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Higher Fuel Prices Offset by High Grain Prices

May 18, 2011

This year's unexpected rise in fuel prices is certain to impact farmers across the nation, but the extent of the impact will vary across agricultural sectors and will depend on other variables, such as the weather and the fate of already record-high grain prices.

Barry Ward, production business management leader with Ohio State University Extension, said that the effect of fuel and energy costs on grain farmers - while significant - will be softened this year by the high profit potential expected for row crops in Ohio and the Midwest.
"Projected corn budgets for this year show the highest net profit outlook I have ever done in six years, and safely you could say this is the highest net profit potential in recent history," said Ward. "Because of that, the high fuel prices we are seeing now are not going to significantly impact the bottom line of grain farmers this year. Of course, the outcome would have been very different in previous years had fuel prices risen to $4 a gallon then."
Ward's calculations of direct energy costs show that farmers will have to spend approximately $10 more per acre to grow corn this year - based on a $1 per gallon increase in on- and off-road diesel and $0.75 per gallon of propane gas for drying grain, compared to 2010.
This represents a 25% increase in fuel and energy costs over 2010. Based on an estimated 192-bushel-per-acre corn yield, fuel and energy costs will represent 11% of farmers' cash costs for 2011.


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RELATED TOPICS: Farm Business, Inputs

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COMMENTS (1 Comments)

PullMyFinger - Chappell, NE
What high grain prices? Wheat is $4.50 below a record high. Only farm publications can't stop screaming about "high" grain prices. You guys really should try farming since you think it is such a get rich quick scheme.
7:26 AM Jun 1st



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