Higher fuel prices put an extra burden on drought-weary farmers

By ELLIOTT MINOR The Associated Press 3/14/00 5:11 PM

ALBANY, Ga. (AP) -- Farmer Tommy Daughtry wishes he had topped off his 10,000-gallon fuel storage tank during the winter, before diesel prices skyrocketed.

"I'm trying to save pennies to the acre and that's going to run me dollars to the acre," Daughtry said Tuesday.

Farmers like Daughtry, already trying to survive the lowest commodity prices in years and a 2-year-long drought, are being hit hard by the highest fuel prices in almost 20 years.

"It just paints more bad news for the farmer," said Georgia Agriculture Commissioner Tommy Irvin. "It's going to increase the cost of everything we do on the farm."

For farmers, higher fuel prices mean increased costs to run irrigation pumps and other farm equipment and higher prices for petroleum-based chemicals and fertilizers.

"We're just going to be as conservative as possible and hit the markets as best we can," said Daughtry, who grows 650 acres of tobacco, cotton, peanuts, watermelons and cucumbers near Lenox in south-central Georgia.

Darvin Eason, who runs a farm supply business in Lenox, said the wholesale price of diesel fuel has climbed from 37 cents per gallon in February 1999 to $1.01 last month. His business provides large trucks that apply custom-blended fertilizers and chemicals to farm fields in four counties.

"We're going to have to go up on (the cost of) our fertilizer spreading," said Eason, who also farms 400 acres of cotton and peanuts.

Eason can pass on the higher fuel prices to his 150 customers, but farmers -- being dependent on market conditions -- have to absorb the added costs.

"It's going to affect the bottom line," Eason said.

Oil prices have tripled over the past 15 months as OPEC production cuts have led to a supply shortfall. Crude, which reached a recent low of $10.72 on December 1998, finished Tuesday at $31.69 in trading on the New York Mercantile Exchange.

Bill Givan, an agricultural economist with the University of Georgia in Athens, said Georgia farmers spent $62.3 million for electricity and $124.4 million for petroleum fuel and oil in 1998, the last year for which figures are available.

"Fuel prices are currently nearly 50 percent higher than late last summer," he said. "Should they continue to rise, expenditures for fuel and oil could top $200 million in 2000."

While fuel and electricity make up less than 10 percent of total farm expenses, they represent a sizable expenditure, Givan said.

And with forecasters predicting a continuation of the drought that began in the Southeast in the spring of 1998, farmers will have to rely more heavily on irrigation. About 1.5 million of Georgia's 3.5 million acres of cropland is irrigated.

Kerry Harrison, a University of Georgia agricultural engineer in Tifton, said about half of the fuel consumed by farmers is used to power irrigation systems.

Farmers who broke even last year will lose money this year if they can't find ways to cut costs, Harrison said.

"Faced with that ... the agricultural community is not too upbeat," he said

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

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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.

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