The rising costs of energy account for nearly 60% of the increase in total farm production costs in 2005. Natural gas prices have risen more than 200% over the past several years, while diesel fuel costs 150% more than it did just two years ago.
Commodity groups and senators testified before the Senate Agriculture Committee on Wednesday addressing the natural gas issue and transportation issues on the Mississippi River.
"Despite the great strides in agriculture to reduce energy costs and become more energy efficient, with these prices there's still going to be a lot of hurt," says Senate Ag Committee Ranking Member Tom Harkin, D-Iowa.
Rocky Mountain Farmers Union member Ryan Niebur told the Senate Agriculture Committee Wednesday that rising input costs are making it hard for family farmers and ranchers to stay afloat.
"Farmers and ranchers are in a situation that does not allow us to pass on these additional costs as a 'surcharge' which other industries, such as truck lines and airlines are able to do," Niebur explains. "There is no doubt in anyone's mind in my area that the rural economy is deteriorating because of declining commodity prices, and skyrocketing input costs as a result of higher energy costs."
Illinois Farm Bureau President Phillip Nelson called the combination of significantly higher energy and fertilizer costs coupled with falling grain prices a "perfect storm" spelling serious trouble for rural America. He says Congress must act to address our nation's energy needs, especially the challenge farmers face with higher natural gas prices.
Nelson called the passage of the recent comprehensive energy bill a "first step" for solving our nation's energy woes. He says, however, more has to be done to encourage domestic exploration and recovery of oil and natural gas. Electrical generation has to be accomplished without the extensive use of natural gas and can be accomplished with investment in the technology for the safe, clean use of our country's huge coal reserves, he says.
Harkin says renewable energy can play an important role in reducing farmer fuel prices. "Renewable energy is another key to success, both in terms of reducing farmer costs and increasing income," he says. "More must be done to bolster our domestic energy security through farm-based renewable energy like ethanol, biodiesel, and wind power."
"Agriculture faces significant challenges in transportation as well. Although the most serious impacts of Hurricanes Katrina and Rita were in the Gulf region, the indirect effects have also been quite widespread. The Gulf serves as a transportation hub for much of the central United States. County elevator prices have fallen in part because of shipping disruptions and higher costs. Iowa corn and soybean prices have fallen by 27% and 11% respectively since the end of August.
Sen. Norm Coleman, R-Minn., notes the effects of Hurricane Katrina on shipping on the Mississippi River have drastically affected farmers' abilities to transport good at reasonable prices. "Hurricane Katrina resulted in the extended closure of the Ports of New Orleans and South Louisiana, and still, we are only operating at two-thirds capacity," Coleman says.
"This tells me two things: first, USDA needs to continue working hard to mitigate the barge backlog and second, Congress needs to pass WRDA (Water and Resources Development Act)," he says. "Rail and truck transport have been critical for agriculture during this time of interrupted river traffic, but clearly, agriculture is heavily dependent on our rivers and we cannot expect to compete with the rest of the world using locks over 70 years old, as we have on the Upper Mississippi River System."