A swather cuts alfalfa in a field in Baker City on June 16, 2022. Farmers and ranchers say production costs, including fuel for equipment and repair parts, have risen substantially this year, largely or completely offsetting the benefits of higher crop yields due to a damp spring.
M.T. Anderson, a rancher in Izee, who, along with his wife Cori, run the High Desert Cattle Co., moves cattle in late February 2022.
Operating wheat combines and other farm equipment is much more expensive in 2022 due to inflation pushing fuel to record highs.
A swather cuts alfalfa in a field in Baker City on June 16, 2022. Farmers and ranchers say production costs, including fuel for equipment and repair parts, have risen substantially this year, largely or completely offsetting the benefits of higher crop yields due to a damp spring.
M.T. Anderson, a rancher in Izee, who, along with his wife Cori, run the High Desert Cattle Co., moves cattle in late February 2022.
Operating wheat combines and other farm equipment is much more expensive in 2022 due to inflation pushing fuel to record highs.
Frederick Phillips can tick off the items he needs to run his cattle ranch near Baker City that cost much more now than they did a year ago.
The list is a long one.
But Phillips can also explain the situation much more succinctly, with a single word.
The rampant inflation that has pushed prices higher in almost every sector of the economy — even dollar stores in some cases have added two bits to their titular price — is having a significant effect on ranchers and farmers.
The central problem, Phillips said, is fuel.
Diesel in particular, which rose to record levels, above $6 per gallon, during June.
“Everything runs off diesel,” said Phillips, whose ranch is in the Keating Valley about 20 miles east of Baker City.
And with hay to be cut, producers hardly have the option, as some drivers do, to curb their mileage.
And of course you can’t bale alfalfa with a bicycle.
“We burn a lot of fuel this time of year,” Phillips said on June 29, in the midst of the first cutting of alfalfa, which was pushed back a couple weeks due to the cool, damp spring.
M.T. Anderson, who, with his wife Cori, owns and operates the High Desert Cattle Co. in Izee southwest of John Day, concurs with Phillips’ assessment.
“We burn a lot of fuel,” Anderson said, “and it’s a huge cost.”
According to the U.S. Energy Information Administration, the average price for diesel climbed to over $5.70 a gallon in June — a 74% increase from two years earlier.
Darrin Walenta, an agronomist with the Oregon State University Extension Service in Union County, said the record high fuel prices are cutting into producers’ bottom lines.
“When we finally start seeing modest prices for the crops, cost production increases and interrupts the good year,” Walenta said.
Nathan Weishaar, owner of NW Farms in La Grande, agreed that diesel prices have become a major consideration for farmers. He said that farmers will need to consider the pros and cons of using different methods to save fuel. For example, he said, some farmers might opt to spray crops with herbicide rather than using rod weeders pushed by heavy diesel using tractors. The sprayers cover ground faster and use less fuel, but are not as thorough as the rod weeders.
“Fellow farmers are going to have to weigh the options,” Weishaar said.
When fuel prices crashed at the beginning of the pandemic, Weishaar said he bought bulk farm diesel for 83 cents a gallon. In comparison, the price of bulk diesel this spring was $3.24 per gallon, and when Weishaar received a quote at the end of June, the price had risen to $5.10.
Anderson said the rising fuel costs weigh heavily on how he and his wife are running their ranch.
“It’s one of those things where we are going to have to change how we operate,” Anderson said, “but the problem is the rest of the world is not changing; (fuel) costs just keep going up, but the price of calves aren’t.”
The calves, he said, are not worth more right now than when diesel was $2.50 or $3 a gallon.
He said fuel costs crept up steadily this past year and then exploded.
Anderson said the high fuel cost has made them more mindful of what they do at their ranch. “We don’t just jump in a diesel pickup and go 200 miles on a whim anymore.”
Anderson said the high fuel cost was one of the reasons why he decided to have a full-time employee on one of his Forest Service cattle grazing allotments this year.
While there were other reasons to have someone at the allotment full-time, eliminating the number of trips between their ranch in Izee and the allotment was one of the overriding factors.
Anderson said the steep tab for diesel has also tempered his enthusiasm about one of the best grass crops he’s seen in the past couple decades.
