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- Fuel, fertilizer, labor and interest rates are major concerns for farmers when they consider the cost of doing business, and 2012 promises to be another year of uncertainty for some inputs as the spring planting season approaches.
Fuel, fertilizer, labor and interest rates are major concerns for farmers when they consider the cost of doing business, and 2012 promises to be another year of uncertainty for some inputs as the spring planting season approaches.
Retail gas and diesel prices spiked in 2008 when they got to close to $5 per gallon, says Greg Ibendahl, Mississippi State University agricultural economist.
“I think one day we’ll go back and look at this period from the 1980s to the 2000s as more or less our golden years, with inflation rates being down and prices staying fairly steady, with everything being pretty consistent and not much controversy,” he says.
After 2000, gas and diesel prices became more volatile, says Ibendahl.
“One of the things that pushed us over the edge with the most recent recession and probably broke the camel’s back is when gas went over $4 per gallon. That extra cost to consumers did it. When the recession started and demand dropped, prices started going lower and we started our slow recovery,” he says.
The EIA — a branch of the U.S. Department of Energy — predicts oil prices of about $80 to $90 per barrel for the next year and a half or so, he says. “But they seem kind of clueless, since their range goes from about $40 per barrel to $190 per barrel, so it looks as though they’re pulling numbers out of the air. They’re also predicting diesel prices to stay about steady in that $4 range,” he says.
Looking at consumption versus production, consumption dropped significantly during the height of the recession, which one would expect, says Ibendahl, with consumers having less money to spend.
“Production didn’t drop off too much though, which led to a surplus and led to the price of oil going back down. On the plus side, for the next couple of years anyway, OPEC does have excess capacity. We’re at about the 10-average as far as excess capacity. We’re not really looking for any dramatic increases in oil prices because of that.”