Energy Costs and Agriculture

Congressional research reportApr 24, 2001

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Order Code RL30943

CRS Report for Congress

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Energy Costs and Agriculture

April 24, 2001

Jerry Heykoop

Agricultural Policy Analyst

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Energy Costs and Agriculture

Summary

U.S. agriculture is not an especially energy-intensive industry, but energy does

account for about 6% of farm production costs. (Mining, including oil and gas

extraction, has energy expenses of about 10%, while all manufacturing is at about 2%

— see 1997 Economic Census, and 1999 Annual Survey of Manufactures. U.S.

Census Bureau). Additionally, farming is a highly mechanized industry and requires

timely energy supplies at particular stages of the production cycle in order to achieve

optimum yields. A substantial part of energy use by agriculture is indirect

—embodied in the chemicals applied and machinery used on farms.

Although there are many kinds of farm operations performed in the different

types of farms, nearly all apply technologies that use either a petroleum product or

electricity. Recently, dramatically higher natural gas prices have increased farm

energy costs directly, and indirectly through farmers’ use of fertilizer. Nevertheless,

the relative contributions of energy types vary distinctly, if not dramatically, by type

of farm and product.

The impact of possible oil and/or electricity price rises is potentially greater on

agriculture (especially for field crop production) than on most other sectors, given the

dependence by farming upon petroleum and electricity, and limited scope for fuel

switching. It is to be expected that farmers will, as they have in the past, reduce

energy use to ease the cost impact of price rises. A sustained increase in energy prices

could have an impact on consumer food prices as higher costs are passed on through

the food production/processing industry.

Continued low commodity prices in the farm economy exacerbate the problem

of higher energy costs. In response, legislation has been introduced in Congress to

assist farmers and other industries in dealing with increased energy costs, including

emergency loans and encouraging alternative energy sources.

Contents

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Fertilizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Current Fertilizer Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Farm Income Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Options for Farmers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Food Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

S. 60 (Byrd) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

H.R. 301, H.R. 302 (Shows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

H.R. 396 (Pickering) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

H.R. 478, H.R. 479, H.R. 480 (Shows) . . . . . . . . . . . . . . . . . . . . . . 11

S. 295 (Kerry) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

H.R. 1010 (Tom Udall) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

S. 568 (Sessions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

List of Figures

Figure 1: Natural Gas Prices: Recent Prices and 1998-99 Typical Range . . . . . 2

Figure 2: Ammonia Production Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Figure 3: Ammonia Production Costs at Increasing Natural Gas Prices . . . . . . . 4

Figure 4: Nitrogen Fertilizer Use Among Various Crops . . . . . . . . . . . . . . . . . . 6

Figure 5: Distribution of a Dollar Spent on Food, 1999 . . . . . . . . . . . . . . . . . . 10

List of Tables

Table 1: Index of Prices Paid for Fertilizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Table 2: Nitrogen Fertilizer Available: Percent of Normal Supply . . . . . . . . . . . 7

Table 3: Index of Prices Paid for Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Energy Costs and Agriculture

Background

There is concern that a sustained rise in energy prices may have serious

consequences on energy-intensive industries. Agriculture, like many other sectors,

requires energy as an important input to production. Farming accounts for only 2-3%

of all energy consumption in the United States. (Manufacturing accounts for about

25%, transportation 13%, and mining 2%.)1 However, farming is a highly

mechanized enterprise and requires timely energy supplies at particular stages of the

production cycle in order to achieve optimum yields.

Natural gas prices, particularly, have had financial consequences for agriculture,

with the surge in prices beginning in 2000. On-farm agricultural production requires

the consumption of natural gas (used primarily for irrigation and crop drying) and

electricity. Animal agriculture is affected, with poultry farmers being hit hard with

higher heating costs for their poultry houses. In addition to the direct consumption

of energy on the farm, substantial amounts of energy also are used off the farm to

manufacture two major inputs to production: fertilizer and pesticides. Virtually all

nitrogenous fertilizers used in the United States require natural gas as a production

input, and most pesticides have a petroleum base. Fertilizer production uses

approximately 3% of all natural gas consumed in the United States, and represents a

significant portion of total energy consumed by the farm sector.

