Fuel prices hit farmers, may drive up food costs too

While you’re feeling more of a pinch at the pump on your wallet when you fill up your car, an Iowa State University survey shows farmers are likely feeling the pain too. I-S-U extension economist Mike Duffy looked at the cost of fuel and fertilizer — the two things most impacted on the farm by higher energy costs. Duffy studied the impact if the prices rose 25-percent and 50-percent.He says the lower increase would result in raising variable costs for corn production by 10 percent and total costs by five to six percent, and variable costs for soybean production by six percent and total costs by two percent. He says it get’s worse under the scenario where the input costs increase 50-percent. He says variable costs of production for corn and soybeans would rise 18 and 10 percent, respectively, and fixed costs would rise 10 percent for corn and four percent for beans. Duffy says farmers have to eat the increase. He says the variable cost increases all go right off the bottom line, and he says that hurts with the already tight margins. Duffy says farmers can’t raise the payment they get for their corn and beans to make up for the increase in cost to produce them. He says farmers are basically price takers, so if their costs go up, they have to eat the increase if the price of their product doesn’t go up. Duffy says that doesn’t mean the prices in the supermarket won’t go up, he says he expects food costs at the retail end to go up higher than what farmers face. Duffy says the added cost to food in stores comes after the commodities leave the farm. He says the farmer’s share on the average is only about one-third of the food dollar, and the transportation cost of food is directly affected by the cost of energy. Duffy says he expects the fuel cost sinuation to continue to remain volatile.