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US: Rising Energy Costs Straining Farmers

Washington DC - The U.S. Agriculture Department's chief economist, Keith Collins, said rising energy and fertilizer costs could add $1 billion to U.S. crop production costs.

From Vermont to the rich fields of Central Valley California, farmers across America are growing concerned over the rising costs of energy and fertilizer.

Anhydrous ammonia, a nitrogen fertilizer used on almost all US corn fields, cost $379 a ton in April. That was up from $373 one year earlier and $250 in April 2002.

According to the USDA, the average cost of fuel paid by farmers in April was $1.76 a gallon for gasoline, up 16 cents from the previous year and $1.31 for diesel, a 7 cent increase over 2003 prices.

In Texas, farmers are facing 30% inflation in the Panhandle and irrigation costs are even higher.

Higher fuel and fertilizer costs are a major factor contributing to fears of lower farm incomes next year.

Food staples have already been on the rise on grocers shelves.

The Bureau of Labor Statistics, which publishes the consumer price index, said beef prices in March were 12.8% higher than a year earlier, and the price of eggs reached a 10-year high, averaging $1.65 a dozen in stores.

"If high oil prices do not abate, businesses and families will have to make adjustments. We don't see an end to it," said House Agriculture Committee Chairman Bob Goodlatte.

Grocers, like Safeway (NYSE: SWY) and Albertsons (NYSE: ABS), still recovering from the "California Grocers Strike", face higher costs too which inevitably will be passed along to consumers.

Sanderson Farms (NASDAQ: SAFM), which rose more than 5 percent following news of increased earnings, said market prices for all poultry products rose 15 percent during the second quarter, though the prices for corn and soybean meal, Sanderson's primary feed ingredients, increased 21 percent and 56 percent, respectively, during the same period.

Many farmers are looking for alternative ways to lower their fertilizer costs but are slow to adapt to newer technologies and products. But with pressure mounting on their bottom lines, California vegetable and fruit growers are beginning to use fertilizers that can be applied through irrigation systems without choking their lines with built up residues. Compounding that is California's stringent prop 65 environmental requirements, limiting their choices.

Also published on World Energy News

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