country to it’s knees quicker than famine.
It stains the neck of the fuel tank so that the government can tell if you have been driving your diesel car or truck with tax exempt off road fuel.
That’s just wrong.Tell you what though,go to the USDA website and have a look at the Supply and Demand analysis for small grains.Then you better hope like hell that farmers have a good year this year,if we don’t a lot of people are gonna go hungry.
Grocery prices are already up and I shudder to think how much more they will climb when all this hits. However we need to put blame where it belongs ...on Congress. The ethanol boondoggle has boosted grain prices and done little or nothing to solve our energy crisis. Vast resources of oil within our borders remain untapped and now Congress wants to add even more taxes to gasoline and diesel fuel. I look for $5 per gallon prices for BOTH milk and gasoline in 2008.
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