Rising fuel costs put a dent in farmers' profits

Last year was a banner year for farmers in Kansas, but that may not ring true for 2008.

In 2007, high grain prices lead to a jump in income for Kansas farmers. From 2006 to 2007, the average farmer saw his or her net income more than double. Over that year, average incomes went from $46,000 to around $115,000, according to the Kansas Farm Management Association.

"Last year was a very good year for farmers in Kansas financially," said Bill Wood, agriculture specialist at the Douglas County Extension Office.

The rising fuel costs are hitting home for farmers this year, hurting their profits and their pocketbooks.

With diesel prices hovering somewhere around $4 per gallon, a near 100 percent increase from last year according to the Energy Information Administration, Kansas farmers have seen their fuel costs skyrocket. Mike Garrett, a Lawrence farmer, watched as his fuel expenses more than doubled over the last three years.

"When it goes from $5-7 to $12,000 a year, that's big," Garrett said.

Right now, the grain prices are holding steadily above average, but that may not be enough to offset rising input costs.

Rising food prices result from the fuel costs to transport and process the grain, Wood said, and those increases don't necessarily get back to the farmers. According to Wood, about 11 cents on the dollar of food item, such as a loaf of bread, goes back to farmers.Garrett echoed this sentiment concerning his crops.

"Last year, tomatoes were $2 a pound, now they're $2.50 and people think that's a lot. What they don't get is the farmers haven't benefitted yet," Garrett said.

So far this year though, things are looking good for Kansas farmers.

Wheat harvest, which took place earlier this summer, held above-average yields for many Kansas farmers. Wheat is considered the third most important crop in Douglas County, behind soybeans and corn. Corn harvest will start here as soon as the ground dries up, Wood said.

"Yields should be slightly above average. There'll be some real good fields, but some of the corn got planted late, so that could drag down the average," Wood said.

While the harvests remain solid this year, the rising costs of production are going to hold incomes down from 2007.

According to Bill Wood, all of the farmers' expenses are going up, as a result of fuel. Fertilizer, seed, and land rent prices have all seen significant increases this year.

"There was a 20% increase in seed costs, and that's just basically the fuel to haul it," Wood said.

A drop in grain prices could put farmers in a tight situation, if fuel costs remain high.

"The prices are still up. When, I should say when and not if, they go back down, that's going to put a real crunch on us," Wood said.

This all could be true, but agriculture economists are wary of making any predictions until the numbers are all in.

Mark Schwarzentraub, an agriculture economist with the Kansas Farm Management Association, said that from 2006 to 2007, operating costs in Kansas saw a 13 percent increase, of over $28,000. In general, operating costs go up 5-8 percent per year, but Schwarzentraub wasn't willing to comment on what this year would be like.

"As economists, we like to have hard figures," Schwarzentraub said.