“(Grass) is absolutely incredible this year,” Anderson said.
He said the ample forage should boost weights for his cattle, and he’s anticipating high yields from his hay fields.
“But there is still $6 (a gallon) diesel,” Anderson said.
Fuel prices not the only challengeThe cost of refilling tanks in everything from pickup trucks to tractors to swathers is far from the only financial blow that inflation is landing on the agriculture industry this year.
Phillips pointed out that everything that he orders to operate his ranch, and everything he sends off to market, including cattle, makes the journey powered by fuel, and usually diesel.
Fuel prices, and in particular for natural gas, have direct effects on the cost of fertilizer, which uses large amounts of natural gas. U.S. natural gas prices are at a 14-year high, according to recent reporting in The Financial Times.
Mark Ward, whose family grows potatoes, wheat, peppermint and alfalfa in Baker Valley, said inflation is offsetting, or worse, the benefits from rising prices for some farm products.
“The wheat price has doubled, I hear from people,” Ward said. “But so has my fertilizer cost. So has my cost of diesel. The only thing that’s been stable is electricity. Something’s got to change on the production costs. We can’t sustain this. It makes you wonder how you can stay in business. It’s scary.”
Ward cited as an example the cost of planting and raising potatoes, a vital crop for his family’s operation.
Last year it cost $3,600 per acre.
This year it’s over $5,000.
“It’s getting when the risk is greater than the reward,” Ward said.
Fertilizer costs spikeCosts of a majority of national retail fertilizers were lower in June than May, according to prices tracked by agricultural data analysis service DTN. This was the first time since the third week of November 2020 that most fertilizers were lower.
Six fertilizers’ prices were lower than May, but none was down a substantial amount. DTN designates a move of 5% or more as significant.
Average price for urea was $979 per ton and anhydrous $1,529.
Two fertilizers were slightly more expensive in June than in May. The average price of UAN28 was $633 per ton and UAN32 $731, an all-time high.
On a price per pound of nitrogen basis, the average for urea was $1.06, anhydrous $0.93, UAN28 $1.13 and UAN32 $1.14.
It took one year, six months and 20 days for the majority of fertilizer prices finally to be lower, DTN noted.
Important fertilizers doubled from the first week of May 2021 to 2022, reported DTN. Anhydrous ammonia reached an all-time high of $1,534 per ton in April, stayed the same in May and fell slightly in June. Urea also hit a record of $1,031 per ton in April, dropped to $1,001 in May and further in June. Anhydrous was barely above $400 in September 2020, but zoomed upward more than 250% in less than two years.
Fertilizer inflation has outpaced even gasoline, diesel and natural gas price hikes. Producing nitrogen fertilizers ammonia and urea requires natural gas feedstock.
Russia and Ukraine have been among major urea-exporting countries. The U.S. was the third leading urea importer in 2019, according to Statista. It imports nearly half the urea it uses. The U.S. produced over 5.7 million metric tons in 2019, while importing almost 4.9 tonnes, for 46%, the U.N.’s Food and Agriculture Organization reported.
Transport costs escalatingInflation cuts into farm revenue at every step of the process, Ward said, including after harvest.
He said the cost of shipping wheat, for instance, which last year was about $1 per bushel, this year could reach $2 or $2.50.
“The cost of getting your crop to market is going to be huge” this year, Ward said.
Getting that crop in the ground was more expensive this year as well.
Ward said the cost to procure seed potatoes from Eastern Idaho for the previous three to four years was about $12 to $13 per hundredweight, plus $2 per hundredweight for freight, for a total of about $14 to $15.
This year the seed potatoes went for $15 per hundredweight, and the freight charge was $5 per hundredweight.
Inflation is also affecting products that are less obvious than fuel, seed potatoes and shipping costs, but are also necessary, Phillips said.
He said he uses a product, xylene, that prevents moss and algae from accumulating in irrigation ditches and blocking the water flow.
Phillips said the price of xylene has risen by 50% over the past year, from $12 per gallon to $18.
