Sunday, December 21, 2014
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Farmers try to balance higher energy costs

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Farmers are worried about the rising cost of fuel and fertilizer. (MPR file photo)
Higher energy costs are affecting everyone's budget. Farmers are wrestling with sharply higher fuel and fertilizer costs as they plan for this years spring planting. Experts say energy costs will make it tough to turn a profit on the farm in 2006.

Moorhead, Minn. — Like most farmers, Tim Dufault is working on closing the books on last year and starting to plan for the 2006 crop. Dufault grows wheat, corn, and sugarbeets near Crookston.

He's compared the cost of planting and harvesting with the price he expects to get for his crop, and the results are not what he hoped for. The best scenario he's come up with is a balance sheet where he breaks even on this years crop.

"You know, fertilizer and energy, you've gotta have them so they're basically going to cut money right off your profit," says Dufault. "It's coming right out of your pocket."

Fuel prices may rise even higher by the time farmers fire up their tractors this spring, and fertilizer is closely tied to natural gas prices. Dufault says his fertilizer costs will nearly double this year.

The past few years have been pretty good income-wise. I think farmers have improved their financial situation somewhat in those years and I think it's given them somewhat of a cushion to survive for awhile.
- Bill Lazarus

There are few good options for using less fuel or fertilizer.

"I can try cutting back some trips over the field for fuel prices, but it's not like I'm out there doing recreational tillage now. You only go over it when you have to," says Dufault. "You can cut back on fertilizer but it's not like we're over fertilizing to start with. You start cutting back too much and you're hurting yields and that hurts your bottom line. There's no way around it."

Tim Dufault will put less fertilizer on his wheat this year. But that means the crop will take extra nutrients out of the soil. It's an option that might work for a year or two, but at some point the land will need more fertilizer to replace the depleted nutrients.

Dufault says he's envious of farmers who live close to large animal feedlots because they don't need as much fertilizer if they have access to cheap manure to put on their fields. The savings could mean the difference between profit and loss this year.

University of Minnesota Professor of Applied Economics Bill Lazarus tracks the energy costs related to farming. Lazarus says there's no doubt 2006 will be a challenging year for farmers. Based on current market prices for grain, it will cost more to plant and harvest a crop than a farmer can hope to earn by selling the crop. Lazarus expects farmers to plant more soybeans because they require less fertilizer than crops like wheat and corn.

But it helps that farmers are coming off a record year for farm income in 2004.

"The past few years have been pretty good income wise," says Lazarus. "I think farmers have improved their financial situation somewhat in those years and I think it's given them somewhat of a cushion to survive for awhile."

That appears to be the case across much of Minnesota, except in the northwest corner.

Farmers in Kittson and parts of Marshall, Roseau and Pennington counties have been hit by several years of weather related crop disasters.

Federal Farm Service Administration Executive Director for Kittson County, Kelly Turgeon, says some farmers have already decided they can't afford to plant a crop this year, and dozens are struggling to secure loans for spring planting.

"We're seeing a great increase in the number of farmers contacting FSA for emergency loan funds. Those funds are made available when traditional lending sources begin to look at the operation and say 'We can no longer finance your operation,'" says Turgeon.

Turgeon says the financial woe is spreading as several businesses in Kittson county have closed in recent months because of the faltering farm economy.

Analysts say farmers will need to find ways to adjust to higher energy prices which are likely here to stay.

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