Since a large portion of on-farm energy use is for the operation of machinery

used in crop production, agricultural energy consumption tends to vary according to

the level of planted acreage. The impacts of higher energy costs vary widely from

farm to farm:

! Some farmers irrigate from more costly deep wells, others from less costly

shallow wells.

! Some burn a lot of fuel by cultivating often to rid fields of weeds, others make

one herbicide application. Relatedly, some farmers makes several passes over

the land for tilling and planting, while others use no-till during planting.

! Some locked in relatively low prices by contracting early for fuel and fertilizer,

others gambled and hoped prices would drop.

Among farmers, higher energy prices will have greater impacts where irrigationrelated energy inputs are required (i.e., corn, wheat, and cotton in the Plains States).

Rising energy prices likely will have a less severe effect on most specialty crops (sugar

Analysis of data from the Census of Manufactures, U.S. Census Bureau; and Monthly

Energy Review, Energy Information Administration, U.S. Department of Energy.

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beets, peanuts, and tobacco) than on other major field crops because energy inputs

comprise a smaller portion of operating costs. Among specialty crops, costs of

producing flue-cured tobacco will be most affected because of natural gas costs for

curing the tobacco. According to the U.S. Department of Agriculture’s (USDA)

Economic Research Service (ERS), 1999 energy related expenses for field crops

comprised 24% to 31% of total variable costs. For producers of fruits and nuts,

vegetables, and nursery and greenhouse products, the range was 10% to 15%, while

the range was 9% to 18% for livestock producers. Fertilizer accounted for 64% of

energy expenses, fuels (gasoline, diesel, natural gas, LP gas) 25%, and electricity

11%, for all farm energy-related expenses.2

Natural Gas3

Higher energy costs are reflected especially in natural gas prices, which have

increased several fold over the last year (Figure 1). Prices have come down from their

highs earlier in the year, but remain well above previous year levels and the effects are

being felt by farmers. Increased natural gas prices raise the cost of production aspects

that use natural gas such as for irrigation pumps, crop drying, and heating costs.

Figure 1: Natural Gas Prices: Recent Prices and 1998-99 Typical Range.

Source: Energy Information Administration (Financial Times Energy, Gas Daily).

Economic Research Service, U.S. Department of Agriculture. Staff analysis. February 13,

2001.

For a further discussion on natural gas, please see CRS Report RL30815, Natural Gas

Prices: Overview of Market Factors and Policy Options.

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Fertilizer

The production process of fertilizer involves a catalytic reaction between

elemental nitrogen derived from the air, with hydrogen derived from natural gas

(Figure 2). Anhydrous ammonia is used directly as a commercial fertilizer and also

is used as the basic building block for most other forms of nitrogen fertilizers, with

natural gas used as a process gas in the manufacture of other fertilizers from

anhydrous ammonia. Anhydrous ammonia also is used in non-agricultural industries

such as adhesives, plastics, resins, and rubber.

Figure 2: Ammonia Production Process.

CH4

(Natural

gas)

(Nitrogen)

NH3

(Anhydrous

Ammonia)

CO2

(Carbon

Dioxide)

Urea

Urea Ammonium Nitrate Solutions

Ammonium Nitrate

Ammonium Phosphates

The rise in natural gas prices has had a severe impact on both the profitability

and operating rate of the U.S. fertilizer industry. By the end of 2000, high natural gas

prices had forced up fertilizer production costs to the point where fertilizer producers

could not cover production costs, according to industry sources. Natural gas makes

up 75-90% of the cost of production for nitrogen fertilizer. One ton of ammonia

requires 34 million British Thermal Units (Mmbtu) of natural gas. At a natural gas

price of $2.19 Mmbtu (the average price during 1999), production costs for a typical

producer are approximately $100 per ton, with gas being about 75% of the cost of

production. At $4.50 Mmbtu, cash costs are $180, with 84% for natural gas. Figure

3 shows the rise in production costs for ammonia as the natural gas price increases.

