Energy Use in Agriculture: Background and Issues
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Energy Use in Agriculture: Background
and Issues
(name redacted)
Specialist in Agricultural Policy
November 19, 2004
Congressional Research Service
7-....
www.crs.gov
RL32677
CRS Report for Congress
Prepared for Members and Committees of Congress
Energy Use in Agriculture: Background and Issues
Summary
Agriculture requires energy as an important input to production. Agriculture uses energy directly
as fuel or electricity to operate machinery and equipment, to heat or cool buildings, and for
lighting on the farm, and indirectly in the fertilizers and chemicals produced off the farm. In
2002, the U.S. agricultural sector used an estimated 1.7 quadrillion Btu of energy from both direct
(1.1 quadrillion Btu) and indirect (0.6 quadrillion Btu) sources. However, agriculture’s total use
of energy is low relative to other U.S. producing sectors. In 2002, agriculture’s share of total U.S.
direct energy consumption was about 1%. Agriculture’s shares of nitrogen and pesticide use—two
of the major indirect agricultural uses identified by the U.S. Dept of Agriculture (USDA)—are
significantly higher at about 56% and 67%, respectively.
U.S. farm production—whether for crop or animal products—has become increasingly
mechanized and requires timely energy supplies at particular stages of the production cycle to
achieve optimum yields. Energy’s share of agricultural production expenses varies widely by
activity, production practice, and locality. Since the late 1970s, total agricultural use of energy has
fallen by about 28%, as a result of efficiency gains related to improved machinery, equipment,
and production practices. Despite these efficiency gains, total energy costs of $28.8 billion in
2003 represented 14.4% (5.2% direct and 9.3% indirect) of annual production expenses of $198.9
billion. As a result, unexpected changes in energy prices or availability can substantially alter
farm net revenues, particularly for major field crop production.
High fuel and fertilizer prices in 2004, and increasing energy import dependence for petroleum
fuels and nitrogen fertilizers has led to concerns about the impact this would have on agriculture.
High natural gas prices have already contributed to a substantial reduction in U.S. nitrogen
fertilizer production capacity—over a 23% decline from 1998 through 2003. In the short run,
price- or supply-related disruptions to agriculture’s energy supplies could result in unanticipated
shifts in the production of major crop and livestock products, with subsequent effects on farm
incomes and rural economies. In the long run, a sustained rise in energy prices may have serious
consequences on energy-intensive industries like agriculture by reducing profitability and driving
resources away from the sector.
This report provides information relevant to the U.S. agricultural sector on energy use, emerging
issues, and related legislation. It will be updated as events warrant.
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Energy Use in Agriculture: Background and Issues
Contents
Introduction ................................................................................................................................1
Farm Energy Consumption Overview..........................................................................................1
Agriculture as a Share of U.S. Energy Use ............................................................................2
Direct Energy Use...........................................................................................................2
Indirect Energy Use ........................................................................................................4
Agriculture Sector Energy Use by Source..............................................................................5
Total Energy Use by Agriculture Has Declined Over Time ..............................................5
Composition of Energy Use Has Shifted Over Time ........................................................6
Efficiency Gains in Farm Energy Use..............................................................................7
Energy’s Share of Agricultural Production Costs ...................................................................9
Direct Energy Costs ...................................................................................................... 10
Indirect Energy Costs .................................................................................................... 10
Fertilizer Prices are Linked to Natural Gas Prices .......................................................... 13
Agricultural Prices-Paid Index (PPI) ............................................................................. 16
Agricultural Energy Use by Activity.................................................................................... 17
Major Field Crops......................................................................................................... 18
Vegetables and Fruit...................................................................................................... 21
Greenhouse, Nursery, and Floriculture........................................................................... 21
Beef Cattle Ranching .................................................................................................... 21
Aquaculture Production................................................................................................. 22
Dairy Cattle and Milk Production.................................................................................. 22
Cattle Feedlots .............................................................................................................. 22
Hog and Pork Production .............................................................................................. 22
Poultry and Egg Production........................................................................................... 22
Agricultural Energy Use by Region..................................................................................... 23
Agricultural Energy Use Issues ................................................................................................. 24
Volatile, Rising Energy Prices ............................................................................................. 24
Import Dependency....................................................................................................... 24
Rising U.S. Demand for Natural Gas............................................................................. 25
Declining U.S. Fertilizer Production Capacity ..................................................................... 26
High Fertilizer Prices .................................................................................................... 27
Fertilizer Supply Shortages?.......................................................................................... 27
Farm Income and Energy Prices .......................................................................................... 28
Price Responsiveness to Energy Price Changes ............................................................. 29
Prices of Most Fuel Sources Tend to Move Together ..................................................... 30
Food Price Effects? ............................................................................................................. 30
Conclusions ........................................................................................................................ 31
