Farm Operators Turn to Energy-Saving Practices
Dennis
Brown, Peter
Stenberg, and Chris
McGath
Over the past 5 years, the price of fuels
has risen sharply and remains high by historical
standards. Driven by strong worldwide economic growth
(especially in China and India) and other factors,
the inflation-adjusted price per barrel of crude
oil (refiner average acquisition cost) climbed 145
percent since 2002. Over the same period, the inflation-adjusted
price of (wellhead) natural gas, a major ingredient
in the production of fertilizer, rose 93 percent.
Higher energy prices have resulted
in higher onfarm energy expenses, with annual average
real prices paid for diesel, gasoline/gasohol, and
liquefied petroleum (LP) gas increasing 61 percent
since 2002. But even with relatively large increases
in prices and expenditures for fuels and fertilizers
in recent years, these items account for a relatively
small share of farm production expenses—5
percent for fuels and oils and 6 percent for fertilizers
in 2007. Fuel and fertilizer use, however, varies
significantly among different farm types. Compared
with total farm production expenses, costs of these
inputs tend to be highest for wheat, corn, soybean,
and cotton producers.
Some farmers have been able to
reduce the effect of higher energy prices by employing
more energy-efficient farming practices (although
operators have been using such strategies for many
years). According to the 2006 Agricultural Resource
Management Survey (ARMS), 524,000 operators—representing
about a quarter of all farmers—took some action
to reduce fuel or fertilizer expenses in 2006. The
most common practices to lower fuel expenses were
to regularly service engines and reduce the number
of trips over fields.
Cutting back on the quantity
of fertilizer applied was the most common practice
employed to reduce fertilizer expenses. Other
actions included conducting soil tests (to determine
an efficient mix of fertilizer use) and negotiating
price discounts.
Rising energy prices and government
policy have also encouraged some farmers to participate
in alternative energy markets. According to ARMS
data for 2006, nearly 4,000 farm operators produced
crops solely for energy purposes and about half
of these farmers operated commercial farms (farms
with sales of at least $250,000). ARMS data also
indicate that about 14,000 operators in 2006 earned
dividends from firms that produced ethanol. Farmers
earning dividends from ethanol tended to be older
and wealthier, with about half at least 65 years
of age, while 85 percent lived in households with
high income/high wealth (relative to the national
median).
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