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Farmers need excellent growing conditions to recover

Residual damage, high energy costs spell trouble for ag

The winds of Hurricanes Katrina and Rita pummeled row crops in the Mississippi Delta, causing damages averaging 15% to 40% in some fields. Unlike similar hurricanes in 2004, Congress failed to pass any disaster relief legislation to help farmers.

Chip Morgan, executive vice president of the Delta Council, says the financial results can be summed up in this way: “If you talk to production lenders, they will tell you they had the largest carry over of debt they have had in the past five years. Farmers are carrying 2005 debt into the 2006 loan. That is a pretty threatening condition.”

After the hurricanes, the U.S. Senate passed disaster relief for agriculture. But the U.S. House did not. Again recently the Senate passed disaster relief provisions. There is hope the House will follow suit.

“It is a huge concern, and something that over the next weeks we hope will be reconciled between the House and the Senate,” Morgan said. “Obviously we hope the House will concede to the Senate, and we will be working toward that end.”

Like in any weather pattern, some counties were hurt worse than others. Morgan said some fields had as much as 40% damage. Entire counties might have seen a 15% adjustment in their yield due to wind.

“We are accustomed to rain in the fall on products ready for harvest,” Morgan said. “But the wind at 40 miles per hour knocked soybeans and cotton off the stalk.”

Farmers in the Mississippi Delta badly need excellent growing conditions in order to have big yields to help them recover from the previous growing year. Morgan said farmers are also in desperate need of Chinese currency reform.

“You don’t have do anything but read The Wall Street Journal to know when a foreign government controls the currency rate, it can control how much it imports and exports,” Morgan said. “What we have to say over and over is we are just as vulnerable as the manufacturing industry that has already left this country. Because, like them, we buy all our inputs retail and sell our goods wholesale. The only industries to do that are agriculture, mining and manufacturing. Those are the basic industries of this country. When you put it into that perspective, if banks and insurance companies bought all the products they sell you at retail and sold to you wholesale, they would go broke pretty quickly.”

As if there isn’t enough to worry about, as ag leaders look ahead to what is expected this year, escalating energy costs are a grave concern.

“The main factor we are wrestling with in agriculture today is fuel costs,” says Mississippi Agriculture Commissioner Lester Spell. “Fuel costs have escalated so much it has really impacted farmers. It impacts all types of farmers, but people in row crops more so than others. These costs have really, really gone up. Factoring increased fuel costs into the cost of production will be a major thing for farmers. What was a small piece of total production costs may now increase to 20% to 25% of the cost of input.”

Slow increases in fuel costs have been tolerated. Spell said it is the sudden surge in oil prices seen over the past two years that has caused the most concern.

Energy costs have gone up at least 40% since Hurricanes Katrina and Rita, says Mississippi Farm Bureau president David Waide. In addition to the obvious impact from higher fuel costs to run equipment, higher energy costs also make pumping water for irrigation more expensive. Fuel is used to provide climate control for chicken houses. And since fossil fuels are used to manufacture fertilizer, higher energy costs also impact the cost of fertilizer.

“We are 67% dependent on energy from sources outside of the U.S.,” Waide said. “If we don’t lessen on our dependence on the Mideast, we are going to continue to see upward pressure on the price of crude.”

The one silver lining is that higher energy prices are making alternative fuels made from agricultural waste and products such as corn and soybeans more competitive with petroleum products.

“With the price of fuel going up, it has made these alternative fuels more attractive to use,” Spell said. “The public is beginning to become conscious we need alternative fuels we can afford. By the end of year, they say we will be looking at even higher prices. Our office has visited with a lot of people interested in production of biodiesel, and some who are interested in ethanol. The whole country is beginning to accept the fact that we must become less dependent on foreign oil.”

Many states have a program that gives an incentive to production of alternative fuels. Mississippi enacted such a program a couple years ago. But Spell said because of the financial crunch, the state hasn’t been able to fund the incentives program.

Spell said a number of alternative energy projects in the state are showing promise. For example, poultry litter is being used to produce methane gas to heat poultry houses at a pilot project near Prentiss.

The higher energy prices have even impacted what crops are being planted this year. Nitrogen fertilizer is made from natural gas, and is a major input cost for corn. Because of high energy costs, corn production in Mississippi is expected to be down this year by 10% to 13%.

“Cotton is going to stay pretty stable, and soybeans will probably be up a little this year,” Spell said.
John Anderson, associate extension professor at Mississippi State University, said both in Mississippi and nationally an increase is being seen in planting crops like soybeans that require less fuel and fertilizer.

“The prospective planting report shows a major decrease in corn and rice acreage in Mississippi that you can directly attribute to fuel prices,” Anderson said. “It is not only more expensive to run equipment but with rice, it is expensive to pump water. High input costs are clearly affecting the planning decisions of producers. The result of that is it could become a challenging year for marketing of soybeans. It will be our biggest crop this year. It could be a challenging market because of the large acreage seen nationally.”

A lot can still depend on the weather. If there is bad production in the Midwest, and good production here, Mississippi producers stand to profit. But a bumper crop all over could have a depressing impact on prices.
Timely rain is always important in agriculture. But Anderson said that is especially true this year.

“If we have to do a lot of pumping, it is going to cost more money because of fuel costs,” Anderson said. “Drought is never far from producers’ minds. It is an issue that is always difficult to deal with. It will be extra costly to deal with this year.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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