In early 2000, with natural gas prices at $2.37 Mmbtu, anhydrous ammonia prices

were $105 per ton. When natural gas prices increased to $9.90 in January 2001,

anhydrous prices rose to $360.

With the increased production costs due to higher natural gas prices, producers

were forced to cut back on fertilizer production. Of the 19 million tons of total

nitrogen capacity in the United States, approximately 7.5 million tons were idled in

January 2001, with the remaining capacity operating at reduced levels. As a result,

the industry operated at 54% of capacity, compared with 95% average over the last

10 years. During the summer of 2000, 24% of U.S. nitrogen capacity was closed

because of high natural gas prices. For the first half of FY01, U.S. nitrogen

production is down 13% from year-earlier levels, and approximately 25% below the

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average level for the 1997-99 period. According to The Fertilizer Institute4, July

2000-January 2001 production of ammonia was 20% lower than that of one year

earlier. For the month of January 2001, production of anhydrous ammonia was 48%

less than January 2000 production. Nitrogen inventories were down 18% in January

2001 compared to January 2000.

Figure 3: Ammonia Production Costs at Increasing Natural Gas Prices.

$396

$400

$363

Production Cost per Ton of Ammonia

$329

$296

$300

$262

$229

$195

$200

$162

$128

$100

$101

$2.19

$3.00

$4.00

$5.00

$6.00

$7.00

Natural Gas Prices ($/Mmbtu)

$8.00

$9.00

$10.00

$11.00

Source: The Fertilizer Institute.

In the March Index of Prices Paid by Farmers (Table 1), the Fertilizer Index was

at 144, up 3.6% from

Table 1: Index of Prices Paid for Fertilizer (1990-92 = 100)

February (139) and 36%

more than March 2000

Feb 00

Mar 00

Jan 01

Feb 01

Mar 01

(105). Prices were higher

Fertilizer

106

134

139

144

for nitrogen fertilizers,

Mixed

108

112

113

114

mixed fertilizers, and

Nitrogen

101

103

168

177

186

potash and phosphate

materials. The price index

K&P

116

109

107

109

112

for nitrogen fertilizers,

Source: National Agricultural Statistics Service, USDA. Monthly. Agricultural

particularly, was 75%

Prices.

higher in February 2001,

and almost 81% higher in

March 2001, than respective year earlier levels. For the year 2001, the nitrogen price

index rose 5% in February, and an additional 5% in March.

In some areas of the country, farmers were expected to pay up to 60% more for

fertilizer than a year ago, with prices for nitrogen fertilizers having risen from $87 per

ton to $140. Since November 2000, liquid nitrogen had nearly doubled from $80-100

The Fertilizer Institute (TFI) represents by voluntary membership, producers,

manufacturers, retailers, trading firms, and equipment manufacturers of the fertilizer

industry.

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per ton to nearly $200 by February 2001. Reported ammonia prices delivered to

Midwest dealers rose from $160 per ton in January 2000, up to $240 in July, and

$350 in December. Prices have changed from $160-195 per ton a year ago to $260400 per ton earlier this year (2001).

Natural gas also is used as a process gas when upgrading anhydrous ammonia

to urea. Producing a ton of urea requires 0.58 ton of ammonia and approximately 4.2

Mmbtu of natural gas for processing. Therefore, at $2 Mmbtu gas, production costs

are $80 per ton of urea. At $9 Mmbtu, production costs are over $210. Urea prices

also have shown a tremendous increase. According to various accounts in

newspapers and farming magazines, in 2000, prices ranged from $110-185 per ton,

and have been $220-270 this year.

Domestic producers account for 75-80% of total ammonia supply, 70-75% of

urea, and 95% of urea ammonium nitrate (UAN). Because most of the U.S. fertilizer

demand has been met by domestic production, some have said it will be difficult for

imports to fulfill current demand. A key limitation for imports is infrastructure.

