High diesel costs take fun out of farmingby Mark Steil, Minnesota Public Radio
High fuel prices are making life difficult for farmers. The price of their favorite fuel, diesel, has almost quadrupled in just four years.
Like many other businesses though, agricultural producers are finding there's no easy way to deal with the increased cost.
Hills, Minn. — On a warm spring day in southwest Minnesota a blue sky frames a peaceful looking farm near the town of Hills. But the calm scenery hides the economic turmoil buffeting this and other farms.
Prices for just about everything are rising. Mike Sandager and his brother Gene run the place along with some hired workers. Mike Sandager says a few days ago the whole group had a big discussion about how much diesel fuel to order for the farm's storage tanks.
"They said, 'Oh, just fill everything up. It's not going to even turn around and go back. We're going up higher and higher and higher.' And who knows, maybe they're right," said Sandager.
This is a big farm, about 2,600 acres. It uses a lot of diesel.
Their tractor is more fuel efficient than past models, but it still burns a lot of fuel. In all, the farm's annual diesel bill is over $100,000.
That is more than 10 percent of the farm's total expenses. Despite the advice of his brother and the farm's workers, when Mike Sandager decided how much fuel to order he went with his gut, he bet on lower prices.
He ordered just enough diesel to get through the summer. He's hoping that sometime between now and harvest, the price of fuel will drop.
"In the last eight times that I've booked fuel I've lucked out I suppose seven times," says Sandager.
Meaning he guessed right on prices. The time he was wrong he ended up paying a painful 50 cents a gallon too much. Paying close attention to fuel prices is part of the business world the Sandager's live in.
But guessing on future prices is not the farm's only strategy to deal with the rising cost of diesel. The Sandagers look for ways to save fuel, but it's difficult.
"There's very few areas where we can cut back," says Sandager.
And when they do cut back it usually means spending money on something else. They paid about $12,000 for a satellite guidance system for their main tractor. It positions the machine within inches of the desired path through a field.
That almost eliminates overlap, reducing the amount of fuel it takes to cover the land. Mike Sandager says combining several plowing and weed control operations into one pass has cut in half the number of trips across most fields compared to a decade ago.
The changes have made some equipment obsolete, like a plow that was too costly too operate.
"We're trying to sell it and no one would even put a bid on it," says Sandager.
But it seems like rising fuel prices more than offset whatever savings the Sandager's find.
University of Minnesota Applied Economics Professor Kent Olson says it's difficult for farmers to react quickly to rising fuel prices.
"Those combines and tractors are expensive, they've got a life of many years. Farmers aren't going to rush out and be buying a whole new fleet of machinery just because prices have gone up to a new level," says Olson.
"But it'll be a gradual process of replacement and not a wholesale replacement this year."
Olson says high fuel prices eventually may force neighboring farms to group together to buy new machinery.
But diesel is not the only high priced commodity. Prices for corn and soybeans are also high. Olson says that has allowed farmers to pay their escalating fuel bills and still make money.
But that is not much comfort for farmers like Southwest Minnesota producer Mike Sandager. The rising financial risk of running a farm is taking a psychological toll.
One reminder of that toll is tucked away in a machine shed, not far from the massive modern equipment which dominates the farmyard.
The John Deere B tractor is about 70 years old, it was the first tractor purchased for the farm. It is a reminder of a simpler time in agriculture, when world issues didn't affect farmers much.
Sandager says all that has changed. Issues like fuel price hikes produce acres of worry.
"I'd rather have it the old way," said Sandager. "You look at the stress levels and it's taken all the fun out of it."
It looks like the high stress levels are here to stay. Besides fuel, fertilizer, seed and herbicide costs are also rising rapidly. Those higher prices erode profit margins.
Right now for Mike Sandager, it's very important to guess right on the next shipment of diesel fuel.
- All Things Considered, 05/23/2008, 5:19 p.m.