Storms, Drought Putting a Lot of Farmers in a Bind

Consumers already have felt the pinch of rising fuel costs, and farmers will be feeling more than a pinch this fall.

Farmers everywhere are facing the dilemma of increased operating costs and decreased prices for their products. Net farm income is projected to be down by 10 percent to 15 percent this year because of Hurricane Katrina’s effect on river traffic and the Gulf of Mexico port and increased fuel costs during harvest.

Most likely, the result will be more costly transportation of crops. Grain transportation by rail and truck is much more expensive than by barge.

Also, a large amount of the propane and refined fuels shipped to the Midwest comes from the Gulf region. Forecasters say heating bills could increase by about $700 per household this winter.

If that’s not enough for farmers to stomach while harvesting this year’s disappointing crop, fertilizer, chemical and fuel costs could create a financial tidal wave in planning for next year’s crop. With what yield, and at what price, will farmers be able to break even next year?

“We’re just starting to do estimates,” said Dale Lattz, agricultural economist and farm management extension specialist with the Illinois Farm Business Farm Management Association. “It sounds like a lot of areas had yields a little better than expected, but at the same time, they had higher input costs for fuel and fertilizer. Looking ahead to next year, I think we can be pretty safe in saying there will be a pretty significant drop in farm income.”

The five-year average farm income, based on FBFM records from 1999 through 2003, is a modest $27,449.

“I would say right now that farm income (this year) is going to be below that,” Lattz said. “We don’t have a projection yet because we’re just starting the process to do that.

“Farmers in central and southern Illinois seem to be faring better with yields than guys in northern Illinois.”

Farmers this fall will have to scrutinize their fertilizer purchases like never before because of anhydrous ammonia costs that have reached new highs.

Illinois Farm Bureau senior economist Mike Doherty said the cost of anhydrous already had increased by an estimated 25 percent this year. And that was prior to hurricanes Katrina and Rita.

Now, with the disruption of natural gas extraction and processing in the Gulf of Mexico because of hurricane damage, anhydrous prices are pushing $450 to $500-plus per ton across the Midwest, according to a fertilizer industry representative. Prior to 2005, the largest spring price quote for anhydrous ammonia (dating back to 1960) was $399 per ton in April 2001, according to the U.S. Department of Agriculture.

Natural gas, meanwhile, has been called the forgotten fuel because so much attention is being placed on high gasoline prices, said Jean-Mari Peltier, president of the National Council for Farmer Cooperatives.

“While gasoline prices certainly hurt consumers, the high and volatile natural gas prices affect agriculture’s ability to produce an abundant food supply,” said Peltier. “This trend cannot continue. With congressional leadership and action, this trend can be reversed.”

Peltier’s group is part of a national coalition thats comprises 72 farm organizations and agribusinesses, the Agriculture Energy Alliance, that is calling on Congress to increase natural gas supplies.

“Farmers are being impacted now with the high prices of fertilizer, natural gas and diesel at a time when our energy needs are at their highest,” said Leon Corzine of Assumption, president of the National Corn Growers Association, another member of the Agriculture Energy Alliance.

At the same time, prices farmers are receiving for their crop are at all-time lows.

Darrel Good, University of Illinois Extension marketing specialist, said the low prices have resulted from relatively large carryover stocks of 2004 corn, a larger-than-expected 2005 crop, increased transportation costs, and the interruption to export movement through the Louisiana Gulf port. His message to farmers: Store the crop if you can.

The American Farm Bureau Federation recently asked Congress to remember not only the extreme hurricane losses, but also the other disasters farmers across the nation are enduring, when it drafts emergency disaster assistance legislation.

In a letter to chairmen of the Senate and House appropriations committees, AFBF president Bob Stallman wrote: “As harvest begins, there is a mounting sense of alarm over a potential financial blow to America’s farmers.”

Stallman’s letter provided examples of extreme losses that farmers in Louisiana, Mississippi and Alabama are contending with in the aftermath of Hurricane Katrina, but it also pointed out other farming disasters that have occurred recently, including hurricanes in Florida, drought across much of the Midwest and major tornado damage in states such as Georgia.

The U.S. Department of Agriculture announced last week it will help with the movement of 140 barges of damaged corn from New Orleans, provide incentives for alternative grain storage, encourage alternative shipping patterns, and allow producers to store USDA- owned corn on their farms with the option to purchase, said Agriculture Secretary Mike Johanns.

“These actions, in conjunction with the tremendous work being performed by the U.S. Army Corps of Engineers, will help the transportation system return to normal as quickly as possible,” Johanns said in a release.