Question & Answer: What's in store with rising fuel costs?

With gasoline over $2 a gallon and natural gas prices still on the rise, agriculture will be one of the first industries to feel the effects of increased fuel costs. We've asked three experts to comment on different aspects of this issue: immediate reactions on the farm, impacts at the distribution level, and what's in store for renewable energy. We've also asked them about the challenges and opportunities for farmers. The Leopold Center intends to continue the discussion on this important challenge for agriculture.

What can farmers do immediately to curb or at least contain energy costs?

Mark Hanna, Agricultural & Biosystems Engineering, ISU: High fuel prices present challenges, but maybe also some opportunities to save time and wear-and-tear on equipment.

This may be a good question to ask before you start spring operations or head out to check livestock. In some cases, trips may be combined (for example, a one-pass tillage and leveling operation before planting, or checking livestock on the way into town). Spring pre-plant tillage may be counter-productive if soils are wet and plastic, or sloping and subject to erosion. ISU Extension bulletin PM 709, Fuel required for field operations, can be used to project estimated fuel use or savings for field trips.

Regularly scheduled maintenance on engines (tractor, truck, etc.) such as changing filters and fluids is needed for best fuel efficiency. For tractors and drawbar field work, the tractor should be properly ballasted for both total weight and percentage split between the front and rear axles. Tires should be at the correct inflation pressure for the load they carry. Over-inflation on soft soil surfaces increases slippage and wastes fuel. Check the tractor operation manual for information. Tillage, planting or application equipment should be set up properly so that the trip won't be wasted.

Higher natural gas prices have resulted in higher prices for nitrogen (N) fertilizer. Your fertilizer applicator should be properly maintained and set up to apply N fertilizer efficiently. See PM 1875, Improving the uniformity of anhydrous ammonia application, for further information. These and other bulletins can be found at www.abe.iastate.edu/machinery.

What challenges/opportunities do rising fuel costs pose for distributors and how are you addressing them?

Michael Nash, GROWN Locally, Postville: GROWN Locally is a small, direct market farming cooperative in northeast Iowa and door-to-door delivery of products is very important to our customers. With three delivery vehicles making two to four routes per week, fuel consumption becomes a concern for us. Even though our system is the most effective use of fuel - as opposed to each customer driving to our farms or to drop-off sites - we must manage consumption.

This season, in addition to efficient route design, we will use higher levels of pre-delivery chilling of products to lessen the need for as much on-road cooling, run fuller delivery vehicles, contain chilled areas in vehicles to smaller zones and use ice to take the load off mobile chilling units. We also will try to keep the vehicles' enroute times as short as possible without compromising effective customer contacts.

Another important change is our venture into on-farm biodiesel production. Designing an effective and efficient biodiesel processor for our farm and delivery vehicles is underway and we hope to replace at least 50 percent of our petro diesel use this season with even higher percentages in the future.

At Sunflower Fields farm we installed a biomass furnace to heat our home and are pleased with the results. We burned no propane during the 2004-2005 heating season (up to April 1), and the fuel for the furnace - dried corn kernels - has come almost entirely from our own farm. As a result, we are investigating the potential for designing a greenhouse heating system and one for other outbuildings using this technology.

As a farmer, I want to become discouraged as I look at the high cost of fuels, their pollution of air, land and water, and our dependence on them. But if I think about it a bit, I realize that we farmers are pretty creative. We have the opportunity to take the lead in innovative solutions to our fuel needs such as promoting alternative heating and cooling systems and wind generation right on our farms. We might not have the resources to build that large biodiesel plant, but by working together to promote this type of research and development we not only solve our fuel supply problems but also develop more viable and sustainable markets for our products.
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What’s in store for renewable energy in Iowa?

Floyd Barwig, director, Iowa Energy Center, ISU: Iowa has roughly 700 utility-scale wind turbines and another 100 are either under construction or on order. The largest over 375 feet tall, these turbines are visible symbols of the opportunities in Iowa for renewable energy.

Farmers can profit by leasing their land and wind rights to a wind farm developer if:

A lease for a 1.5-megawatt turbine pays about $4,000 per year. Farmers who become their own wind project developers, as some have done in Minnesota, stand to make a greater return but they must be willing to make a substantial investment (a single 1.5-megawatt is about $1.5 million).

Solar energy is evolving one niche at a time. While utility-scale applications to produce electricity using photovoltaic technology remain uneconomic, small applications such as photovoltaic fence-charging systems and photovoltaic pumping for remote stock-watering applications are commercially available. There also are successful examples of solar water heating.

I think the most exciting opportunity for renewable energy lies in the use of biomass – derived from both plants and animals – to make chemicals, fuels, plastics and composite materials. Before the advent of cheap oil in the 1930s, chemicals and materials commonly were made from plants. In 1940, Henry Ford built an experimental automobile with body panels made from a soy-based plastic. Inexpensive oil made most plant-based chemicals uneconomic and a chemical industry based on petroleum has evolved over the last half century.

A trip to the gas pump will quickly show you that oil is no longer cheap. As the price of oil rises, more effort will go into reinventing a biomass-derived chemical industry. Beyond ethanol and biodiesel, technologies that will allow corn stover, alternative crops like sweet sorghum or grasses and even manure to be cost-effectively converted into a wide array of chemicals and materials are close at hand. The list of possible products is long and the markets are huge, running into millions of tons per year.

With its productive soils, Iowa is poised to be at the center of a new bio-based industry. Displacing petroleum-derived products with bio-based products has the potential to dramatically expand Iowa’s rural economy while simultaneously providing environmental and national security benefits.

Associate director Mike Duffy discussed the farmer impacts of high energy costs in 2001, the last time that fuel prices skyrocketed. See his article in the Spring 2001 Leopold Letter, "Prices on the rise."

Duffy also has examined the impact of the current round of price increases. The estimated costs of crop production have already shown 21 and 50 percent increases for gas and diesel fuel, respectively, from 2004 to 2005. One scenario that assumes an additional 25 percent increase in fuel costs would raise variable costs for corn production by 10 percent and total costs by 5-6 percent, and variable costs for soybean production by 6 percent and total costs by 2 percent. Using a scenario in which fuel prices go up 50 percent, variable costs of production for corn and soybeans would rise 18 and 10 percent, respectively, and fixed costs would rise 10 and 4 percent, respectively.

To see Duffy's 2005 report, see "Rising Energy Prices and Iowa Farmers" on the Leopold Center web site, www.leopold.iastate.edu/pubs/staff/files/energy_impact0405.pdf