Fuel crisis looms for farmers Filed: 03/13/2000

WASHINGTON (Bloomberg)  U.S. farmers' fuel costs could jump by 47 percent this year, further squeezing farm income just as grain prices sink to their lowest levels since 1986, a government economist said.

Keith Collins, chief economist at the U.S. Agriculture Department, raised his estimate of agriculture's total fuel bill to $9.4 billion this year, up from $6.4 billion last year, as oil-exporting nations maintain restrictions on supplies.

At $9.4 billion, fuel would account for 5.5 percent of all U.S. farm expenses in 2000. The increase would add about 10 cents to 12 cents to the cost of producing a bushel of wheat and about 12 cents to the cost of a bushel of corn, Collins said in a speech to the National Association of Wheat Growers.

"It's going to come right out of your bottom line," Collins told the Washington-based trade group.

"On the farm, (the fuel price increase) affects you almost immediately," said John Guerard, an agronomist with Bolthouse Farms, which grows carrots year-round as well as rotational crops such as wheat, corn, onions and garlic in Kern County.

Guerard said diesel fuel is used to run the tractors, harvesters and delivery trucks, along with water pumps, which are used to water crops.

"We depend very heavily on diesel," he said. "It affects your profitability right off the bat.

"You just brace yourself," he said.

Kern grower Don Andrews of Sam Andrews' Sons, which grows melons, bell peppers, cotton and flowers for the fresh cut market, said: "Our costs are going up. We'll just have to absorb the cost in the operation. I don't think it will be fatal. We'll try to recover in the marketplace."

The run-up in fuel costs comes as the USDA projects wheat and corn prices will average their lowest levels since 1986, and soybean prices before this year's harvest will average the lowest level since 1972. The USDA estimates that net cash farm income will drop 16 percent this year.

Collins' projection of a $3 billion increase in fuel costs is up from a $1 billion rise he forecast Feb. 24. He based the new forecast on his expectation that oil prices could average in the "mid $20s to upper $20s" per barrel this year, from "the low $20s" he expected in February. Oil now fetches about $31.70 a barrel.

Collins said higher fuel costs raise production expenses, lift transportation costs and push up food prices.

http://www.bakersfield.com/oil/i--1259142589.asp

-- Martin Thompson (mthom1927@aol.com), March 14, 2000