Public Laws and Bills Affecting Energy Use by Agriculture ...................................................... 31
What Is a Btu? .............................................................................................................. 33
Figures
Figure 1. In 2002, Agriculture Accounted for 1% of Total U.S. Direct Energy Use.......................4
Figure 2. U.S. Farm Energy Use by Source, 2002........................................................................5
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Energy Use in Agriculture: Background and Issues
Figure 3. Energy Use on U.S. Farms, Direct vs. Indirect, 1965 to 2002........................................6
Figure 4. Composition of Energy Use in U.S. Agriculture, 1965 to 2002......................................7
Figure 5. Direct Energy Use (DEU) and Output, 1965-99 ............................................................8
Figure 6. Indirect Energy Use (IEU) and Output, 1965-99 ...........................................................8
Figure 7. Direct vs. Indirect Energy Cost Shares on U.S. Farms, 1965 to 2002........................... 11
Figure 8. Energy Cost Shares by Source on U.S. Farms, 1965-2003........................................... 11
Figure 9. U.S. Commercial Fertilizer Use, 1965-2002 ............................................................... 12
Figure 10. U.S. Nitrogen Fertilizer Use, 1989- 2003.................................................................. 13
Figure 11. Anhydrous Ammonia and Natural Gas Prices............................................................ 14
Figure 12. Nitrogen Fertilizer Prices.......................................................................................... 14
Figure 13. Phosphate, Potash, and Nitrogen Prices .................................................................... 15
Figure 14. Fruits and Vegetables Apply More Nitrogen.............................................................. 15
Figure 15. ...But Major Field Crops Harvest More Area............................................................. 16
Figure 16. Corn and Wheat Dominate Nitrogen Use .................................................................. 16
Figure 17. USDA Prices-Paid Index for Major Farm Production Inputs ..................................... 17
Figure 18. U.S. Farm Production Expenditure Regions .............................................................. 23
Figure 19. Natural Gas vs. Crude Oil, Monthly Prices, January 1976 to July 2004 ..................... 25
Figure 20. U.S. Farm Fuel vs. Crude Oil Annual Prices, 1973-2003........................................... 30
Figure 21. Distribution of a Dollar Spent on Food, 2000............................................................ 31
Tables
Table 1. Energy Uses in Agricultural Production..........................................................................2
Table 2. U.S. Farm Production Expenditures, 1998-2003.............................................................9
Table 3. Farm Energy Costs (Value and Share) by Activity, 2002............................................... 17
Table 4. Irrigated Area and Share by Activity, 2002 ................................................................... 19
Table 5. Agricultural Production Expenditures for Energy by Major Crop, U.S. Average
for 2003 ................................................................................................................................. 20
Table 6. Fuel Price Changes, 2003 to 2004 ................................................................................ 28
Table A-1. Btu Conversion Chart............................................................................................... 33
Table A-2. U.S. Farm Energy Costs in Production, by Activity, 2002 ......................................... 34
Table A-3. Energy Cost Shares of Total Production Costs, by Activity, 2002.............................. 36
Table A-4. U.S. Energy Cost Shares by Activity, 2002 ............................................................... 38
Table A-5. U.S. Farm Energy Costs in Production, by Region, 2003 .......................................... 39
Table A-6. Energy Cost Shares of Total Production Costs, by Region, 2003............................... 40
Table A-7. Regional Shares of U.S. Energy Costs by Type, 2003 ............................................... 41
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Energy Use in Agriculture: Background and Issues
Appendixes
Appendix. Tables ...................................................................................................................... 33
Contacts
Author Contact Information ...................................................................................................... 42
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Energy Use in Agriculture: Background and Issues
Introduction
Agriculture, as a production-oriented sector, requires energy as an important input to production.
U.S. farm production—whether for crop or animal products—has become increasingly
mechanized and requires timely energy supplies at particular stages of the production cycle to
achieve optimum yields.
Several key points that emerge from this report are:
•
agriculture is reliant on the timely availability of energy, but has been reducing
its overall rate of energy consumption;
•
U.S. agriculture consumes energy both directly as fuel or electricity to power
farm activities, and indirectly in the fertilizers and chemicals produced off farm;
•
energy’s share of agricultural production expenses varies widely by activity,
production practice, and locality;
•
at the farm level, direct energy costs are a significant, albeit relatively small
component of total production expenses in most activities and production
processes;
•
when combined with indirect energy expenses, total energy costs can play a
much larger role in farm net revenues, particularly for major field crop
production; and
•
energy price changes have implications for agricultural choices of crop and
activity mix, and cultivation methods, as well as irrigation and post-harvest
strategies.
This report provides background on the relationship between energy and agriculture in the United
States. The first section provides background information on current and historical energy use in
the U.S. agricultural sector and how this fits into the national energy-use picture. Energy’s role in
agriculture’s overall cost structure is detailed both for present circumstances and for changes over
time. Finally, this section examines how agriculture’s energy-use pattern varies across activities
and regions.
Farm Energy Consumption Overview
At the farm level, energy use is classified as either direct or indirect. Direct energy use in
agriculture is primarily petroleum-based fuels to operate cars, pickups, and trucks as well as
machinery for preparing fields, planting and harvesting crops, applying chemicals, and
transporting inputs and outputs to and from market.1 Natural gas, liquid propane, and electricity
also are used to power crop dryers and irrigation equipment. Electricity is used largely for
lighting, heating, and cooling in homes and barns. Dairies also require electricity for operating
milking systems, cooling milk, and supplying hot water for sanitation. (See Table 1 for a listing
1
See CRS Report RL30758, Alternative Transportation Fuels and Vehicles: Energy, Environment, and Development
Issues, for a description and cost comparison of the major fuels natural gas, LP gas or propane, and electricity, and the
alternative fuels biodiesel, ethanol, and methanol.
