State Journal-Register

May 8, 2001

Higher energy costs driving up farmers' expenses 


WASHINGTON - High energy costs are expected to push up farmers' expenses by as much as $3 billion over last year, the U.S. Department of Agriculture's chief economist told a House panel Wednesday.

In January, the department forecast energy-related costs would be up $700 million from 2000, reducing farmers' net income by 10 percent. But the estimate was revised upward largely due to higher fertilizer expenses, said USDA's Keith Collins.

Farmers feel the impact of high energy costs in various aspects of production, including the diesel fuel that powers farm equipment, the propane used to dry grain and the natural gas used to make fertilizer.

In Illinois, farmers estimate their direct energy costs alone - diesel fuel and propane - are up 10 percent from two years ago, Illinois Farm Bureau president Ron Warfield said.

Despite the gloomy news, he struck a positive chord.

"We view this as an opportunity for farmers to be a part of the energy solution," said Warfield, who testified before a House agriculture subcommittee.

Warfield, who serves on the executive board of the American Farm Bureau Federation, urged Congress and the Bush administration to use the corn-based fuel additive ethanol to help alleviate the nation's energy crisis while boosting farmers' incomes.

Warfield urged the Bush administration to deny California's request for a waiver of Clean Air Act regulations that ethanol supporters see as a chance for the industry to expand its markets.

Illinois is the nation's leading producer of ethanol.

California is seeking a waiver of federal regulations that require oxygen-boosting additives such as ethanol and MTBE to make
the gas less polluting. By 2003, California plans to phase out its use of MTBE, or methel tertiary butyl ether, which has contaminated water supplies.

Without the waiver, the state's refineries would have to switch to ethanol. But California officials argue there is not enough ethanol being produced to take the place of MTBE and has requested an exemption to the oxygen additive rule.