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“We talked about this last
fall and they are realizing it now and fuel prices have gotten even higher than
we anticipated.”
Craig Gibson,
UK College of Agriculture
Farm Management Specialist |
By Laura Skillman
PRINCETON, Ky., (May 3, 2006) – 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.
Writer:
Laura Skillman
(270) 365-7541 ext. 278
Contact:
Craig Gibson, (270) 827-1395
Chad
Lee, (859) 257-3203
Scott
Shearer, (859) 509-5026, ext. 218
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