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of various direct and indirect energy uses by agriculture.) In addition, oils and lubricants are
needed for all types of farm machinery.
Indirect energy is consumed off the farm for manufacturing fertilizers and pesticides. Because of
measurement difficulties, energy used to produce other inputs for agriculture, such as farm
machinery and equipment, is not included in USDA’s definition of indirect energy.2
Agriculture as a Share of U.S. Energy Use
Direct Energy Use
In 2002, the U.S. agricultural sector (encompassing both crops and livestock production) used an
estimated 1.1 quadrillion Btu3 of total direct energy. 4 This represents slightly more than 1% of
total U.S. energy consumption of 98 quadrillion Btu in 2002. (See Figure 1). In comparison, the
non-agricultural component of the industrial sector is estimated to have used 31.4 quadrillion Btu
(32%), while the transportation sector used 26.5 quadrillion Btu (27%).
As a result of its small share, significant changes in direct energy consumption by the U.S.
agricultural sector are unlikely to have major implications for the overall supply and demand for
energy in the United States. However, within the agricultural sector, changes in the supply and
demand of energy can have significant implications for the profitability of U.S. agriculture as
well as the mix of output and management practices.
Table 1. Energy Uses in Agricultural Production
Direct Use of Energy
Fuel
Operating farm machinery and large trucks:
Diesel fuel
- field work (tractors, combines, mowers, balers, etc.)
- input purchase and deliveries (large trucks)
Operating small vehicles (cars and pickup trucks):
Gasoline
- farm management activities
Operating small equipment:
Diesel fuel
- Irrigation equipment
Natural Gas (NG)
- Drying of grain or fruit
LP Gas (LP)
- Ginning cotton
Electricity (E)
- Curing tobacco
- Heating for frost protection in groves and orchards
2
USDA, Economic Research Service (ERS), Agricultural Resources and Environmental Indicators, Agricultural
Handbook No. 705, December 1994, p. 106.
3
See Appendix, “What Is a Btu?” for a definition.
4
John Miranowski, “Energy Consumption in U.S. Agriculture,” presentation at USDA conference on Agriculture as a
Producer and Consumer of Energy, June 24, 2004; hereafter referred to as Miranowski (2004). Conference proceedings
are available at http://www.farmfoundation.org/projects/03-35EnergyConferencepresentations.htm.
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Direct Use of Energy
Fuel
- Crop flamers
- Heating/cooling of cattle barn, pig or poultry brooder,
greenhouse, stock tanks, etc.
- Animal waste treatment
- Standby generators
General farm overhead
Electricity
- Lighting for houses, sheds, and barns
- Power for farm household appliances
Custom operations
- Field work (e.g., combining)
Diesel, Gasoline,
NG, LP, E
- Drying
- Other
Marketing
- Transportation: elevator to terminal, processor, or port
Diesel
Gasoline
- Elevating
Indirect Use of Energy
Fuel
Fertilizer
Natural Gas (NG)
- Nitrogen-based (NG is 75% to 90% of cost of prod.)
- Phosphate (NG is 15% to 30% of cost of prod.)
- Potash (NG is 15% of cost of prod.)
Pesticides (insecticides, herbicides, fungicides)
Petroleum or NG
Source: Assembled by CRS from various sources.
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Energy Use in Agriculture: Background and Issues
Figure 1. In 2002, Agriculture Accounted for 1% of Total U.S. Direct Energy Use
Source; Dept. of Energy, Energy Information Agency.
Note: Each user category includes primary energy plus electricity. Electric generation used 38.2 billion Btu of
primary energy.
Indirect Energy Use
In contrast to direct energy, agriculture’s share of two important indirect energy uses—fertilizer
and pesticide use—is signficantly higher. According to the Government Accountability Office
(GAO),5 in 2002 agriculture accounted for about 56% (12 million out of about 21.4 million
metric tons) of total U.S. nitrogen use.6 Nitrogen fertilizer is the principal fertilizer used by the
U.S. agricultural sector. (See the section “Fertilizer Production Costs” later in this report for more
information.) Data on agriculture’s share of phosphorous and potash fertilizer use was not readily
available.
In addition, the U.S. Environmental Protection Agency (EPA) estimates that U.S. agriculture
accounted for 67% of expenditures on pesticides in the United States in 2001 (the year for which
data was most recently available).7
Although direct use of natural gas by agriculture is the smallest of any major energy source (see
Figure 2), its importance is magnified by an indirect linkage with fertilizers, particularly
nitrogenous fertilizers. Natural gas is the major feedstock of nitrogenous fertilizers and represents
as much as 90% of the cost of production of anhydrous ammonia—the primary ingredient for
most nitrogen fertilizers. Similarly, but to a smaller extent, natural gas is a significant cost
5
Formerly the General Accounting Office.
6
GAO, Natural Gas: Domestic Nitrogen Fertilizer Production Depends on Natural Gas Availability and Prices, GAO03-1148, Sept. 2003, p. 4.
7
U.S. EPA, Pesticide Industry Sales and Usage: 2000 and 2001 Market Estimates, May 2004, p.6.
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Energy Use in Agriculture: Background and Issues
component in the production of both phosphate (15% to 30% of production costs) and potash
(15%) fertilizers.