Historically, virtually all the direct application ammonia market has been supplied by

U.S. production with some additional supplies from Canada, while offshore imports

have been used mostly for ammonium phosphate production and in the industrial

market. Consequently, the infrastructure to offload ammonia and move it to the

primary direct application markets is extremely limited, according to industry experts.

The current infrastructure for offloading, storing, and transporting, thus, could create

a practical limitation on the amount of imported fertilizer that can be transported to

farmers.

In addition to delivery delays, farmers face the likelihood of receiving less total

fertilizer nitrogen than they would like to purchase. Additionally, fertilizer nitrogen

may be available only in an unfamiliar form or one they are not optimally equipped to

use.

There are many factors that impact fertilizer use, but application rates and

planted acreage are the most important. Because application rates typically do not

change a lot from year to year, most changes in nutrient use can be predicted from

changes in crop acreage —especially corn acreage.5 Figure 4 shows rates of nitrogen

fertilizer use for various crops. Nitrogen rates typically are much higher for fruits and

vegetables than for field crops. However, due to planted acreage, total nitrogen use

is greatest for corn, as shown. Therefore, much of the recent context of the fertilizer

discussion has been relative to corn plantings and whether corn acreage in the United

States would decrease if producers switched to alternative crops with lower energy

costs.

Energy-input costs per acre for cotton production are nearly as high as those for

corn ($57 vs. $62), but comprise a much smaller proportion of total operating costs

The Fertilizer Institute, at the annual meeting of the Kentucky Fertilizer and Agricultural

Chemical Association. November 8, 2000. (The Fertilizer Institute represents by voluntary

membership producers, manufacturers, retailers, trading firms, and equipment manufacturers

of the U.S. fertilizer industry.)

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(23% vs. 40%), according to the ERS. Reducing fertilizer and energy costs may

provide an incentive to switch crop acreage from feed grains and wheat, to soybeans

or cotton, which have lower energy costs. This could be an unappealing prospect for

traditional growers of soybeans and cotton, who already are suffering the impact of

low prices and surplus production.

Figure 4: Nitrogen Fertilizer Use Among Various Crops.

Nitrogen Fertilizer Rates by Crop

Total Nitrogen Fertilizer Use by Crop

Soybean

Wheat

Cotton

Corn

Almonds

Orange

Grapes

Potato

Tomato

Lettuce

100

150

Rate (pounds per acre)

200

250 0

1,000

2,000

3,000

Thousand Tons

4,000

5,000

Source: National Agricultural Statistics Service, USDA, data as compiled by The Fertilizer

Institute.

There have been reports in the press about farmers switching crops (e.g.,

sorghum and sunflowers instead of corn) in order to reduce irrigation needs. Corn

and soybeans typically are grown in rotation (alternate yearly between planting corn

and soybeans) and growing soybeans in consecutive years likely will reduce soybean

yields and increase risk of disease. Additionally, reduced corn production and

increased soybean production will raise corn prices and lower soybean prices.

Therefore, most reports believe it is unlikely that a significant number of acres will be

switched from corn to soybeans.

Current Fertilizer Situation

The supply situation for nitrogen fertilizers has improved significantly since the

beginning of the year, according to industry reports. As a result of easing in natural

gas prices, a large portion of the capacity that had been idled is back on-stream. As

of the end of March 2001, nitrogen fertilizer availability for the United States was

92% of normal levels (Table 2). Nevertheless, some western states still are 10-15%

below normal levels.

For the period July 2000 - January 2001, U.S. nitrogen imports increased by 28

percent over the same period July 1999 - January 2000. Nitrogen imports into the

U.S. are likely to hit record levels this year, according to The Fertilizer Institute.

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Ta ble 2: Nitrogen Fertilizer Available: Percent of Normal Supply

State

% of

Normal

% of

Normal

State

% of

Normal

State

% of

Normal

State

% of

Normal

100

State

Source : “Weekly Weather and Crop Bulletin.” April 3, 2001. National Agricultural Statistics

S ervice, U.S. Department of Agriculture.

