Ukraine invasion may bring more fuel spikes for farmers

Already facing sticker shock on materials and services they need to farm, California farmers are now bracing for further spikes to fuel and other energy costs as Russia’s invasion of Ukraine pushes crude oil prices higher.

Some economists predict the conflict and resulting sanctions aimed at hurting the Russian economy will affect all petroleum-based products, including diesel fuel and fertilizers key to farming. The price increases come as California farmers rev up tractors and other implements for spring planting.

“It’s just crazy the amount of cost that it’s coming out to be,” said Kings County farmer Brian Medeiros.

Diesel and gasoline account for about 10% to 15% of his production costs. Because the weather has been so dry, Medeiros said, his pumps and irrigation equipment are what’s consuming the most fuel right now.

Medeiros noted that he already finished two irrigations on his wheat crop and will need to do another this week. He’s also doing a lot more preplant irrigation, to establish enough moisture in the soil to help sustain crops in the summer.

To take advantage of the cooler weather and higher water table this time of year, he’s preparing fields for his summer crops weeks earlier, because there’s more water coming out of his wells. All this work requires pickups, quads and gators to move people around to check sprinklers and fields.

Transportation alone, Medeiros said, has already consumed half his fuel budget for the year. With higher prices and increased use, he’s now spending $125 an hour on diesel versus $50.

Medeiros said he has some fuel storage on the farm and tries to fill up before refineries make the annual switch to producing the more expensive summer-blend fuel. That’s usually a 50- to 60-cents-per-gallon savings.

“It’s just unfortunate that we didn’t do it before the whole Russia thing started, because now we’re already seeing that increased price,” he said.

As a fruit grower, packer and shipper in Tulare County, Doug Phillips’ energy bill stretches from the field to the packinghouse, where cold storage remains “a big electricity user.”

In addition to running tractors and pickups on the farm, his greenhouse consumes “a lot of propane,” which he said has “gone sky high.” To protect his crops from freezing temperatures late last month, he had to run wind machines that also use propane.

The higher price of diesel has shown up in the cost of his trucking, whether it’s hauling bins of fruit from the field to the packinghouse or moving packed fruit to national markets. Ocean vessels to ship fruit overseas also run on diesel, he noted, and those costs had already skyrocketed due to container shortages, port congestion and general supply-chain issues.

On the import side, Phillips said he’s seen “crazy prices” to ship everything from packaging materials to shade nets used in the orchard.

“Everything’s going up, and it’s not transitory,” he said. “We’re in for a rough ride going forward.”

To be more fuel efficient, he said he’s bought new vehicles, including pickups that run on diesel. Because he grows permanent crops, he noted his farm already is “pretty much non-tillage,” though orchard prunings still need shredding, and his trees and vines need spraying, all of which require diesel-running tractors and equipment.

“We’re not going to cut back on what we need to get done,” he said.

To save water, Phillips said he’s using more modern soil-moisture sensors, which allow him to run his irrigation pumps in shorter durations, and that in turn also saves energy.

Lee McCorkle, who farms rice and olives in Glenn County and operates a trucking business, said he’s able to pass on the higher fuel cost in the form of surcharges to his trucking customers, but he can’t do that in his farming business. During the busy planting and harvest seasons, he said his fleet of trucks will consume a storage tank holding 12,000 gallons of fuel in about a week.

On the farm, McCorkle said there aren’t too many areas where he could cut fuel use without negative consequences, pointing out that farmers already “are trying to be as conservative as they can.”

With water shortages this year, he said he thinks there won’t be as many planted acres, which will mean farmers won’t be using as much fuel.

Del Norte County nursery operator Rob Miller said there is “very little” he can do in his greenhouse and field operations to change his fuel consumption. He specializes in production of Easter lily bulbs and hydrangeas.

“The problem is you also have no ability to alter pricing or put on some sort of a fuel surcharge on the product that you sell, and so you eat it,” he said.

He noted how rates to truck lily bulbs to the East Coast have jumped from $7,000 to $17,000, and “there’s nothing you can do about it.” He said he could raise his prices “a minimal amount,” but they don’t begin to cover the increased costs to his production, a big chunk of which has been in labor due to changes in the state overtime rules.

If he raises his prices too much, he said, “I won’t get any orders,” and farmers who grow his plants will just switch to a different crop.

Riverside County farmer Grant Chaffin echoed the same concerns. In addition to growing his own crops, he runs custom-farming operations for other farmers. Though he can charge more for his services, including adding a fuel surcharge, he said he “can’t get too aggressive in increasing our prices, because then people won’t use us.”

Chaffin said he also can’t pass on any increased costs to crops he’s growing on contract, including his onions, garlic and potatoes, because those contracts are already set.

He said he does look for efficiencies on the farm, such as by reducing the number of trips his tractor makes through the field. This could be done with a multi-task implement. But that would require a bigger, more expensive tractor that burns more fuel, he added.

With the price of fertilizer continuing to climb, Chaffin said he was able to hedge some of those costs last fall by prebuying enough supply to get him through the season.

“If we get close to the end of 2022 and there hasn’t been some relief in these fertilizer prices, then I’m going to be in a pinch,” he said.

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