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Rising Prices Drain Farmers’ Pocketbooks

A tractor fuels up at Terranova Ranch in Fresno County
A tractor fuels up at Terranova Ranch in Fresno County. Diesel fuel, whether for on-road or off-road use, is seeing sizable price jumps. Farmers trying to deal with rising prices are not always able to recover their increased expenses, which may force some to forgo raising certain crops next year. (Photo: Lindsay DaFonte)

By Kevin Hecteman, Assistant Editor, Ag Alert

Reprinted with Permission from California Farm Bureau Federation

Kevin Hecteman, Assistant Editor, Ag Alert

The road to higher food prices begins at the diesel pump and winds through the auto-parts store, the fertilizer-supply company and even the hangar at the local airfield. By the time that road reaches the farm, California farmers and ranchers may have paid double—and then some—to grow and transport their crop.

“We’ve seen diesel prices more than double in the last six months,” said Don Cameron, a diversified grower in Helm, in Fresno County. “We’re coping with it, but what that means is, we’re going to have to get more for the profit we grow wherever possible. We’ve got to pass this on, whatever way we can, to the consumer.”

A year ago, a gallon of No. 2 diesel fuel averaged $3.25 in California, according to the U.S. Energy Information Administration. By April, the price had risen to $3.98; in October, the average had ballooned to $4.48. That adds up for farmers. And it’s having an impact on the food market.

Among the consequences for supermarket shoppers may be fewer options in the produce aisle.

“We have a couple of crops that we’re just not going to be growing, because the buyer doesn’t want to pay the price that we need,” Cameron said, preferring not to name the specific crops. “Because of increased fertilizer, increased labor and increased fuel prices, we’ve just decided to take a few crops out of our mix for 2022.”

Chris Torres, who grows rice and runs a trucking company in Colusa County, said he’s looking at higher bills for everything.

On the trucking side, “it’s making operational costs higher,” Torres said. “In the places where we can get a fuel surcharge, we’re putting one on, but some of the contracts, we can’t get that.”

As to the farm, Torres said he’s done for 2021 and has not yet begun to crunch the numbers for 2022—but the picture already looks ugly.

“I’ve heard rumblings of aqua ammonia possibly doubling in price,” Torres said of the nitrogen fertilizer widely used in rice farming. “Fuel to run the tractors is obviously going to be half again as much more, if not twice as much more. The chemicals and the operating costs and everything are going to go up.”

That tractor fuel is red-dye diesel, so named for the reddish tint denoting its tax-exempt status.

“It’s exempt from the road taxes, but it’s not exempt from going up in price, and we still have to pay sales tax on it also,” Torres said. Dry fertilizers manufactured from petroleum products also are likely to see an increase, he noted.

Cameron said UN 32, a nitrogen fertilizer, has tripled in price “and could go higher in the spring,” on account of high demand, and supply-chain issues are making it difficult to obtain herbicides.

So what will happen to the farmer’s bottom line? “That’s the $64,000 question that nobody really knows,” Torres said, adding that he’s unsure he’ll be able to recover his expenses when crops go to market.

“That’s all part of the gamble that we take in farming,” Torres said. “We could be putting the crop in, and the crop prices could drop. We’re hoping that we can get more for the crop. It looks like we could get more for last year’s crop, but the crop that we’re going to put in this coming year, we don’t really have any idea.”

Agricultural-aviation operators aren’t immune to soaring fuel prices. Rick Richter, who runs an aerial-application company in Maxwell, said aviation fuel was going for $2.60 per gallon last week, up from $1.50 to $2 per gallon in November 2020—and up from 80 to 85 cents per gallon in summer of 2020.

That assumes he can even get the stuff in the first place.

“What I’m more concerned with is the availability,” Richter said. “That’s going to be a concern, I think, going forward. In the summertime, we have the fires; they take priority when it comes to ‘Jet A.’ We had to wait sometimes three weeks for a load this past summer when the fires are burning.”

Transporting the fuel to the airfield also is an issue, Richter noted.

“It’s hard to get trucks,” Richter said. “When you order a truckload, you have to wait. I was planning on putting in some extra storage this winter, just to take advantage of those times when we’re not busy and we see we can get a load of fuel.”

Long-term fuel contracts could be an option, but not every farmer takes advantage.

“We’ve never done it,” Cameron said. “We don’t have a lot of storage on the farm, especially when we’ve got a lot of equipment running. It’s pretty much hand-to-mouth. We try to stay ahead of it. At least we have had supply.”

On top of all this, Cameron said, are the drought—recent rains notwithstanding—and rising labor costs. California’s minimum wage will go up Jan. 1, to $15 for employers of 26 or more people, and $14 for those employing 25 or fewer.

“It’s unfortunate because it’s going to lead to higher food prices in the next couple of years,” said Cameron, who also chairs the state Board of Food and Agriculture. “It’s not going to be a one-year problem; I think it’s going to be a multi-year problem. Unfortunately, it hurts the people that can’t afford it the most.”

Torres said there isn’t much choice but to keep on farming.

“You do what us farmers normally do,” Torres said. “We roll the dice and keep moving forward.”