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U.S. farmers are paying more for inputs
College Station, Texas
April 27, 2004

If producers want to see the greening of their fields, they're going to have to provide more "green" at the cash register, Texas Cooperative Extension reports.

Nationwide, the prices for agricultural inputs are increasing.

"An input is something that goes into the production process for an agricultural commodity, such as seed, fuel and water," said Stephen Amosson of Amarillo, Extension economist.

A large part of the rise in input prices can be attributed to the high cost of natural gas, Amosson said. Natural gas is used in irrigation and the production of fertilizer, as well as other processes.

"The price of natural gas has risen dramatically," Amosson said. "Looking at the last five-to-10-year average cost, the number has almost doubled."

He attributes the price hike partly to supply and demand.

"We had a very rough winter in the east that caused a drain in natural gas reserves," Amosson said. "Overall the demand for natural gas is rising. Production is currently trying to catch up and get back on track."

Consumers shouldn't expect a price drop because of lowered demand, he said.

"The demand is going to stay high. The question is, can we get production of natural gas up in order to bring prices back down," Amosson said.

Bruce Blake of Bushland Grain Cooperative, sees the natural gas price in the company's fertilizer manufacture expenses.

"In the past, anhydrous ammonia, which is used in nitrogen fertilizer, cost $250 to $275 a ton," Blake said. "Now it is around $335 a ton." The input has slightly decreased from a recent price of $400 a ton, he said, but it is still high.

Dr. Jason Johnson of San Angelo, Extension economist, said natural gas prices have increased about 28 percent in the last 12 months.

"The increased price of natural gas isn't immobile, it gets passed along in the form of higher fuel prices, higher fertilizer prices and an increased cost to irrigate," he said.

"When you look at the long-term price increase, it could definitely affect some of our crops," Amosson said. "Anything irrigated gets more

expensive- sorghum, cotton; these are major Texas crops."

The increased price of natural gas does not stand alone, Johnson said. Gasoline prices have increased 44 percent as well.

"Between (gasoline and natural gas) there has been roughly a 30 percent increase in the cost of inputs," Johnson said.

Fortunately, Amosson said producers are seeing a price increase for their commodities and that is helping to even out price extremes.

"Almost all commodity prices are looking to be 25 percent above the long-term average," Amosson said.
According to Johnson, every crop has its own reasons for receiving a higher price.

"In most cases we've seen some glitches in other producing areas," he said. "There have been world production issues the United States was able to come away from without much detrimental affect on production.

"We've been pretty fortunate with commodity prices. The increase in price has allowed producers more sail to weather this storm."

Some producers are considering making changes to alternative forms of irrigation, such as electricity and diesel, Amosson said.

Johnson said one positive thing he has been able to tell producers is to remember that this is an election year.
"Election years usually bode very well for fuel prices," he said. "I tell producers to do their planning expecting prices to hover at these levels, but hopefully we'll get some relief as we get into the latter part of the year."

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