Natural Gas Prices Send Production Expenses Skyrocketing

American Farm Bureau Federation president testifies of the importance of preventing farmers from feeling a double whammy of low crop prices and high input costs. Compiled by staff 

Published on: Nov 18, 2005

The skyrocketing price of natural gas is sending expenses related to producing food for Americans through the roof. This is a long-term challenge for the United States, and Congress must take quick and decisive action to increase domestic natural gas supplies. Because of this situation, America's farmers will face serious challenges to their family-owned businesses come spring planting season, according to the American Farm Bureau.

The nation's tight natural gas situation was the topic of a hearing Thursday before the House Resources subcommittee.

"Natural gas is used in so many aspects of food production, that farmers cannot simply sit by to let demand continue to drive prices up," says AFBF President Bob Stallman. "Our nation must address the supply side of the natural gas equation, and Congress has the power to do that by taking steps such as opening the Outer Continental Shelf to natural gas exploration."

Stallman explains that natural gas is a key raw material used to produce fertilizer and many crop protection products. It is also used to heat many livestock and dairy buildings during the cold winter months and to dry grain.

"Farmers face the likelihood of anhydrous ammonia fertilizer prices being $500 or more per ton this spring, which is double the 2002 price of just $250 per ton," Stallman explained. "Overall, the Agriculture Department tells us that farmers paid more than $6 billion in added energy-related expenses during the 2003 and 2004 growing seasons. At this point, there is no reason for us to expect 2005 and 2006 to be any better."

Stallman says U.S. energy policy has discouraged domestic exploration and recovery of oil and natural gas, and has made the nation more dependent on foreign energy sources. Compounding this situation, many U.S. power plants have been forced to use natural gas for generating electricity to comply with environmental regulations. With natural gas demand expected to increase by 54% by 2025, according to the Energy Information Administration, Stallman says Congress must do what it can immediately to increase supplies and ease demand.

"When it comes to putting food on the table, natural gas plays a huge role," Stallman says. "By allowing environmentally-sensible exploration and development of our domestic natural gas resources, Congress can help ensure food and energy security for our nation. We cannot allow farmers to face the double whammy of record high natural gas prices and low crop prices."