Published on 05/10/96

Farmers' Fuel, Grain, Fertilizer Costs Rising

Gas prices are going up. Consumers feel it at the pump, and farmers may begin to feel it in the field.

"This is the time of year when farmers use the most fuel," said William Givan, a University of Georgia Extension Service economist for farm management.

"During land preparation, farmers see their tractors burn 50 to 60 gallons of diesel fuel per day," Givan said.

But even at that rate the effect of high gas prices could be nominal.

"Most farmers bought their gas before the prices ran up," Givan said. "And, even at $1 per gallon for diesel, it is a very small percentage of the cost of growing a crop."

The problem has gotten the attention of Congress, as they are working to repeal the 4-cent gas tax. But for most farmers the governmental moves are symbolic.

"On-farm diesel fuel is exempt from the road tax anyway," Givan said. "The president released some of the national reserve, but it was only about a day's supply."

The real test, Givan said, is how long the prices stay high.

"So many things farmers use have petroleum bases or are carried to the farm by a truck. If the prices stay up," he said, "it will run up the cost of doing business. If fuel prices stay up, it will trickle through to everything that is petroleum-based or is moved by a truck."

For consumers, farm-product prices may go up, but not because the farmers' costs are higher.

"Prices rise based on what suppliers can pass along," Givan said. "Unfortunately for the farmer, he can't usually pass along his higher costs."

Farmers recoup their costs based on a rise in demand or a dip in their products' supply, or both.

Right now, corn growers are seeing a huge price increase, thanks to high demand and low corn supplies.

"It actually happened with our two major grain crops, corn and wheat, in the past two months," Givan said. "The wheat crop is expected to be way off, and the corn crop is expected to be off here and in other countries.

"There will be an increase in demand," he said, "especially from some Third World countries. That has run up the price."

In the United States, corn is up to more than $5 per bushel. That's good news for grain growers, but bad news for livestock farmers.

"It raised the price to the point that some people will stop feeding corn to their livestock," Givan said. "They don't have anything to substitute for the high-priced grain, so they have to buy it and feed it. But in the long run they can cut back on the number of animals they feed."

Along with gas and grains, fertilizer prices jumped 15 percent to 20 percent over last year's prices.

"There's not much a farmer can do about that," Givan said. "They have to have fertilizer."

Fertilizer prices have been fairly stable over the past few years, even though a lot of suppliers have been going out of business.

"Before, there was a glut in the market, and many fertilizer suppliers were losing money," Givan said. "The drop in supply brought the supply and demand into line, and prices went up."

Faith Peppers is the director of public affairs with the University of Georgia College of Agricultural and Environmental Sciences.