Farmers find increased fuel prices are driving up other costs, such as fertilizer

ON THE FARM

May 14, 2006|By TED SHELSBY

It seems that the anxiety associated with a trip to fill up the tank has never been higher. But imagine pulling up to a gas station and pumping 200 gallons of fuel.

That is what farmers do routinely. For example, a tractor big enough to pull a 30-foot, 12-row seeder will burn 15 gallons of diesel fuel in an hour, said Melvin Baile Jr., who farms about 750 acres near New Windsor in Carroll County.

"It is like getting hit with a hammer, and it is making our lives very, very difficult," Baile said.

It would be worse if Baile had not contracted in advance for fuel at a fixed rate. But even that approach serves to illustrate the rising costs of production, which have been exacerbated by recent surges in fuel prices.

"I was able to lock in diesel fuel at about $2.25 a gallon this year," Baile said. "Last year, I locked in at $1.74. The year before last, it was $1.24 and the year before that, I paid less than a dollar, probably about 85 cents."

One source of relief is that farmers are not subject to the 24.25 cents-a-gallon state motor fuel tax for fuel used in their farm equipment.

It is not just fuel prices that are putting a financial pinch on farmers. Many other energy-related costs rising. For example, the price of nitrogen fertilizer, a byproduct of natural gas, has more than doubled.

"Two years ago, I paid $98 a ton for 30 percent nitrogen fertilizer," said Phil Council Jr., 46, a farmer who plants more than a 1,000 acres of grain at a farm outside Cordova in Talbot County. "This year, the price is $214."

The price of tractor tires, a petroleum product, also is up. Baile said tire prices are up between 5 percent and 12 percent this year, while Council told of his recent purchase of two rear tires for his John Deere tractor.

"I don't know what they cost, but the guy at the equipment dealership said I would be shocked when I get the bill," he said.

Maryland farmers are already feeling the impact of deregulation of electricity. Baile said his monthly bills are up about 30 percent, with a big use of electricity being corn-drying equipment.

The costs of herbicides and pesticides have jumped 10 percent to 15 percent in recent years, Baile said. Even the cost of money is going up.

"Interest rates have risen 50 percent since last year, going from 6 percent to 9 percent," Baile said. "Most farmers borrow a couple hundred thousand each year to put their crops in. To plant 500 acres of corn costs about $220,000."

The farmers say that collectively, these rising costs paint a bleak picture.

"I don't know how much longer agriculture can continue paying these kinds of increases," Baile said. "All of our fixed costs are going up while the price of corn has remained stagnant, maybe up 20 cents a bushel over the past 10 years."

The continuous drive to increase yield and offset rising costs can provide some cushion, Baile said.

"But I don't know how long that will last," he said. "I have got to produce 140 bushels of corn per acre to break even."

During a good year, Baile has been able to harvest up to 160 bushels of corn from each acre planted.

That's well above the Maryland average. Since 2000, the average corn yield in the state has ranged from a low of 74 bushels an acre in 2002, when crops were damaged by a drought, to a high of 155 bushels in 2000. Last year, farmers harvested an average of 135 bushels of corn from each acre planted.

Corn and soybeans are Maryland's major grain crops. They are used primarily for chicken feed in support of the state's huge poultry industry.

Lynne Hoot, executive director of the Maryland Grain Producers Association, said rising energy costs are changing the way some farmers farm.

"You will probably see less corn planted this year," Hoot said, explaining that corn takes about twice as much fertilizer to grow as soybeans.

That's why Council is not planting any corn this year.

"It's a matter of economics, he said. "I would need an above-average yield this year just to break even."

Council typically plants 400 acres of corn, along with 300 acres of wheat. The remaining 600 acres are covered in soybeans. With the elimination of corn, he will plant 1,000 acres of soybeans this year.

Council is not alone in his decision to cut back on corn.

Grain farmers across the country plan to plant 2.6 million fewer acres of corn this year than last, according to the U.S. Department of Agriculture.

Corn growers cannot continue to sustain the increased nitrogen fertilizer prices when growers are seeing the price of corn stay at the same level for the past several years, said Garry Niemeyer, a Glenarm, Ill., grain farmer. Niemeyer is also a board member of the National Corn Growers Association, a St. Louis-based agricultural trade association representing 32,000 corn farmers.

He said fertilizer accounts for about 40 percent of the energy cost of planting corn.

Niemeyer was in Washington last week seeking relief from rising fertilizer costs.

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