Data for the month of January 2001, show anhydrous ammonia imports up 74%

over January 2000. For the period covering July 2000 – January 2001, ammonia

imports are up 22% over the previous year. According to The Fertilizer Institute,

these figures are understated since they do not include data on imports of ammonia

from Russia and the Ukraine, which are not available from the Commerce

Department. It is estimated that annual U.S. imports from these two countries range

from 750,000 to 1.2 million tons.

There remains concern the California energy crisis will contribute to increase in

fuel and fertilizer costs for farmers. The state’s recent electricity shortage has been

blamed for boosting the price of natural gas, a fuel for many California power plants.

Farm Income Effects

According to USDA’s Economic Research Service (ERS), as of January 2001,

net farm income for 2001 is forecast at $41.3 billion, which compares to $45.4 billion

in 2000. Average net farm income for 1990-2000 was $45.3 billion. According to

ERS, the lower 2001 forecast hinges on an assumption that government payments will

be approximately $8 billion less in 2001 than in 2000. Government payment

assumptions are the main reason for a decline in the farm income forecast, since the

value of commodity receipts is on an upward trend. Government payments were a

record $22.1 billion in 2000, up $1.5 billion from 1999. Additional emergency farm

assistance accounted for $8.9 billion of total government payments in 2000. In 2001,

emergency assistance is limited to the payments for which farmers remain eligible

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under the legislation enacted in 2000, and is forecast to be $3.6 billion, as of this

writing.

According to ERS, total commodity production expenses are forecast to rise

$1.0 billion in 2001 (1% above 2000), topping $200 billion for the first time. Even

though planted acreage is expected to fall, fertilizer expenses should increase 3-4%

due to the impact of significantly higher production costs for nitrogen fertilizer.

Petroleum is one of the main inputs in pesticide products, but pesticide expenses are

forecast up less than 2%. Factors other than petroleum account for a larger share of

pesticide production costs, so pesticide expenses are not expected to increase as much

as fertilizer expenses.

Energy costs for agriculture will rise slightly in 2001, according to ERS

projections made in January 2001. This assumes fuel expenses will be similar to 2000,

as the recent price increases fall off toward the end of the year. As shown in Table

3, the Fuels Index during March 2001, was at 140, down 2.1% from February 2001,

but up 4.5% from

March

2000.

Table 3: Index of Prices Paid for Fuel (1990-92 = 100)

Compared

Feb 00

Mar 00

Jan 01

Feb 01

Mar 01

February 2001, prices

Fuels

125

134

143

140

were lower for diesel

fuel and gasoline, but

Diesel

127

133

141

137

129

% higher for

Gasoline

125

137

134

135

132

liquefied petroleum

LP Gas

117

136

172

188

205

(LP) gas during

March 2001. In 2000,

Source: National Agricultural Statistics Service, USDA. Monthly. Agricultural Prices.

expenditures for fuels

increased by $2.3

billion over 1999, which was the highest year-to-year jump since 1980, when they

rose by almost the exact same dollar amount. The highest percent increase occurred

in 1974, when fuel costs soared 43%.

Incentives for farm operators to seek cost saving practices, such as adopting

fuel-saving cultivation and other production processes, are likely to offset some of the

recent rise in production expenses. Farmers across the nation used conservation

tillage (no-till, ridge till, and mulch-till) on more than 109 million acres of farmland

in 2000, over 36% of U.S. planted cropland area, up from 26% in 1990. Expansion

of no-till accounts for most of the growth in conservation tillage in the last decade.

In 2000, no-till was used on over 52 million acres of 297 million cropland acres

planted (17.5%) a threefold increase in no-till acreage since 1990.6 Conservation

tillage requires fewer trips across the field and generally less horsepower for field

operations. The outlook for increased use of conservation tillage adoption for the

2001 growing season likely will be positively influenced by a combination of low

commodity prices and higher input costs, especially for diesel fuel. This will

encourage farmers to seek potential cost-savings from conservation tillage without

sacrificing yield, according to ERS.

