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Wednesday, May 6, 2015

Cost of Diesel & the Farm

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Cost of Diesel & the Farm
Gary Schnitkey, Ag Economist - University of Illinois

The price of diesel has dropped and, as Todd Gleason reports, this should be helpful to U.S. farmers.

U.S. farmers struggling to find ways to cut cost…
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U.S. farmers struggling to find ways to cut cost will find the price of diesel fuel somewhat comforting. It is one of their larger input costs for the production of a row crops like corn or soybeans. This year that fuel cost will be sharply lower says University of Illinois Ag Economist Gary Schnitkey.

Schnitkey :19 …diesel fuel over the last four years.

Quote Summary - Since 2011 on through 2014 diesel fuel prices have average about $3.50 per gallon. Today’s cost is about a 36% decline. It is a significant decline in the cost of diesel fuel from the last four years.

Here’s how that costs translates directly to the farm. Last year fuel cost Illinois farmers, on average, $24 per acre of corn production. A 36% drop puts that estimated cost this year at $15 per acre. It’s a nine dollar savings, but certainly not enough to really ease the coming income woes of the American corn farmer comments Schnitkey.

Schnitkey : …and for that matter soybeans in the state.

Quote Summary - The total cost to raise an acre of corn is about $600. So, the fuel savings is a relatively small portion of the total cost of producing corn, and for that matter soybeans in the state.

Schnitkey thinks producers should certainly consider taking advantage of the diesel fuel prices today. The other two items of note related to energy costs concern drying corn in the fall and nitrogen fertilizer. The ag economist thinks drying costs should be much lower this fall. As for the cost of nitrogen fertilizer - and this would be for next year - well he says…

Schnitkey :09 …maybe someday that will come down.

Quote Summary - Patients, relative to nitrogen fertilizer and buying it, might be a good thing. Because maybe someday that will come down.

The cost of nitrogen fertilizer this year is actually higher than it was last year. Its primary creation cost is for natural gas.