Fuel prices stack odds against East Texas ag profits

By KRISTY HEMMINGSEN | East Texas Edition

February 27, 2003 -- As recently explained in an Associated Press news story, "a possible war in Iraq, a stagnant U.S. economy, a strike affecting the Venezuelan oil market, a colder than normal winter in the Northeast ... have pushed refined oil prices higher."

The situation inevitably is creating financial stress for most U.S. citizens, but for the East Texas farmer, high fuel prices on top of an already tight agricultural economy have stacked the odds against profitable ag business.

For example, spring farming chores are under way in the region. Crop farmers are eyeing their potential 2003 fuel bills to cultivate and plant, then fertilize, harvest, and transport crops from farms to market.

Billy and Roby Watson of Leonard rely heavily on fuel year-round. The brothers farm about 3,500 acres in Fannin County, producing a variety of crops, such as soybeans, wheat, and corn.

According to Roby, fuel is a factor for almost everything they do and an elevated price simply raises their input costs so high that they are forced to do "as little as possible," such as not plow their fields as many times as they normally would.

The brothers are also in the fertilizer business and they own around 1,000 head of steer - two businesses also easily affected by high fuel prices.

"The price per a head for steers has gone down 3 cents from a few weeks ago," explained Roby in mid-February. "It's not that bad. We can still break even. But, if factors such as fuel continue to affect us, it will only get worse for us." (Fuel costs are factored in as it is used when feeding and transporting their cattle.)

And on the horizon is the time of year for fertilizer application on pastureland.

According to Ken Ragsdale, Triangle Fertilizer in Winnsboro, with high fuel prices comes a price increase for fertilizer.

"Natural gas is a key element of nitrogen production," explained Ragsdale. "And nitrogen is a major fertilizer expense for many farms."

With that in mind, Ragsdale said if the current price of natural gas doesn't decline, it will not only be a bad situation for the farmer, but for his business as well.

"When the price of fuel is high, there tends to be a decrease in the amount of fertilizer purchased, because farmers are only going to buy enough to get by," he said.

Ragsdale also has to factor in purchasing pricey diesel fuel in order to run his fertilizer trucks.

Rising propane costs are directly affecting area poultry producers, cutting into potential profits, forcing growers to look for ways to handle the steep increase, such as finding ways to reduce the quantity of propane required to heat each chicken house.

For dairy farmers, who have already been severely hit by record low milk prices, the situation certainly makes them no exception to the negativities of the elevated fuel price.

As explained by Wood County dairy producer Kyle Hayes of Quitman, who milks around 140 head of cows, fuel costs has forced him to change a few things.

Hayes said he has already altered his feed routine by incorporating at least two trips in one when possible. "I have some rented places with cows on it as far as 12 to 15 miles from the dairy; the amount of fuel it takes each day to feed my cattle really adds up."

Hayes, who also produces his own hay, says he doesn't even want to think of what the cost of hay production and hauling will cost him this summer.

The dairyman also sells Holstein bulls, and he normally delivers the bulls for free within the immediate area. "But, if the fuel price doesn't improve, I might have to start charging those customers," explained Hayes.

If there is "a light at the end of the tunnel" for area farmers, it doesn't appear to be any time soon. Some experts are predicting fuel prices to exceed $2 before long.

Rose Rougeau, spokeswoman for the AAA Texas, recently told the Associated Press, "The average price per gallon for regular, self-serve gas in Texas rose 5 cents in one day to $1.55 the next."

She said the average price on Friday, Feb. 7, was about $1.63 per gallon and has only continued to increase since then.

Currently, the price of diesel fuel seen at area gas stations has been as high as $1.70.