If fertilizers and pesticides were divided into their natural gas and petroleum components, the
total direct and indirect consumption of natural gas would amount to over 26% of total energy
consumption in the agricultural sector.
Agriculture Sector Energy Use by Source
Of the estimated 1.7 quadrillion Btu of total energy used by the U.S. agricultural sector in 2002,
65% (1.1 quadrillion Btu) was consumed as direct energy (electricity, gasoline, diesel, LP gas,8
and natural gas), compared with 35% (0.6 quadrillion Btu) consumed as indirect energy
(fertilizers and pesticides).
Figure 2. U.S. Farm Energy Use by Source, 2002
Source: Miranowski (2004).
Total Energy Use by Agriculture Has Declined Over Time
Agricultural energy use peaked at 2.4 quadrillion Btu in 1978.9 The oil price shocks of the late
1970s and early 1980s forced the agricultural sector to become more energy efficient. Since the
late 1970s, the direct use of energy by agriculture has declined by 26%, while the energy used to
produce fertilizers and pesticides has declined by 31%. (See Figure 3.) Switching from gasolinepowered to more fuel-efficient diesel-powered engines, adopting conservation tillage practices
8
9
LP (liquified petroleum) gas is the generic name for commercial propane and commercial butane gases.
Miranowski (2004).
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Energy Use in Agriculture: Background and Issues
(which tend to use less energy), changing to larger multifunction machines, and creating new
methods of crop drying and irrigation contributed to this decline in energy use.10
Figure 3. Energy Use on U.S. Farms, Direct vs. Indirect, 1965 to 2002
Source: Miranowski, (2004).
Composition of Energy Use Has Shifted Over Time
Gasoline’s relative share as a source of farm energy has declined substantially over the past four
decades, falling from a 41% share in 1965 to about a 9% share in 2002. (See Figure 4.) The
direct use of natural gas and LP gas also experienced a decline in share, falling from a combined
15% to 8%. In contrast, diesel fuel and electricity both gained substantially, rising from 13% and
6% shares respectively in 1965 to 27% and 21% shares in 2002.
The shift away from gasoline-powered machinery toward diesel-powered machinery underlies the
rise of diesel and decline of gasoline. Diesel is better performing than gasoline in terms of miles
per gallon and miles per Btu. Diesel fuel also tends to be significantly cheaper on a gasolineequivalent basis.11 The overall decline in total direct energy use also reflects an important decline
in the stock of agricultural machinery, equipment, and motor vehicles that has occurred since total
farm machinery inventories peaked in 1979.12 Capital depreciation exceeded capital expenditure
in every year from 1980 through the mid-1990s.
The capital depletion was due to several factors including, first, increased machine efficiency and,
second, shifts away from conventional tillage practices (which required working the soil many
10
USDA, ERS, Agricultural Resources and Environmental Indicators, Agricultural Handbook No. 705, December
1994, p. 108.
11
See Table A-1 for gasoline-equivalent prices.
12
USDA, ERS, Agricultural Resources and Environmental Indicators, 1996-97, Agricultural handbook No. 712, July
1997, p. 145.
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Energy Use in Agriculture: Background and Issues
times prior to planting) toward reduced and no-till practices (which require fewer passes over the
soil and, therefore, less fuel consumption). In addition, conservation tillage practices have helped
to conserve soil moisture and nutrients (lowering the need for commercial fertilizers) and to
prolong the useful life of tractors and equipment.
Figure 4. Composition of Energy Use in U.S. Agriculture, 1965 to 2002
Source: Miranowski, (2004).
Since 1965 fertilizer and pesticide use have exhibited a disjointed pattern as a share of energy
source for U.S. agriculture, rising from a combined 25% share in 1965 to slightly above a 46%
share in 1986, then declining to a 35% share by 2002. Increasing use of precision farming (i.e.,
computerized equipment that allows precise quantity and placement of inputs such as fertilizers
and pesticides), conservation tillage, and crop residue management have all contributed to lower
fertilizer volumes without sacrificing yield gains. 13 Plantings of genetically engineered crops such
as Bt corn and Bt cotton, which require fewer pesticide applications, also have contributed to a
reduced pesticide volume. In addition, improved pesticide products and expanded use of crop
scouting services have contributed to lower pesticide volumes while maintaining or improving the
level of pest control.
Efficiency Gains in Farm Energy Use
The large declines in agricultural sector use of direct and indirect energy sources since the late
1970s has not come at the expense of lower output. Agriculture appears to have made dramatic
efficiency gains in energy use. The gains are measured by sharply declining energy-use per unit
of output indices for both direct and indirect energy categories.
13
Ibid., pp. 149-150.
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Since 1980, direct energy use (DEU) per unit of output has fallen almost continuously while total
agricultural sector output has risen steadily (see Figure 5). Indirect energy use (IEU) per unit of
output has also tracked downward, but with more variability than direct energy use (see Figure
6). Both direct and indirect energy use per unit of output appear to have plateaued somewhat in
the 1990s.
Figure 5. Direct Energy Use (DEU) and Output, 1965-99
Source: USDA, Economic Research Service.
Figure 6. Indirect Energy Use (IEU) and Output, 1965-99
Source: USDA, Economic Research Service.