“Conservation Tillage Firmly Planted in U.S. Agriculture.” Agricultural Outlook March

2001. Economic Research Service, U.S. Department of Agriculture.

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If fuel supplies were disrupted due to unforeseen circumstances, expenditures for

fuels could rise above current levels, according to ERS. California farmers, who are

heavy users of electricity, currently are considering alternative fuel sources and

energy-conserving practices to offset the rising costs of electricity. Farmers in other

parts of the country, who are dependent on natural gas, LP gas, and propane also are

evaluating alternatives.

Because individual farmers are “price-takers” and lack the capability to quickly

pass on higher costs through the food marketing chain, net farm income likely would

be reduced in the short term by the equivalent amount of any rise in production

expenses. Moreover, nearly half of all nitrogen fertilizers consumed in the United

States are produced and marketed by farmer-owned co-ops. Thus, losses to this

sector are likely to have impacts on farmers invested in co-ops.

Options for Farmers

It seems likely that farmers will reduce fertilizer application rates, with a resulting

reduction in crop yield. The current fertilizer situation makes it more critical that

fertilizer management be geared toward achieving maximum efficiency. Options

available to farmers include soil tests, realistic yield goals, and applying fertilizer later

in the growing season.

Farmers also can alter their production mix and switch to different crops to

reduce fertilizer/energy costs. One of the principal reasons for USDA’s prediction

that soybean acreage is likely to increase in 2001, while corn acreage decreases is that

soybeans use less nitrogen-based fertilizer than does corn. Soybeans fix their own

nitrogen from the air, so require very little fertilizer. Therefore, farmers may switch

from corn to soybeans. In order to reduce irrigation costs, farmers may switch from

corn to cotton, sorghum, or sunflowers, for example, which require less water.

Another option for farmers is switching to a different form of nitrogen fertilizer.

Using urea, for example, instead of anhydrous ammonia, might be an option because

urea prices have not risen as much.

Some have suggested current fertilizer prices offer an increased incentive to use

animal waste such as poultry litter or hog waste as fertilizing agents, although this

approach has some limitations. Approximately 15 truckloads of poultry litter are

needed to achieve the same nitrogen level as one truckload of commercial fertilizer.

Moreover, hog waste typically is in liquid form, and might only be practical where it

can be piped in. Environmental concerns (including manure odor) also might

accompany large scale uses of these alternatives. However, in some parts of the

country where animal waste is produced in amounts that exceed available disposal

space, this may be a viable option.

For heating purposes, some farmers are switching from natural gas to propane

because of lower prices. Also, rising prices for fossil fuels and falling grain prices

have prompted some farmers to switch to grain furnaces, which can burn grain such

as corn, wheat, barley, etc. According to research, one bushel of corn will generate

about as much heat as five gallons of liquid propane. Burning grain has a potential

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economic advantage if the grain has lesser value; e.g., is low quality, mildewed, or for

some other reason unmarketable.

Food Prices

A sustained increase in energy prices could be translated into higher food prices

for consumers. Energy use adds to food production costs and consumer food prices

beyond the farm gate in three stages: (1) food manufactured with energy intensive

technologies, (2) transportation of food products to regional markets in climate

controlled cargo areas, and (3) storage and distribution of food items in

environmentally controlled facilities. Food retailers are likely to use considerably

more energy than the average retailer to control the environment for perishable food

products around the clock, according to ERS.

ERS estimates 3.5% of the cost of food is attributable to energy expenses, and

4% is attributable to transportation expenses (Figure 5). (The energy bill includes

only the costs of electricity, natural gas, and other fuels used in food processing,

wholesaling, retailing, and foodservice establishments. Transportation fuel costs,

except for those incurred for food wholesaling, are excluded.)

Figure 5: Distribution of a Dollar Spent on Food, 1999.

Source: “Food Marketing and Price Spreads: USDA Marketing Bill.” ERS, USDA.

