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Report Finds Farmers Responding to Changing Energy Economy

USDA ERS examines the impact of rising energy prices and more renewable energy production on farmers

Published on: Jun 17, 2013

The tie between energy and agriculture is consistently growing stronger, says the USDA Economic Research Service in a recent report. Traditionally, agriculture used energy directly in terms of fuel and electricity and indirectly in the form of inputs such as fertilizer, but the situation has been altered over the years to reflect a boom in agricultural demand and a boost in fuel prices.

"Record-high energy prices and expanding biofuel policies have substantially increased the demand for agricultural products as renewable fuel feedstocks since the mid-2000s. As of 2012, corn-based ethanol and soybean-based biodiesel supplied almost 6% of U.S. transportation fuels, consuming 42% and 1% of U.S. corn and soybean production, respectively," the report found.

USDA ERS examines the impact of rising energy prices and more renewable energy production on farmers
USDA ERS examines the impact of rising energy prices and more renewable energy production on farmers

That change has brought about higher commodity prices and has also increased the cost of agricultural production, report authors Jayson Beckman, Allison Borchers and Carol Jones say. But it has also caused farmers to adjust the type and amount of each commodities to produce.

Specifically, some farmers have reacted by producing more energy-based crops. Corn production alone has increased 13% from 2001 to 2012, while barley, oat and sorghum production declined. Higher corn production, the authors say, has also contributed to tighter supplies and increased demand, pushing prices higher.

Energy use has changed, too – farmers have shifted to more energy efficient practices and input use. Engines were kept properly serviced and fewer trips across the field were required due to reduction in fertilizer use and improved efficiency of fertilizer use, the report finds.

"Farmers were able to hold the line on energy use—while total output and the output share of corn, a highly energy-intensive crop, increased—by increasing the energy efficiency of production relative to 2001," the report says.

However, despite the changes, energy-related ag costs increased with rising energy costs. Overall, the share of energy-based input costs in total corn production costs increased from 27% during 2001-2005 to 34% for 2006-2011.

ERS researchers also considered on-farm energy production. From 2008 to 2011, they reported,  the number of farms generating renewable energy increased 99%, though the share of farms with on-farm  renewable energy programs is just 1.6%.

Read the full report.