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Energy’s Share of Agricultural Production Costs
Producers are slowly gaining more options for responding to energy price changes, but in the
short term most energy price increases still translate into lower farm income. During the 20002003 period, U.S. farmers spent an annual average of nearly $194 billion on total production
expenses (see Table 2). Of this total, nearly 15%, or an estimated $28.8 billion, was for energy
expenses. Energy’s share of annual farm production expenses varies from year to year with
changes in planted acres, the crop and livestock mix, and relative energy prices.
Table 2. U.S. Farm Production Expenditures, 1998-2003
Average:
Annual Expenses
Expenditure Categorya
2000
2001
2002
2003
$ Billion
2000-03
Share
$ Billion
%
Total Energy Expenses
28.5
29.1
28.0
28.8
28.6
14.7%
Direct energy
10.0
10.2
10.1
10.4
10.2
5.2%
Fuels
7.0
6.7
6.5
6.7
6.7
3.5%
Electricityb
3.0
3.5
3.6
3.7
3.5
1.8%
Indirect energy
18.5
18.9
17.9
18.4
18.4
9.5%
Ag chemicalsc
8.5
8.6
8.3
8.4
8.5
4.4%
Fertilizersd
10.0
10.3
9.6
10.0
10.0
5.1%
Livestock & poultrye
18.0
18.5
18.3
19.0
18.5
9.5%
Feed
24.5
24.8
24.9
27.0
25.3
13.0%
Labor
20.7
21.7
21.5
21.2
21.3
11.0%
Seeds, supplies, etc.f
19.9
20.9
21.1
20.3
20.6
10.6%
Farm servicesg
22.4
23.4
23.2
23.1
23.0
11.9%
Farm improvementsh
8.7
8.3
8.5
12.1
9.4
4.8%
Machinery & vehicles
13.0
14.2
14.1
14.9
14.1
7.2%
Rent, interest, & taxesi
33.9
34.3
33.5
32.5
33.6
17.3%
Total expenditures
189.6
195.2
193.1
198.9
194.2
100%
Source: USDA, NASS, Farm Production Expenditures, 2003 Summary, July 2004, p. 27.
a.
Data excludes Alaska and Hawaii. Total includes production costs not allocated to any of the major expense
categories; landlord and contractor share of farm production expenses.
b.
Electricity has not been included in NASS survey data since 1991. It is approximated as 15% of the original
farm services expense category.
c.
Includes material and application costs.
d.
Includes lime and soil conditioners, as well as material and application costs.
e.
Includes purchases and leasing of livestock and poultry.
f.
Excludes bedding plants, nursery stock, and seed purchased for resale. Includes seed treatment, bedding and
litter, marketing containers, power farm shop equipment, miscellaneous non-capital equipment and supplies,
repairs and maintenance of livestock and poultry equipment, and capital equipment for livestock and
poultry.
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g.
Includes crop custom work, veterinary services, custom feeding, transportation costs, marketing charges,
insurance leasing of machinery and equipment, miscellaneous business expenses, and utilities.
h.
Includes all expenditures related to new construction or repairs of buildings, fences, operator dwelling (if
dwelling is owned by operation), and any improvements to physical structures of land.
i.
Rent includes public and private grazing fees.
Direct Energy Costs
Demand for refined petroleum products such as diesel fuel, gasoline, and LP gas in agricultural
production is determined mainly by the number of acres planted and harvested, weather
conditions, and the prices for the various types of energy. Because the majority of energy used in
the United States (and the world) is derived from either petroleum-based sources—such as
gasoline, diesel, and LP gas—or natural gas, their prices tend to move together. This limits the
success of switching among fuel sources to reduce energy costs.
During the 1960s and 1970s, direct energy costs (for inputs such as petroleum products and
electricity) varied substantially as a share of total farm costs, ranging from 4% to 8% (see Figure
7). However, since the mid-1990s direct energy’s share of total farm costs has averaged about 5%.
Electricity’s share of production costs grew from about 0.7% in the mid-1970s to 1.9% by 1989,
and has held fairly steady ever since as technological efficiency gains in electricity use have
essentially offset price rises (see Figure 8). In contrast, fuel costs have declined as a share of
production costs, falling from a 6.4% share in 1981 to average 3.3% since 1994, due in large part
to efficiency improvements in farm machinery, as well as adoption of no- or minimum-tillage
cultivation practices.
Indirect Energy Costs
Indirect energy costs (for fertilizers and pesticides) have shown considerable variability over the
past 40 years, ranging between 8% and 12% of total farm production expenses. The most notable
cost-share movement occurred in 1974, when indirect energy costs experienced a sharp upward
spike due to a jump in fertilizer prices. In 1971, USDA’s Economic Stabilization Program had
frozen U.S. fertilizer prices at the producer level.14 These price controls were removed on October
25, 1973, and resulted in a rapid rise in U.S. fertilizer prices and expenditures. Since 1996,
indirect energy’s share of total farm costs has trended downward to about a 9% share in 2003.15
Agricultural Chemical Costs
Pesticides comprise the majority of agricultural chemical expenditures. Pesticides are commonly
broken out into three major types—herbicides, insecticides, and fungicides. Defoliants, used
primarily by cotton in the United States, are another major agricultural chemical grouping.