Farmers receive 24 cents for every $1 of consumer expenditures on food. This

means that 76 cents of the consumer food dollar is attributable to the marketers of

food. These food processors, transporters, wholesalers, and retailers, have a greater

capability than farmers of passing on their higher costs through the productionmarketing system, and eventually to the consumer.

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Congressional Action

In response to the energy situation, Congress has introduced various legislation

that would encourage alternative sources of energy, allow emergency loans for

businesses affected by high energy costs, and allow for further exploration in

protected areas. Additionally, several Senators have requested the General

Accounting Office (GAO) study various energy-related issues. Currently, GAO

reportedly is setting up a way to do a broad-based study that would combine all

requests.

Legislation

S. 60 (Byrd). National Electricity and Environmental Technology Act.

Authorizes accelerated research and development programs for advanced clean coal

technologies for use in electricity generating facilities; amends the Internal Revenue

Code to provide financial incentives to encourage retrofitting, repowering, or

replacement of coal-based electricity generating facilities to protect the environment

and improve efficiency and encourage the early commercial application of advanced

clean coal technologies. Introduced January 22, 2001, and referred to Finance

Committee.

H.R. 301, H.R. 302 (Shows). Amend the Consolidated Farm and Rural

Development Act to authorize the Secretary of Agriculture to make emergency loans

to poultry farmers whose energy costs have increased substantially. Introduced

January 30, 2001, and referred to the Agriculture Committee.

H.R. 396 (Pickering). Amends the FY01 Agriculture Appropriations Act

(P.L. 106-387) to direct the Secretary of Agriculture to provide emergency assistance

to crop, livestock, and poultry producers, and greenhouse operators who have

incurred economic losses due to increased energy prices in 2000 or 2001. Introduced

February 6, 2001, and referred to the Agriculture Committee.

H.R. 478, H.R. 479, H.R. 480 (Shows). Directs the Secretary of Agriculture

to provide emergency loans under the Consolidated Farm and Rural Development

Act, to agricultural producers who have experienced qualifying energy cost increases.

Such assistance would not depend upon the existence of a natural disaster in the

affected farm's county. Introduced February 6, 2001, and referred to the Agriculture

Committee. On March 22, Congressman Shows wrote a “Dear Colleague” letter

urging support for H.R. 478.

S. 295 (Kerry). Introduced as the “Small Business Energy Emergency Relief

Act of 2001,” and passed the Senate as the “Small Business and Farm Energy

Emergency Relief Act of 2001.” The Small Business Committee adopted an

amendment (originally introduced as S. 380 by Senator Kohl) to include farmers.

Section 4 relates specifically to agriculture and amends the Consolidated Farm and

Rural Development Act, to authorize USDA to make disaster loans to assist farmers

to recover from economic injuries resulting from sharp and significant increases in

energy costs. Authorizes USDA to provide loans for this purpose for two years.

Directs the Secretary to submit a report on the effectiveness of such loans, together

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with recommendations for improvements, if any, to the Agriculture Committee and

the Small Business Committee in both the Senate and House.

S. 295 was introduced on February 8, 2001, and referred to the Small Business

Committee. On February 28, the Committee ordered the bill to be reported favorably

with an amendment in the nature of a substitute, which included the agricultural

provision. On March 26, the bill passed the Senate by unanimous consent. On March

27, the bill was received in the House and referred to the Agriculture Committee and

the Small Business Committee.

H.R. 1010 (Tom Udall). Small Business and Farm Energy Emergency Relief

Act of 2001. Companion bill to S. 295, including agricultural provisions. Introduced

March 13, 2001, and referred to the Agriculture Committee and the Small Business

Committee.

S. 568 (Sessions). Amends the FY01 Agriculture Appropriations Act (P.L.

106-387), to provide 2000 and 2001 emergency assistance to crop, livestock, and

poultry producers, and greenhouse operators who have or are likely to have increased

energy-caused operating costs. Introduced March 20, 2001, and referred to the

Agriculture Committee.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.