Rising fuel prices could mean higher costs for producers, consumers

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COLLEGE STATION – Rising fuel prices could mean higher costs for producers and eventually consumers, said a Texas A&M AgriLife Extension Service economist.

Dr. Mark Welch, College Station, said he saw indications of fuel prices bottoming out late last year. And since January, there have been signs of overall inflation within the economy.

Higher fuel prices will mean an increase in input costs for farmers who are preparing land and planting 2017 crops, Welch said. It will also likely mean higher costs for irrigation, fertilizer and chemicals that aid optimum field production.

He said the concern is what higher fuel prices will mean not only to production budgets but the overall costs of producing, shipping and storing commodities.

“It goes beyond the diesel in the tractor and gas in the truck,” Welch said. “When fuel prices are high, it costs more to make things and move them. It affects food prices. Everything is tied closely to energy.”

Direct fuel costs today make up a small portion of production budgets, Welch said. Farm equipment is more efficient in fields, covering more acres or doing more in a single pass.

Diesel and gasoline fuel costs amount to around $6 to $8 per acre for a typical dryland grain sorghum or cotton crop, according to AgriLife Extension-based budgets, Welch said. The cost of fertilizer is around $12 to $20 per acre, twice the cost of fuel.

For irrigated crops, direct gasoline and diesel are little changed but fertilizer increases to $50-$60 per acre and irrigation fuel adds $40-$50 per acre.

A larger impact for producers is how fuel prices can impact other costs, such as fertilizer, Welch said. Fertilizer prices are low now, but about 75 percent of the cost associated with producing anhydrous ammonia, a commonly used fertilizer, is natural gas.

Typically, there is a lagged commodity price response at market to fuel prices and other increased costs on the input side, Welch said.

“It can make things difficult for producers when commodity prices are falling and costs continue to rise,” he said.

AgriLife Extension district reporters compiled the following summaries:

SOUTHEAST: Livestock were in good condition. Row-crop producers were planting their driest ground and moving fast. Rain showers helped keep good moisture in the ground. Soil moisture levels throughout the district ranged from adequate to surplus with most ratings in the adequate range. More rain was expected and will likely slow planting. Soil moisture levels and temperatures were conducive to fast, uniform emergence and strong stands. Plants and trees are budding out. Walker County reported excellent growing conditions. Waller County reported more rain which restricted field work. Wet field conditions in Brazos County continued to delay the planting of corn. In Montgomery County, light rains helped with dry conditions.

SOUTH: Weather conditions were up and down throughout the district. Temperatures were mostly in the 90s throughout the day and 70s in the evenings. Rainfall amounts ranged from 1.5 inches to more than 3 inches in some areas. Overall, rangeland and pastures were green, plush and full of good forage for livestock throughout most of the district. Crop production was fair, but fields still needed additional moisture for good development. Wheat, oats and potatoes were under irrigation. Field work increased in preparation for corn planting. Body condition scores on cattle remained fair. Soil moisture conditions ranged from adequate to short with most reporting adequate levels. Live cattle market pricing remained quiet with prices remaining where they were in the beginning of the year. Grasses and native plants were showing signs of germinating, though they have not grown much due to the lack of rainfall. Good progress was made on planting corn and some grain fields in Jim Wells County. In Zavala County, late-season spinach harvesting was active and was expected to extend another four to six weeks. Cabbage and onion fields also made good progress. Sorghum planting continued in Cameron County. The germination of corn and sorghum plants was good. Some irrigation occurred throughout. Some cotton planting was underway, and livestock conditions were fair. In Hidalgo County, row-crop planting continued and was very active. Harvesting of vegetables, sugarcane and citrus continued.

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