March 31, 2011

How Will Energy Price Increases Affect Your Costs?

Note:  The fuel prices used in these tables may differ from those in the 2011 Nebraska Crop Budgets, which was revised April 1.  Use your fuel costs to calculate actual costs.

Gasoline and diesel prices have been climbing since the gulf oil spill and now are higher still due to the unrest in the Middle East. In managing your farm operation, you’ll want to consider what effect these increases will have on your overall production costs, particularly for farm machinery and specific practices.  From 2009 to 2010 diesel fuel costs per gallon increased 26% from $1.92 to $2.42. 

To answer this question, first estimate fuel consumption for farm operations. If you routinely track fuel use for various tractors and combines while performing farming operations, you probably already have this information you need. Simply multiply your historical fuel consumption by the former price per gallon and the current price and compare the results.

Most folks don’t track fuel consumption by field operation and need a research-based fuel use estimate to compute the effect a rise in price will have on overall production costs. A good reference for this is the Minnesota Farm Machinery Economic Cost Estimates See footnote for website information.

Using the fuel consumption estimates presented in the Minnesota publication, the fuel consumption estimate per hour for power units is presented in Table 1 and the estimate of fuel consumption per acre for field operations is presented in Table 2. Note: implements that have a wider swath require more horsepower overall but the horsepower hours per acre, and therefore the fuel consumption per acre, remain unchanged.

Tom Dorn
Extension Educator, Lancaster County