Pesticide’s share of farm production expenses has grown significantly from less than a 1% share
prior to 1960 to a high of nearly 5% in 1998. The cost share increase that occurred through 1980
14
USDA, Economic Research Service, Agricultural Outlook, AO-1, June 1975, p. 9.
Fertilizer use and energy costs are discussed in more detail in the following section, entitled “Fertilizer Production
Costs.”
15
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Energy Use in Agriculture: Background and Issues
was attributable both to increased total use and to rising per-unit costs, while the increase in cost
share between 1980 and 1998 was due almost solely to higher per-unit prices paid. The total
pounds of active ingredients of farm chemicals applied to crops rose steadily from early 1960
until about 1980, after which total pounds applied remained relatively unchanged. However,
quality improvements in the mix of pesticide ingredients, their ability to kill selected target pests,
and the increasing ability of farmers to better target pesticide applications have continued through
the 1990s. These and other quality improvements have limited growth in usage rates since 1980,
but have contributed to increases in per-unit prices paid through the mid-1990s.
Figure 7. Direct vs. Indirect Energy Cost Shares on U.S. Farms, 1965 to 2002
Source: USDA, NASS.
Figure 8. Energy Cost Shares by Source on U.S. Farms, 1965-2003
Source: USDA, NASS.
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Fertilizer Production Costs
In 2002, fertilizer expenditures accounted for about 5% of agricultural production expenses.
However, they were the single largest outlay among farm energy expenditures, with a 34% share
of the $28 billion of total energy expenses in 2002. That same year, fertilizer also represented the
largest single source of farm energy (measured in Btu’s), with a 29% share.
Total fertilizer use by U.S. agriculture has averaged nearly 20 million metric tons since 1991 (see
Figure 9). Of this total, nitrogen-based fertilizers comprise the largest portion, with a 56% share
compared with 24% for potash and 21% for phosphate. The demand for fertilizer depends on
several factors, including soil type and fertility, climate, crop rotations, and relative prices of both
inputs and outputs. Many, if not most, crops grown in the United States benefit from routine
application of commercial fertilizers. Fertilizers provide nutrients that enhance both plant growth
and crop yield.
Figure 9. U.S. Commercial Fertilizer Use, 1965-2002
Source: United Nations, Food and Agricultural Organization.
U.S. farms use an average of nearly 12 million metric tons of nitrogen fertilizers each year. Since
1992, the United States has imported an increasing share of its nitrogen needs (see Figure 10).
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Figure 10. U.S. Nitrogen Fertilizer Use, 1989- 2003
Sources: Trade data—USDA, FATUS; use data—1996 to 2002 is from GAO, GAO-03-1148, September 2003;
1989 to 1995 is The Fertilizer Institute but adjusted to GAO scale.
Canada is the traditional source for most U.S. nitrogen imports (accounting for about 40% of total
imports since 1989).16 However, since 2000 the United States has increased the share of nitrogen
imports from other sources, particularly from Middle Eastern countries such as Bahrain, Egypt,
Kuwait, Qatar, and Saudi Arabia, but also from Bulgaria, China, Russia, Poland, Romania,
Netherlands, Norway, Ukraine, Trinidad and Tobago, and Venezuela.
Fertilizer Prices are Linked to Natural Gas Prices
U.S. fertilizer production is closely linked to energy availability, particularly natural gas. Natural
gas is the key ingredient in the production of anhydrous ammonia. Anhydrous ammonia is used
directly as a nitrogen fertilizer and as the basic building block for producing most other forms of
nitrogen fertilizers (e.g., urea, ammonium nitrate, and nitrogen solutions). Natural gas also is used
as a process gas in the manufacture of these other nitrogenous fertilizers from anhydrous
ammonia. As a result, natural gas accounts for 75% to 90% of costs of production for nitrogen
fertilizers. In addition, natural gas is an important input in the production of diammonium or
monoammonium phosphates (accounting for 15% to 30% of production costs), and potash
(accounting for as much as 15% of the production cost).
Because fertilizer prices are closely linked to natural gas prices through anhydrous ammonia,
these prices move in tandem as anhydrous ammonia prices follow natural gas prices, while the
prices of other nitrogen fertilizers in turn follow anhydrous ammonia’s price (see Figure 11 and
Figure 12). Phosphate and potash prices are less closely linked to natural gas than are prices for
nitrogen fertilizers (see Figure 13).
16
The Fertilizer Institute, available at http://www.tfi.org/.
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Energy Use in Agriculture: Background and Issues
Higher fertilizer prices encourage two potential responses: (1) lower fertilizer application rates on
the current farm planting mix; or (2) the planting and production of crops that are less dependent
on fertilizer. Although nitrogen fertilizer application rates tend to be higher for various fruit and
vegetable crops, field crops are planted on dramatically larger areas (see Figure 14 and Figure
15). As a result, total fertilizer usage is highest for those crops that are planted to the greatest
area—corn and wheat, with rice, cotton, and sorghum trailing far behind (see Figure 16).
Figure 11. Anhydrous Ammonia and Natural Gas Prices
Sources: USDA, NASS. Agricultural Prices, April issue for fertilizer prices; DOE, EIA, for natural gas prices
Figure 12. Nitrogen Fertilizer Prices
Source: USDA, NASS, Agricultural Prices, April issues.
