May 3, 2006 | By: Laura Skillman
PRINCETON, Ky.

Soaring fuel prices are putting the pinch on farmers’ pocketbooks as they face increased production costs without any guarantee of increased receipts for their products.

Grain farmers face uncertainties with much of the corn crop only recently planted and soybean planting still under way. Will yields help keep crops profitable or will poor growing conditions mean low yields and little profit? Add to those questions the fact that the livestock sector has begun an expansion mode, meaning prices are likely to be somewhat lower this year compared to 2005.

As a result farmers can’t help but worry and try to cut corners wherever possible.

“All I hear is how expensive this crop is,” said Craig Gibson, farm management specialist with the University of Kentucky College of Agriculture. “We talked about this last fall and they are realizing it now and fuel prices have gotten even higher than we anticipated.”

As expenses, especially fuel and fertilizer, dig into the pocketbooks of farmers, Gibson said he is concerned that income will take an even bigger hit in 2006. Market analysts aren’t very optimistic on corn pricing, yet they are likely to be too high for farmers to qualify for any federal loan deficiency payments. Last year, the LDP averaged 40 cents per bushel. On a 150-bushel-per-acre crop, that added $60 per acre to the income, he said.

“LDPs have really added to farm income in recent years, as have countercyclical payments, which are also in jeopardy,” he said. 

Net farm income is forecast to be $56.2 billion in 2006, down from $72.6 billion in 2005, according to the U.S. Department of Agriculture’s Economic Research Service. The value of production is forecast to be down $2.3 billion for crops and $2.9 billion for livestock, a little more than 2 percent for each. Government payments are forecast to decline $4.5 billion.

What this means is farmers will have to look for ways of reducing costs. That won’t be easy with purchases of manufactured inputs expected to rise by $2.6 billion due largely to higher fuel and fertilizer prices, according to the ERS. Farm payments are forecast to be up $2.3 billion, led by rising interest payments on debt and higher expenditures for labor. 

Fuel and fertilizer costs for planting corn on a farm managed for high yields are estimated at $124 per acre compared to $38 per acre for soybeans, according to the Food and Agricultural Policy Research Institute's (FAPRI) Fertilizer and Fuel Outlook for Spring 2006. Based on a six-month average fuel cost, the institute estimates the cost of fuel per acre to till, plant, spray and harvest a crop is about $11 for corn, $7 for soybeans, and $6 for wheat.

Farmers may have to postpone plans for this year to buy equipment or make improvements or unnecessary maintenance on buildings, Gibson said. “They have to do some serious thinking about where their priorities are. They need to be judicious where their money is going to be spent.”

Use of no-till can be one of the biggest savers of fuel, said Chad Lee, UK Extension grains specialist. Many farmers have already made their tillage decisions for this year, but may want to consider it as they look to fall tillage and beyond. Allowing the corn crop to dry in the field can also be a cost saver, but may not be realistic for farmers with large acres who need to get the harvest completed in a timely manner.

Field scouting always plays an important role in crop care and with such tight margins it is essential, he said. This allows producers to only apply pest controls if they are needed and proven economically viable.

In addition, Lee said soybean producers may want to consider adding a residual herbicide with their glyphosate to try to control weeds in one application, avoiding the need for another trip across the field for a second application. The costs of the residual herbicide, the weeds in the field and the weeds controlled by the herbicide should be considered.

Other fuel-saving measures include proper maintenance and operation of equipment, said Scott Shearer, UK Extension agricultural engineer. Proper tire pressure, air and fuel filter maintenance and matching the proper tractor size to the implement are ways to improve fuel efficiency.

In addition, the term “gear up, throttle back” can help save fuel. If a farmer is using a tractor that is larger than necessary for the job, it is better to slow the engine down and increase the gear to get the needed ground speed, he said. Finally, minimize idling time. While some idling time is needed to warm up and cool down the engine, don’t leave the tractor running for a long stretch of time.

Contact: 

Craig Gibson, (270) 827-1395, Chad Lee, (859) 257-3203, Scott Shearer, (859) 509-5026, ext. 218