Producers feeling fuel price pinch

Fortune has dealt Alabama farmers another bad card this year. If Hurricane Ivan wasn't bad enough, producers now have to contend with skyrocketing fuel prices — all the more frustrating for farmers, because much like weather, it is a factor entirely beyond their control.

As one expert observes, the two factors, bad weather coupled with the price spikes, have left “farmers stuck in the middle.”

“There is real irony here,” says Robert Goodman, an Alabama Cooperative Extension System economist and Auburn University associate professor of agricultural economics. “Alabama farmers are out gathering the produce of a largely bountiful crop but they nonetheless face a sobering future due to high energy costs and low crop prices.”

With harvesting under way throughout the state, the hike couldn't have come at a worse time.

“Almost everyone ends up getting pinched,” says Tim Reed, Extension coordinator in Franklin County, “but it's especially hard on farmers who must pay for higher-priced fuel not only to run their trucks but their cotton pickers and combines as well.”

Reed estimates that on a good day, a four-row cotton picker burns about 80 gallons of diesel fuel picking 20 acres of cotton.

“Add another 10 to 20 gallons each to run the tractors and other equipment and the costs could run as high as $170 a day for diesel,” he says. Farmers running mid-sized combines are spending at least $30 more each day to harvest corn and soybeans compared with last year.

The news gets even worse for larger-scale cotton producers who are paying as much as $1,000 a day for fuel to operate three large pickers and other equipment during harvesting, Reed says.

The fuel cost spikes aren't limited only to diesel fuel. For many producers, there is the added expense of propane and natural gas. Corn producers use propane to dry corn for storage to prevent molding. When propane costs are at their normal level of around a dollar a gallon, it only costs 4 cents a bushel to dry them. This year, though, they are now well above this level, Reed says.

Broiler producers are especially vulnerable to spikes in propane and natural gas costs, he says.

It's common for poultry producers to use between 3,000 and 4,000 gallons of propane annually to heat a broiler house — a sobering thought for many growers considering that propane is running 30 cents a gallon higher than last year.

Natural gas already is up 5 cents per 100 cubic feet compared with last year. By winter, it's projected the costs could rise another 50 percent.

“I'll just have to cut back on spending in other areas to pay the higher propane bills,” says Franklin County broiler producer Mike Clay.

Clay predicts the higher prices over a prolonged period will be reflected in higher poultry prices at the grocery store.

Finally, there is nitrogen fertilizer, a farm staple derived almost entirely from natural gas. Currently, about the only people feeling this price pinch are winter forage producers and wheat producers. These higher costs already have forced some Tennessee Valley cattle producers to reduce their normal nitrogen fertilizer applications to fescue pastures this September, Reed says.

Virtually every producer will be affected if the high prices carry over next year into spring planting.

The price spike likely will prompt some producers to search for alternatives.

“Forage and livestock producers will be looking for ways to reduce their fertilizer costs and this might include the use of forage legumes and organic waste material such as broiler litter,” says Don Ball, and Extension forage crop agronomist and Auburn University professor of agronomy and soils.

Unfortunately for most producers, there are no short-term solutions. High prices undoubtedly will prompt many producers to try to replace nitrogen fertilizer with broiler litter.

Reed believes farmers could reduce their fertilizer costs by as much as 65 percent using broiler litter as a substitute. The biggest challenge remains getting the litter and applying it in a relatively short time. The Alabama Department of Environmental Management requires that the litter be spread no more than 30 days before planting — a factor that likely will make this more practical for forage producers than row crop producers.

It's an even bigger challenge for other producers for whom adequate alternatives aren't available.

“When a farmer is confronted with extremely high fertilizer and fuel prices and pitifully low prices for cotton, soybeans and corn, the chances of turning a profit are slim,” Reed says. “In the Tennessee Valley many farmers need to pick 800 pounds of cotton an acre to stay profitable this year.”

For his part, Goodman believes farmers will survive by doing what they've always done — keeping a level head and thinking on their feet.

“If history is any guide, they'll somehow find a way to cope and adapt to these extreme prices and continue producing the fiber we all need to survive,” he says.

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