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Energy Use in Agriculture: Background and Issues
Figure 13. Phosphate, Potash, and Nitrogen Prices
Source: USDA, NASS, Agricultural Prices, April issues.
Figure 14. Fruits and Vegetables Apply More Nitrogen...
Source: The Fertilizer Inst. From NASS, USDA; data for most years is from 1998 or 1999.
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Energy Use in Agriculture: Background and Issues
Figure 15. ...But Major Field Crops Harvest More Area
Source: The Fertilizer Inst. From NASS, USDA; data for most years is from 1998 or 1999.
Figure 16. Corn and Wheat Dominate Nitrogen Use
Source: The Fertilizer Inst. From NASS, USDA; data for most years is from 1998 or 1999.
Agricultural Prices-Paid Index (PPI)
USDA’s agricultural PPI suggests that fuel and fertilizer prices have been significantly more
variable than pesticide prices (see Figure 17). The impact of possible oil or natural gas price rises
on agriculture can be significant, especially for field crop production, given the dependence of
farming on petroleum products and the limited scope for fuel switching. In addition, the
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Energy Use in Agriculture: Background and Issues
agricultural sector is particularly vulnerable to natural gas price increases due to the important
role natural gas plays in the manufacturing of fertilizer.
Figure 17. USDA Prices-Paid Index for Major Farm Production Inputs
Source: USDA, NASS.
Agricultural Energy Use by Activity
Total production expenses and the relative importance of energy costs vary greatly both by
production activity and by region. Although there are many kinds of farm operations performed
by the different farm types, nearly all mechanized field work, as well as marketing and
management activities, involve machinery (such as tractors and harvesters) as well as trucks and
cars that are dependent on petroleum fuels. Grain dryers and irrigation equipment are often more
versatile in that they can be powered by petroleum fuels, natural gas, or electricity, while
electricity is the primary source of power for lighting, heating, and cooling in homes, barns, and
other farm buildings.
Table 3. Farm Energy Costs (Value and Share) by Activity, 2002
Activitiesa
Total Costs of
Production
(COP)
Total Energy
Costs
$ million
Energy Share
of COP
Share of Total U.S.
Farm Energy Costs
by Activity
%
%
Crop Activities
80,343
18,364
22.9
76.4
Major Field Crops
50,091
13,627
27.2
56.7
Vegetable & Fruits
19,737
3,759
19.0
15.6
Greenhouse &
nurseryb
10,514
979
9.3
4.1
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Energy Use in Agriculture: Background and Issues
Total Costs of
Production
(COP)
Total Energy
Costs
Energy Share
of COP
Share of Total U.S.
Farm Energy Costs
by Activity
Livestock
Activities
95,857
5,701
5.9
23.7
Beef cattle ranching
20,038
2,323
11.6
9.7
Aquaculture &
other
5,617
445
7.9
1.9
Dairy cattle & milk
prod.
18,451
1,241
6.7
5.2
Hog & pig farming
11,312
526
4.6
2.2
Poultry & egg prod.
17,649
534
3.0
2.2
Cattle feedlots
22,143
577
2.6
2.4
United States
173,199
24,036
13.7
100.0
Activitiesa
Source: USDA, NASS, 2002 Census of Agriculture.
a.
Activities are organized by North American Industry Classification Ssytem (NAICS), see “Tables” of 2002
Census of Agriculture for details; available at http://www.nass.usda.gov/census/census02/volume1/us/
index1.htm.
b.
Includes floriculture.
Table 3 provides details from the 2002 Agricultural Census on energy costs, as well as the total
production expenses by major agricultural production activity in the United States.17 Clearly,
those farm activities where energy costs play a larger role are more likely to see profits squeezed
by rising energy costs.
According to census data, energy expenses in agricultural production in 2002 were $24 billion,
composed of $18.4 billion on crops and $5.7 billion on livestock production. Energy costs
represented nearly 14% of total U.S. agricultural production costs. In terms of energy’s share of
costs within each major production activity, 23% of crop production expenses were attributable to
energy costs, compared with only 6% for livestock production outlays. The higher the share of
total production costs accounted for by energy, the more sensitive a production activity is to
energy price or supply fluctuations.
Major Field Crops
Major field crop production traditionally requires several passes over the field, either with a
tractor pulling some type of equipment involved in field preparation, planting, cultivation,
fertilizer and chemical applications, or harvesting, or with a specialized machine that may
perform one or more of these functions. Fuel consumption depends on the fuel efficiency of the
particular machine involved, the number of passes over the field (determined largely by the
tillage practice employed), and the size of the field. Indirect energy use in the form of pesticides
and fertilizers varies widely across crops and regions depending on weather and soil conditions as
well as production practices.
17
For more detail on types of energy expenditures across various crop and livestock activities, see Appendix Tables
A2-A4 at the end of this report.
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Energy Use in Agriculture: Background and Issues
A significant portion of U.S. field crop production is irrigated each year, requiring further energy
to operate the pumping equipment. In 2002, approximately 55.3 million acres, or nearly 13% of
the 434.2 million acres of cropland—for all field, forage, vegetable, and tree crops—were
irrigated (see Table 4). The use of irrigation varies from year to year based on weather and soil
moisture condition. For example, in 1997 nearly 16% (67.8 million acres) of the 425.2 million
acres of total cropland were irrigated. Also, irrigation use can vary substantially based on the crop
grown—100% of the 1997 rice crop was irrigated compared with only about 6% of wheat
production.
