Iowa Public Television


Farmers Likely Will Feel the Pinch of High Fuel Costs This Harvest

posted on August 19, 2005

Hello, I'm Mark Pearson.

Analysts this week released snapshots of July economic activity in the U.S., and they weren't pretty.

*The Conference Board's Index of Leading Indicators rose by a sluggish one-tenth of a percent last month. *Inflation at the wholesale level increased by its largest amount in nine months. *And consumer prices in July climbed a half-percentage point, the biggest increase in three months.

You don't need a Nobel Prize in Economics to figure our why those reports were gloomy. Just go to your nearest filling station for a tank of gas. Skyrocketing energy costs alone are responsible for any measurable sign of inflation in the U.S. economy. And the rising cost of fossil fuel impacts every class of wage-earner.

That's especially true in rural America, where the rapidly approaching harvest season has farmers refiguring input costs before hitting the fields.


Farmers Likely Will Feel the Pinch of High Fuel Costs This Harvest

This week's sharp hike in crude oil prices is affecting people nationwide. The price of crude oil per barrel has jumped by nearly 50 percent since last August, from $45 to the current $67 per barrel. The same thing is happening at the pump. Gasoline prices have gone up more than 18 cents in the past few days alone. Now, the national average is $2.55 a gallon. In some places, mainly in the West, the price is up to $3.

These high prices are impacting several industries that rely on oil products. Farmers likely will feel the pinch of fuel costs this harvest season. They use a variety of petroleum and natural gas products to keep their farm operations running.

Tractors and combines must be powered by diesel oil. According to economists, diesel prices have shot up 104 percent during the past three years. The current price of diesel fuel is $2.63 per gallon, compared to $1.87 a year ago. Anhydrous ammonia, the most commonly used fertilizer, is made from natural gas, which is seeing the same severe hike in prices as other oil products.

Even farmers who use twine to bale hay are feeling the squeeze. The twine is treated with oil to keep it from rotting. The price for an oil-treated bale of twine has more than doubled in the past year, from about $13 to $31 a roll.

Fuel costs remain the biggest problem for farmers. Some say allowing farmers to use more ethanol might help. Energy legislation signed into law by President Bush last week calls for refiners to use 7.5 billion gallons of ethanol annually by 2012. This is double the current production. However, many experts worry that the bill will not provide any immediate relief for farmers this harvest season.


Tags: agriculture crops farmers harvest news oil