FarmWeek, IL
05-17-06
Fuel/fertilizer outlook suggests continued woes
The outlook for fuel and fertilizer costs this year suggests the recent run-up in
prices could be a long-term problem for farmers and other consumers.
A recently completed report by the Food and Agricultural Policy Research
Institute (FAPRI), a dual university research program between Iowa State
University and the University of Missouri, projected a 10 to 15 percent increase
in fertilizer prices and nearly a 10 percent increase in fuel prices for 2006.
“We’re probably looking at a little higher price path for fuel,” Lori Wilcox, FAPRI
market/policy analyst, told FarmWeek. “When you’re seeing $75-per-barrel oil
prices for the second week, it would tend to support that,” she said shortly after
the report was released
Wilcox said fuel price increases are driven by a multitude of factors, including
tight supplies, increased consumption in countries such as China, and concerns
about tight supplies down the road.
The Energy Information Administration (EIA) reported the average diesel price
was $2.56 per gallon this March compared to $2.21 in March 2005 and just $1.63
in March 2004. EIA projected retail diesel prices this summer will average $2.63
per gallon.
“We’re at a different (price) level than in the past,” Wilcox said.
Wilcox said fertilizer prices could soften this fall based on reduced consumption
of natural gas this past winter. She said prices could decrease by 10-20 percent
in coming years.
However, Wilcox does not foresee fuel or fertilizer prices ever falling back in line
with price levels of just three or four years ago.
The 2006 outlook by FAPRI suggests fertilizer prices are 70 percent higher than
in 2002 and corresponding fuel prices increased roughly 113 percent since that
time.
Wilcox cautioned farmers against aggressively cutting back fertilizer rates to
reduce input costs. She said there is a “fine line” between cost savings and
losing potential crop yields, which could hurt the bottom line.
She said soil testing to ensure the best use of fertilizer and reducing trips to cut
back on fuel use are among the best short-term solutions for farmers.
A recent University of Illinois study also suggested reduced tillage systems can
conserve fuel for farmers.
The study indicated that a conventional tillage system uses an estimated 3.7
gallons of fuel per acre — 1.3 gallons more than that consumed in strip-till and
no-till systems. The U of I reported the reduced-tillage systems result in a
savings of roughly $3.25 per acre when diesel fuel averages $2.50 per gallon. –
Daniel Grant