Gasoline isn’t the only fuel that’s soaring in price. The high cost of diesel is a headache for Iowa farmers, though Iowa State University Extension specialist Darnell Smith says it’s an unavoidable factor in their cost of doing business. He says the increase in diesel, nitrogen and a few other products have increased farm operating costs 30 to forty percent, he says, and overall costs by 20-percent over the last there or four years. Farmers have traditionally been big users of credit, sometimes buying their seed and fertilizer with plans to pay it back when the crop’s harvested, but Smith says they can’t do that with the fuel for the tractor and trucks. From their operating-cost perspective, folks have to come up with that money “up front,” so it’s a cash-flow issue for them. If you head to the grocery store, however, Smith says you may not even notice. The farm production costs won’t have much impact on food prices, he explains, “because only about 10 or fifteen-percent of overall food cost goes to the farmer.” He says that’ll mean the cost of producing it only contributes to a small increase in the retail price. More upward price pressure may come from the middleman — the stages in production that include shipping and handling. The transportation and refrigeration of those food products also use energy and will affect their price. Smith says the major impact on grocery-store food prices is going to come from the non-farmer cost increases. Electricity and refrigerated trucks are among those non-farm handling factors that the ag economist says will be to blame for a bigger bill at the grocery-store, if high fuel costs continue.
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