Farmers brace for costly season
Escalation in fuel, fertilizer and other input costs shows no signs of easing

Bob Krauter, Capital Press 3/14/08

After easing during the winter, fuel prices are back on the march again just as farmers in the West start their spring planting season. The shock that consumers are feeling at the gas pump is due to hit farmers and ranchers as soon as they fuel tractors and purchase fertilizer, chemicals and other supplies in the coming weeks.

An omen of things to come is the soaring cost of crude oil, which climbed to a new record price of $109.72 a barrel on the New York Mercantile Exchange on March 11. Higher crude prices have already been reflected in the farm fuel market. Data from the California Energy Commission show that average rack prices for diesel fuel have risen almost 50 cents a gallon since mid-January to nearly $3 a gallon as of March 3.

California farmer Rick Scheuber is bracing for higher diesel fuel costs when the tank he filled last year runs low in the next week.

"I know the fuel has gone up. It has to be up at least 25 percent or more," said Scheuber, who grows alfalfa, winter oats, wheat and corn near Patterson.

His agricultural chemical and fertilizer bills, too, are on the rise as a result of higher petroleum costs. Scheuber said his bulk nitrogen-based fertilizer price has gone out of sight.

"I know what I paid last year was double from the previous year. I bought UN-32 at $325, and I have been told it might be $500. It is over $400 right now," he said.

Jean-Pierre Wolff, a winegrape grower and vintner in California's Edna Valley, on the Central Coast, said the fuel price hike is far-reaching. Wolff has switched to using biodiesel in his equipment. He has also gone to green compost and organic fertilizers like seaweed and catfish emulsion in his vineyard.

But in the winery, Wolff said, higher fuel costs have affected the cost of supplies like cardboard boxes and glass.

"With the cost of glass bottles, there is now an energy surcharge, so the energy surcharge is tacked into the price of glass," said Wolff, who serves as president of the Central Coast Wine Growers Association. "Then when you get the glass shipped to you, the shipper charges you a fuel surcharge for the trucking, so you get all of these compounded costs."

The misery about fuel- and energy-related costs is shared all across the West. Bruce Pokarney, director of communications for the Oregon Department of Agriculture, said the one saving grace has been strong commodity prices.

"We're seeing some very good numbers in terms of value of production for Oregon agriculture in 2007. Ag sales of many commodities have been very, very strong based on prices paid for the commodity," Pokarney said. "But that doesn't mean that our producers are necessarily making money hand over fist, because of the high input costs that we are seeing. It is just more expensive to farm."

Farmers have learned to save on energy as components like diesel fuel have become pricier. In some cases they are making fewer tractor passes through vineyards, fields and orchards to conserve on precious fuel. But in the case of fertilizer, it is more difficult to scrimp.

Rich Pottorff, chief economist with Doane's Agricultural Services in St. Louis, Mo., said strong global demand has pushed fertilizer prices higher and higher.

"It is a combination of high energy prices and strong world demand," Pottorff said, noting that China and India have both boosted their fertilizer use. But the weak dollar has played a role, too.

"Since we now import about half of the nitrogen we use and 90 percent of the potash, there's an impact of the weak dollar because the weak dollar buys less fertilizer from overseas, and as a result we sort of import higher prices as a result of that," Pottorff said.

Farmers should not see any shortage of fertilizer this spring, but Pottorff said dealers will want to avoid having any excess supply at the end of their season. His advice to farmers is to plan ahead.

"There is a chance that farmers won't be able to get what they want, when they want it," he said. "That reinforces the idea that farmers - A - need to plan ahead and - B - they need to communicate with their supplier so that they can have the fertilizer on hand when they want it."

Rick Phillips, a spokesman for the J.R. Simplot Co. in Boise, Idaho, said there have been unusual price surges for fertilizer and fuel.

"The market is pretty well determined by global supply and demand," he said. "Any commodity like fertilizer or grains is so tied to transportation costs because they have to be shipped by barges or trucks. That just adds to the final cost to the end user and in this case, the farmer. It is just a vicious cycle."

Scheuber, the California farmer, wonders how long stronger commodity prices can keep up with higher input costs.

"I don't know where it's all going to end. I know with our costs today we couldn't go back to prices we had two years ago and stay in business," he said. "I think that's pretty much true of most of agriculture right now."

California editor Bob Krauter is based in Sacramento. E-mail: bkrauter@capitalpress.com