“The cost of everything has gone up,” said Todd Nash, a Wallowa County rancher and president of the Oregon Cattlemen’s Association. “It is going to be a really challenging year for guys that have cattle and raise hay with those escalating costs. Others may have to go out and purchase hay.”
Hay and grain prices have seen an increase, but Nash said cattle prices have not enjoyed the same bump. He said many ranchers have already been running as lean as they can for several years and are making tough choices on their feed for their most productive cattle.
Nash said one solution is to try to extend grazing season, but that can be a challenge in Wallowa County and other areas where snow can arrive early in the fall at higher elevations.
Commodity prices can help ease producers’ concernsDespite high prices for fuel, fertilizer and other petroleum products, though, some local farmers and ranchers remain cautiously optimistic.
“As long as wheat prices stay up, I’m OK with high inputs,” said Tim Leber, a wheat and cattle rancher from Umapine. “Where I get nervous is if wheat crashes, while we’re stuck with high inputs, as happened in 2008 to 2010.”
In 2008, soft white wheat prices were almost as high as 2022. The recent surge is still holding up. Soft white wheat at Portland averaged $11.21 per bushel on June 22, up from $8.50 a year earlier.
Wheat pulled back from its May high nationally, however. Wheat futures peaked at $13.49 at the Chicago Mercantile Exchange on May 17, then fell to $9.51 on June 24, by which time harvest had begun in Kansas.
During the pandemic, live cattle prices crashed from $1.27 per pound on the CME on Jan. 6, 2020, to 86 cents on April 20. They then climbed to $1.44 on April 18, 2022, before pulling back to $1.32 on May 23. They reached $1.38 on June 13, but fell to $1.36 on the 22nd. The price of livestock feed of course has gone up with grain.
Leber top-dressed fertilizer on his fields this year, to take advantage of the spring rains. A further jump in wheat price as India banned export of the staple cereal, due to its heat wave, helped.
Leber noted that major wheat exporter Ukraine is managing to plant, despite the war.
“Even with the ports closed, they’ll find a way to get it out,” he predicted.
Still, looking ahead to his likely fertilizer bill in the fall is worrisome.
“We’re paying 50 cents per pound more than last fall, but that’s as of now,” he said during an interview in May. “Fertilizer could keep going up.”
Supply chain challengesProduction costs isn’t the only thing plaguing farmers and ranchers this year.
Equipment breaking is a part of their everyday life, but the supply chain issues that began with the pandemic are still evident. Getting needed parts to fix breaks is no guarantee and neither is obtaining new equipment.
“I talked to a guy that ordered a new tractor and he has been waiting a year and a half for it,” Nash said. “They are telling him it could be another half of a year before he gets the tractor.”
Mark Butterfield, chairman of the Wallowa County Hay Growers, pre-buys his fuel and fertilizer so he has avoided a significant economic sting, but said it was still expensive.
Butterfield grows alfalfa, timothy grass and wheat and knows that one of his biggest costs will be transporting his product to Boardman before it is sent to Japan.
Butterfield said he has been able to get the parts he needs — particularly for the baler — to keep his operation running, but he knows that will only last so long.
“We have all learned to pre-buy and keep our parts shelves filled,” he said. “Eventually we will have to refill them.”
It’s not only parts that are in short supply, said Clair Pickard, a cattle rancher in Keating Valley east of Baker City.
Finding someone to install those parts — or figure out a way to get a busted machine running again — can be a fruitless search, he said.
“We don’t have any mechanics to work on this equipment,” Pickard said.
Walenta said shipments of supplies and parts that used to take a few days to arrive are now taking weeks or months to get to farms and ranches.
Some companies are now adding a gas surcharge to the bill, which is an additional cost that farmers and ranchers have to absorb, he said.
Weishaar said he is keeping more parts on hand than usual because of shipment times.
Weishaar said many farm equipment manufacturers are back ordered and new equipment models orders being placed now will not be ready until 2023 or 2024. This means farmers are having to make big financial decisions based on the current crop prices, which could easily change by the time the equipment is available.
“For my chemical needs, I try to plan six months in advance,” Weishaar said. “I’m buying more than I need, rearranging things to store everything. You could almost say I’m hoarding at this point,” he said with a laugh.
