Fuel and Fertilizer Costs
by Washington Wheat Commission
The unprecedented rise in fuel and fertilizer costs is threatening to put dozens of eastern Washington wheat farmers out of business.
The effects of Hurricane Katrina and Hurricane Rita in the Gulf have also recently contributed to rising operating costs for wheat producers in Wheat Life.
These are perilous times for wheat farmers and operators and an industry that contributes more than $1-billion in gross state output. In eastern Washington, a single bushel of wheat generates $9 in business activity.
Curtis Hennings, chairman of the Washington Wheat Commission, said the wheat industry could be facing a five to 10 percent reduction in the number of active farming operations within the next year based on anecdotal reports from financiers throughout eastern Washington.
Recent analysis by Washington State University of a representative Whitman County farm (see related story, page 4) reveals the dire straits farmers across Wheat Life are facing. These calculations are from low-cost farmers operating on leased ground in annual rainfall areas of 14 to 16 inches.
Since September 2004, fertilizer costs have risen 47 percent while fuel prices rose 67 percent, resulting in a reduction in net income by $13,000 over a two-year crop rotation. This amounts to a 20-cents-per-bushel decrease in returns. Combined with the fact that the price of wheat fell 10 percent in the same time period, net income drops by $31,850. This is equal to a net loss of 43 cents per bushel compared to a net gain of six cents per bushel just a year ago.
Add to the rising transport costs such as rail, truck and barge carriers, then apply fuel surcharges, and the plight of farmers becomes even more critical.
The pursuit of offsets to escalating production-related cost increases has become paramount. What is at risk is food production, widespread economic hard-ship and disruption in rural communities with the ripple effects extending beyond local communities. The wheat industry, and agriculture as a whole, is central to both food and national security. The U.S. cannot afford to lose its food production capability and become dependent upon other countries to provide this basic necessity.
The well being of an entire industry is at stake.
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