Cost of raising corn grows
Prices for fuel, fertilizer eat into farmers' profit



Brad Worthington finished planting corn on May 11, perfect timing for maximizing yield potential in Iowa. If the weather cooperates, he hopes to harvest a bumper crop in the fall, as he has for several successive years."You just put it out there, and you let the good Lord take over," he said. "You can manage it well, but it's all about the weather."Another factor beyond his control also will affect Worthington's 1,100-acre crop farming operation this year: high-priced diesel fuel, fertilizer, propane and other energy products. By his estimate, those costs will add $22 per acre to his production expenses on 750 acres of corn - $16,500 in all."When you put the LP costs and the fertilizer and the diesel together, you're talking serious dollars," said Worthington, a 43-year-old, third-generation Iowa farmer. "Something has to give."In February, the USDA forecast that U.S. farmers would spend 12.5 percent more on fuels and oils this year compared with last, with the highest prices this year occurring in the first six months. Fertilizer costs in 2006 are expected to be 6.5 percent higher.While those percentage increases are smaller than they were in 2005, crop farmers' costs have risen sharply in the past several years, agribusiness leaders said.Since 2002, Iowa corn growers' production costs, for instance, have increased by about $55 per acre due to higher energy prices, pushing farmers' variable costs 31 percent higher, said Dave Coppess, an executive with Heartland Cooperative in West Des Moines. During that same four-year period, the cost for nitrogen fertilizer alone has doubled, he said.In April, farm-related diesel fuel prices averaged $2.28 per gallon across the country, compared with $1.97 per gallon a year ago and $1.31 two years ago, said Keith Collins, chief economist with the U.S. Department of Agriculture in Washington, D.C."That's 16 percent year-over-year and 74 percent compared to 2004," Collins said. "That's a huge increase."The United States is not alone."For the major producing nations, they all have very high energy prices. Argentina, Brazil, Australia, Canada and the European Union - we're all facing those kind of increases," Collins said.The same factors affecting Worthington's bottom line are rippling throughout the U.S. farm economy. Higher energy costs have hit crop and livestock producers, as well as farmer-owned cooperatives, grain processors, truckers, manufacturers and other agribusinesses, economists said.Across the U.S. Corn Belt, farmers and their suppliers have had to make tough decisions.Sully Cooperative Exchange budgeted for a diesel fuel cost increase of 75 cents per gallon this year. That may not have been enough, said Jim Magnuson, general manager of the cooperative."Any cushion we built ... is quickly being liquidated," he said.As fuel costs have increased in recent years, shippers have added fuel surcharges to delivery costs. Before 2005, the Sully co-op absorbed added fuel expenses. Now, SCE assesses surcharges for delivery of everything - livestock feed, fuel, seed and crop chemicals."That has been very difficult to do, passing those prices along," Magnuson said.Earlier this month, Iowa agribusiness leaders called on the U.S. Congress to loosen restrictions on oil and natural gas exploration in the Gulf of Mexico. U.S. law prohibits exploration of fields within 200 miles of the Gulf Coast. The newly formed Iowa Consumer Alliance for Energy Security wants Congress to change that."High energy costs are a hardship on all of us," Heartland Cooperative's Coppess said during a May 9 press conference at the Iowa Capitol in Des Moines. The group is part of a national coalition pushing for increased domestic production of energy sources. Iowans involved in the effort are calling for passage of a bill pending in the U.S. Senate that would allow production inside the 200-mile barrier.Cuba has agreements with China to explore fields in the Florida Straits, within 45 miles of the U.S. coastline, said Craig Lang, a Brooklyn farmer and president of the Iowa Farm Bureau Federation. He and other proponents of the pending legislation believe the United States needs to reduce the ban on exploration for fuel sources on the Outer Continental Shelf in the Gulf of Mexico.Fields there contain more than 5 trillion cubic feet of natural gas, which is used to make fertilizer, dry grain and drive ethanol plants."We need to open that up," Coppess said. "Our drying costs have gone up $800,000 to $1 million more per year, and there's no relief in sight."For grain handlers, farm equipment manufacturers and other agribusinesses, energy costs have become the difference between red ink and black."Our business does very little without a lot of transportation fuel expense," said Magnuson, manager of the cooperative in Sully. "It's running the trucks. It's delivering feed. It's floaters in the field, and it's high-clearance sprayers. It's all of our equipment. So that increase is a very substantial part of the impact on our bottom line."Worthington and his wife, Michele, also run a roofing business. Higher energy costs have affected that, too. So have the sale and pending closing of Maytag in Newton. This spring, there have been fewer roofing jobs in the Newton area, he said.Worthington plans to be especially attentive to crop prices and fuel expenses, but there is only so much a farmer can do to contain costs."You try to do the best job you can do, so the yields will be there," he said. "The big fuel eater in my operation is the combine, and there is nothing I can do about that."