“I know it’s cliche, but it’s been the perfect storm,” Walenta said.
Don Wysocki, local Oregon State University Extension soil scientist, said equipment maintenance this past winter was more difficult than usual due the supply chain problems.
“Parts are a problem,” Wysocki said. “Combine repair needed to be done early, before the Midwest soaked up all the spare parts. Distribution and freight cost more, even when supplies are available.”
Older producers have gone through tough times and know how to tighten their belts, he said, but this might be the first time younger farmers have faced challenges like this.
“Inflation might affect interest rates. If you need to borrow capital to buy land, or for an operating loan, it could cost you more, or you’re simply priced out,” he said.
Kevin Scheibner, 51, who grows wheat and runs a cow-calf operation in upper Wildhorse Creek near Athena, echoed Wysocki’s comments on the effects of inflation.
“Seed costs and any petroleum-based products have gone through the roof,” Scheibner said. “But we make adjustments and carry on. American farmers face whatever the world throws at us, and keep moving forward.”
High petroleum prices slam local fruit growers“Orchardists and fruit growers power their wind machines with propane,” said Roger Lemstrom of Los Rocosos Vineyards in Milton-Freewater’s Rocks District. Besides using these giant fans for warming, they still use old-fashioned smudge pots fueled by diesel, he noted.
It’s not just pain at the pump for local farmers and orchardists. High prices for other petroleum products such as agricultural chemicals also squeeze growers’ profits.
“(Inflation) differs by region,” said Corey Coad, president of agricultural supplies at Orchard & Vineyard Supply, with locations in four states. He’s based in McMinnville, but is familiar with OVS’ business in Milton-Freewater.
“In some areas, fertilizer prices have shot up by 500%,” he said in late May. “In the Pacific Northwest, it’s 50% to 150%. For pesticides, it’s 175% since January of 2021.”
Coad explained the problem isn’t just with supply and demand for hydrocarbons. Shipping containers are in short supply as a result of pandemic-induced interruptions to international trade. Many active ingredients in agricultural chemicals come from overseas.
Crop nutrient prices also rose as a result of sanctions on supplier Belarus, curbs on Chinese fertilizer exports and sanctions on Russia, a big provider to Brazil, according to Reuters in May.
The cost increases, combined with fuel, lubricant and other agricultural chemical cost hikes, mean farmers may have trouble turning a profit even with higher crop prices. Ukraine is a major wheat exporter, so war on the Black Sea has naturally boosted grain prices.
Midwest farmers have adapted by planting more nitrogen-fixing soybeans and less corn, but enduring drought reduces yields for all crops. Northeast Oregon farmers and ranchers have fewer options, with the market for peas so much lower than in previous decades. Canola is not a legume.
Wysocki said one option is to grow a nitrogen-fixing cover crop, such as peas. The crop is terminated before its water use threatens grain yield, but still adds some nitrogen to the soil. Cover crops can be planted in the fall or spring, but it’s always a risk in the fall, since producers can’t know how wet the winter will be.
Management practices also can make less fertilizer go farther, such as split applications. Again, growers don’t know how much moisture to expect, so Wysocki recommended applying an average amount in the fall, then top dressing in the spring. With a wet winter and spring, such as this year, farmers can get more crop growth per fertilizer buck by applying when it’s most needed.
Costlier application methods can save on fertilizer. Liquid solutions applied with pesticides in the spring make both agricultural chemicals more efficacious.
“Producers might want to consider whether to bale their straw or not, now that the value of nitrogen has gone up,” Wysocki said.
Wysocki also said the war affected both supply and Black Sea shipping, so he didn’t see change coming abruptly.
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According to the USDA’s National Agricultural Statistics Service, farmers in
April 2022 compared to April 2021 paid:
“We burn a lot of fuel, and it’s a huge cost.”
— M.T. Anderson, Grant County cattle rancher
"Something’s got to change on the production costs. We can’t sustain this. It makes you wonder how you can stay in business. It’s scary.”
— Mark Ward, Baker Valley farmer
“It is going to be a really challenging year for guys that have cattle and raise hay with those escalating costs."
— Todd Nash, Wallowa County rancher and president of the Oregon Cattlemen's Association
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