An Analysis of the Relationship Between

Energy Prices and Crop Production Costs

ExecutiveSummary   Full Study

Energy prices are a major factor in the cost of pro­duction for major crops. Growers use significant amounts of diesel fuel, gasoline, electricity and pro­pane to prepare the land, plant and care for the grow­ing crops, harvest the grain and move the products to market. But the impact of energy prices goes well beyond those direct costs, impacting prices farmers pay for many other inputs, especially fertilizers. Ris­ing prices for energy, regardless of the cause, will drive up production costs for farmers and cut into farmers profits.

The cost of pro­ducing an acre of corn would be $40 per acre higher and the increase in costs for rice would be even larg­er. The increase in total production expenses for the eight major crops considered would be around $6 billion in 2020. 

EPA suggests crude oil prices will rise by 36.6 percent and natural gas prices would be up 50 percent. This outcome for energy prices causes even bigger increases in crop produc­tion costs, pushing total production expenses up $8 billion in 2020 compared to the base case. If carbon capture and sequestration technology does not be­come available until after 2020, the increase in pro­duction expenses is near $12 billion with an $80 per acre increase in corn production costs and an in­crease of $153 per acre for rice.

The data from this study clearly shows that legisla­tion now under consideration could have significant impacts on the costs of producing major crops in the U.S. These higher costs will, at least partially, offset any economic benefits that may result from the pro­posed legislation.