Archived Issues

Higher fuel costs

Article Images (Click for larger view) 

Farmers search for ways to save money

by Rocky Womack

Higher fuel costs


By Rocky Womack

Visit a farmer’s farm and one of the things he complains about is the high cost of fuel. Ever since the tobacco quota buyout, farmers have absorbed the extra costs, meaning less profit to pay their bills and plan for another crop.
“I don’t know what we’re going to do about it,” says Sam Crews, a flue-cured tobacco grower in Oxford, N.C. “We’ve got to do something about fuel costs and labor costs if we’re going to continue to do this. Either we’re going to have to get more money or we’re going to have to do something about reducing both of those costs. The LP gas is at $1.50 plus this year. It’s just going to be brutal.”
Saving on fuel use proves difficult during the growing season, says Andy Shepherd, a flue-cured tobacco grower in Dundas, Va., because the farmer still needs to break, order, bed and cultivate his crop several times. Outside of tobacco fuel cutting, Shepherd says he plants as much no-till grain as possible to reduce trips over the fields.
Burley tobacco grower John Price Jr. of Charlotte Court House, Va., says the rise in fuel prices has hurt him, too, especially when using tractors and trucks to go to the field. He says fuel prices cause everything to increase, and it is affecting the way growers make decisions in raising their crop.

Crews’ adjustments
From 1997 to 2000, Crews removed all of his older, inefficient rack-curing barns and replaced them with double-walled, metal-boxed models. “They’re as efficient as you can get, I think,” he says. “Obviously they’re better than these older rack barns that were 30 years old.”
When curing, Crews keeps a close eye on his damper control and eliminates as much open air as possible. He uses a wet bulb thermometer more than he used to so he can cure more efficiently.
“If you shut that damper a half inch, it might save you a few gallons,” Crews says.
Some tobacco growers have turned to buying fuel in bulk to save money. Crews says he has not gone that route, although he admits that he probably should have several years ago. He didn’t because the cost to install a large tank and gas lines was prohibitive. On Crews’ farm, the LP gas delivery driver fills up a 1,000-gallon tank at each barn to cure his tobacco.
Like many tobacco growers operating under the free market system, Crews complains about the prices received for his crop. He says when marketing contracts were first signed shortly after the tobacco quota buyout, growers failed to see the rise in fuel prices across the nation and how it would affect them. Since signing future marketing contracts, the tobacco companies have increased their prices slightly, but Crews says the adjustments—while he appreciates them—don’t reflect the increase in costs that the growers have incurred not only in fuel costs but other inputs.

Shepherd’s adjustments
Before he begins curing, Shepherd says he will go over his barns and add weather strip to the doors as well as he can.
He reworked one of his barns last year and installed fiberglass insulation between the plywood in hopes that it would reduce air flow and cut down on LP gas use.
Unlike many growers, Shepherd sold his box barns years ago and bought rack barns, which were fueled by oil and already had heat exchangers in them. “It takes about an average of 200 gallons of fuel oil to cure a barn,” he says. “The first two pullings you might get a little less than 200. Then when you get to the October barns, you’re up to 275 gallons. It’ll average out to 200 gallons a barn. I know there’s some new heat exchangers that can probably save 30 percent and sometimes a little more than that.”
While fuel prices are high now, Shepherd believes he suffered more from higher prices after Hurricane Katrina blew through New Orleans. “I think I paid $2.83 a gallon for curing oil then. It didn’t get that high last year,” he says, “but of course it started high. I’m not sure there was a lot of difference. The 2005 shock at the end of the year was pretty intense.”
How much is too much?
“Well, it really hurts when you go to the field in the morning and know you are going to spend $1,000 for that one barn with your labor, electricity and the fuel,” Shepherd says. “If you throw in the baling and all, you’re talking probably $1,300 every time you pull one. That’s a lot. Your first couple of barns you end up giving to your petroleum guy to refill it for the next go-round.”
Shepherd says petroleum drives the price of everything on the farm. For instance, he recalls when 3-9-9 fertilizer costs $53 a ton. The kerosene to cure stick barns was a cheap 12 cents a gallon. He believes the crop averaged about 85 cents a pound that year.
In 2007, Shepherd paid about $365 a ton for 6-12-18 fertilizer.
“In terms of those dollars, we were making a whole lot more money then than we are now,” he says.
On top of the high fuel and fertilizer costs, the price of tobacco has decreased from the pre-tobacco quota buyout era. He believes an excellent tobacco grower with a really nice crop will find it hard today to net $1,000 an acre.
“You’ve got to have been very efficient with no slip-ups to make that $1,000,” Shepherd says. “I would say most people are more in the range of $600. When you figure the effort, investment, risk, labor situation, plus you’ve got to buy replacement machinery, the $600 is just on the crop. That’s not saying you’ve made that after you’ve paid all your debts. That’s what you’ll make above the expenses of the crop, maybe. The risks to get $600, you’re risking probably $3,000 or more per acre to make $600.”
The scary part so far this crop year is a hurricane hasn’t even hit the United States hard yet, he says, and that could drive up the price of fuel overnight, possibly to $4 a gallon. Growers already have the crop in the ground and have purchased inputs to go on it, yet they haven’t pulled and cured their crop.

Price’s adjustments
Instead of increasing his burley acreage, Price decided to decrease slightly this year, partly due to the higher fuel prices and partly due to rising inflation. “I cut back acreage to get my expenses more in line,” he says. “The contracts didn’t go up in price much, so I’m trying to do as much as I can [without extra labor].”
Price says unforeseen inflation has kicked in big time this year and has made a huge difference in the bottom line. “If it was just labor, just fuel, just fertilizer … but when it’s everything, it’s just crazy.”

The huge impact
Higher fuel prices cause a ripple effect on the farm just like a pebble on a body of water. When thrown harder, the pebble goes further, and the ripples spread out more, causing a larger effect. If thrown with a heavy rock, the rock splashes the water and sinks. Will the higher fuel prices, along with increased labor wages and other higher input costs, cause a ripple effect or a splash to where we see more growers exiting the tobacco business? Time will tell.