Viewpoint: Would you rather drive or eat?

The Rock River Times (Illinois)

By Joe Baker
November 2, 2005

Most attention today continues to be focused on high gasoline prices; but if present trends continue, the time is not too far off when we all may be much more concerned with whether we eat than with whether we drive.

Why so? The effects of Peak Oil not only hit transportation, they also put great stress on agriculture. Skyrocketing costs for fertilizer, fuel, petrochemicals and the cost of shipping crops to market are threatening to prevent many family farmers from normal production next year and the year after.

Jimmy Westerfeld, president of the McLennan County, Texas Farm Bureau, said farmers in his area are very worried. “Many of us will not be able to farm this year or the next,” he said. “The doubling and tripling of fuel and petrochemical prices are the last link in a chain of bad economic events.”

Nat Webb, a wheat farmer in Washington state, commented: “Energy costs that were once one of our lesser expenses have become a major item and threaten our ability to continue farming.”
Weather has had an adverse effect on farmers in the upper Midwest, including northern Illinois. Two chief factors have been drought and hurricanes Katrina and Rita.

“We send a lot of crops to the Gulf,” said Roger Christin, manager of the Winnebago County Farm Bureau, “but the (Mississippi) river is so low they can’t load the barges. The cost of shipping is very expensive.”

Many of the crops from this area normally are shipped down the Mississippi to New Orleans, which is the major port for overseas shipment of grain and other foodstuffs. One item that strongly affects every farmer’s budget is the cost of fertilizer; in this area that means anhydrous ammonia. Even before the hurricanes hit, the cost of this fertilizer was high. Much of that fertilizer comes up the river.

Mike Doherty, senior economist with the Illinois Farm Bureau, said the cost of anhydrous ammonia had risen by an estimated 25 percent before the storms. Then came the hurricanes, and the nation’s refining capacity was severely damaged. That reduced the production of natural gas, necessary to manufacture the fertilizer.

As a result, the price of anhydrous ammonia across the Midwest is pushing beyond $500 a ton. “In agriculture, we cannot pass these prices along as other industries do. Ultimately, it means the numbers don’t add up,” Westerfeld said. “If we can’t show positive cash flow, we won’t get our operating loans.”

Before this year, the highest spring price quote for anhydrous ammonia [going back to 1960] was $399 a ton in April 2001, according to the U.S. Department of Agriculture.

“Natural gas has been called the ‘forgotten fuel’,” said Jean-Mari Peltier, president of the National Council for Farmer Cooperatives, “because so much attention is being placed on high gasoline prices. While gasoline prices certainly hurt consumers, the high and volatile natural gas prices affect agriculture’s ability to produce an abundant food supply.”

The Gulf Coast installations account for 19 pecent of total U.S. natural gas production in normal times. But after Hurricane Katrina and before Hurricane Rita reached land, production dropped to about 40 percent of normal levels. At the time, four key refineries were shut down.

“Natural gas represents 80 percent of the cost of manufacturing anhydrous ammonia,” Doherty said. He said the loss of production and refining capacity would “drive fertilizer prices higher, of course.” It has done that for sure.

“Basically, fuel is up,” said Mark Grant, manager of the Bank of Whitman in Walla Walla, Wash., “and people are going to have to budget 100 percent more than last year, and they pay sales tax on top of that.”

The current price of natural gas is up an estimated 21.4 percent compared with last year. Heating oil costs have risen 35.7 percent, while diesel (33.1 percent) and gasoline (25.6 percent) also show sharp increases since 2004.

These increasing cost factors come at a time when farmers are getting the lowest prices for their crops that most can remember. Against this backdrop, Congress and the Bush administration are proposing to cut farm programs sharply while continuing unrestrained pork barrel spending.
“Agriculture is in serious trouble,” Westerfeld said. “Why invest huge amounts, work from daylight to dark and struggle for a profit when you know you have no chance?” he asked.

The cost of growing corn climbed an estimated $35 an acre from last year, according to the researchers at the University of Illinois. Higher energy costs are the reason. “Some (area) farmers are switching from corn to [soy]beans,” Christin said. Soybean production is expected to be more profitable next year by $10 an acre. “Shifting acres to soybeans may be prudent,” said Gary Schnitkey, U of I Extension farm financial management specialist. He said farmers should consider lowering fertilizer rates and cutting back on tillage passes to reduce fuel costs.

“Fifty percent of our corn is still in the field,” Christin said. “One of the biggest concerns is moisture—it’s powder dry. That’s a problem.” The summer-long drought in the heartland and some other areas of the country have sucked all moisture from the soil. Brad Tompkins, former president of the Washington Wheat Council, said: “We have the lowest soil moisture samples I’ve ever seen. What we’re seeding into right now, researchers would say there’s not enough (moisture) to grow...so if we don’t get decent rains this winter, we’re in trouble.”

Christin observed: “A farmer has to be an optimist, or he wouldn’t be in business.” The National Weather Service, at present, has no clear idea of how much precipitation to expect in the next three months.

Westerfeld raised an alarming prospect. “What if, one by one, many farmers are forced into the painful decision that they can’t afford to plant this year and the next?” he asked. “How many such decisions will it take to produce nation wide, the bare grocery shelves brought about by Katrina and Rita?”

Sure, he admits, in that circumstance food would be imported, but, Westerfeld says: “Do we really want our food supply at the mercy of producers outside our own borders?”

“We don’t know what it’s like to starve to death,” Christin said. “Agriculture is the cornerstone of our economy.”

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