Although fuel costs are up at the pump now, farmers won't feel the worst of it until 2001, if crude oil prices hold, according to an American Farm Bureau Federation economist. Terry Francl, AFBF economic policy specialist, notes that fuel and oil costs account for only 30 percent of the typical farm's energy bill, while the remaining 70 percent lies hidden in the prices of manufactured inputs, such as fertilizers and pesticides. Energy accounts for half or more of the underlying cash production costs for nearly all of the other manufactured inputs. Fortunately, this year's inventory, for all practical purposes, has already been produced.
Anhydrous ammonia is the most intense.
Just because crude oil goes up doesn't mean it's automatically factored in. However, nearly all these contracts have escalation clauses. Six or 12 months down the road, there are likely to be price adjustments. It will affect manufactured inputs at some stage. An immediate impact, however, are the increased prices farmers are paying for diesel, gasoline, and oils.