Once harvested, most field crops require additional types of energy-related on-farm processing
before being sold. Harvested crops with a high moisture content generally undergo drying to meet
storage and processing requirements. Other crops, such as cotton and tobacco, require other types
of energy outlays. Cotton must be ginned to separate the lint from seeds and foreign matter.
Tobacco has to be cured—a process of heating and drying to develop and preserve the potential
quality, flavor, and aroma of tobacco—before it can undergo processing into cigarettes or other
products.
According to the 2002 Agricultural Census (see Table 3), the highly aggregate category of
“major field crops” was the largest agricultural energy user—both in total outlays at $13.6 billion
and as a share of production costs at 27%. Furthermore, “major field crop” energy expenses
accounted for 29% of the total energy costs expended by U.S. agriculture.
Table 4. Irrigated Area and Share by Activity, 2002
Crop
Total
Cropland
Irrigated Area
Irrigated Share
Commodity Groups
1,000 acres
1,000 acres
%
Fruit & tree nuts
6,790
4,585
67.5
Vegetable & melons
8,639
4,975
57.6
Cotton
14,590
4,766
32.7
Greenhouse & nursery
2,497
743
29.7
Other crops
54,176
8,850
16.3
Cattle feedlots
11,505
1,379
12.0
Oilseed & grain
204,555
19,473
9.5
Beef cattle ranching
89,838
7,771
8.6
Dairy cattle & milk prod.
19,231
1,379
7.2
Tobacco
3,576
112
3.1
434,165
55,311
12.7
Rice
3,198
3,198
100.0
Orchards
5,330
4,374
82.1
Potatoes
1,266
1,033
81.6
Vegetables
3,433
2,360
68.7
978
497
50.8
U.S. Total
Individual Crops
Sugar cane (for sugar)
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Energy Use in Agriculture: Background and Issues
Total
Cropland
Crop
Irrigated Area
Irrigated Share
Peanuts
1,223
463
37.8
Upland cotton
12,224
4,570
37.4
Sugar beets (for sugar)
1,366
472
34.5
Alfalfa hay
22,638
6,809
30.1
Tobacco
429
97
22.7
Forage
64,041
10,280
16.0
Corn for grain
68,231
9,710
14.2
Soybeans
72,400
5,460
7.5
Wheat for grain
45,520
2,910
6.4
Source: USDA, NASS, Agricultural Census, 2002.
Production expenditure data for 2003 from the Agricultural Resource Management Survey
(ARMS) as reported by the Economic Research Service (ERS) of USDA suggests that there is
considerable variation within the “oilseed and grain” category (see Table 5). According to ERS
agricultural production cost estimates, energy costs represent about 29% to 30% of total
production expenses of rice, barley, and peanuts, but only 14% of total production expenses of
soybeans. For three of the four most extensively planted field crops in the United States—corn,
wheat, and cotton (soybeans being the exception)—energy costs represented 22% to 27% of total
production costs. As a result, year-to-year crop selection and profitability are potentially more
sensitive to energy price and supply fluctuations for major U.S. program crops than otherwise
indicated by the aggregate “major field crop” aggregation of Table 3.
Table 5. Agricultural Production Expenditures for Energy
by Major Crop, U.S. Average for 2003
Indirect Energy Costs
Crop
Area
Planted
Total Production
Costs
Total Energy
Costs
1,000 ac
Direct
Energy Costs
Chemicals
Fertilizers
Total
$ per acre
Rice
3,022
614.37
187.11
73.78
59.02
54.31
113.33
Sorghum
9,420
217.74
62.47
32.74
11.56
18.17
29.73
Peanuts
1,344
689.19
196.84
48.52
99.82
48.50
148.32
Corn
78,736
349.78
92.67
23.06
26.20
43.41
69.61
Barley
5,299
200.93
49.17
16.23
9.81
23.13
32.94
Cotton,
all
13,479
545.25
130.44
38.59
55.94
35.91
91.85
Sugar
beets
1,365
872.29
204.42
50.58
96.39
57.45
153.84
Wheat, all
61,700
191.41
41.07
10.98
6.95
23.14
30.09
Oats
4,601
156.03
27.00
7.85
1.87
17.28
19.15
Soybeans
73,404
238.49
33.04
8.73
16.92
7.39
24.31
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Energy Use in Agriculture: Background and Issues
Indirect Energy Costs
Crop
Area
Planted
Total Production
Costs
Total Energy
Costs
Direct
Energy Costs
Share of Total Production Costs
Chemicals
Fertilizers
Total
percent
Rice
100.0
30.5
12.0
9.6
8.8
18.4
Sorghum
100.0
28.7
15.0
5.3
8.3
13.7
Peanuts
100.0
28.6
7.0
14.5
7.0
21.5
Corn
100.0
26.5
6.6
7.5
12.4
19.9
Barley
100.0
24.5
8.1
4.9
11.5
16.4
Cotton,
all
100.0
23.9
7.1
10.3
6.6
16.8
Sugar
beets
100.0
23.4
5.8
11.1
6.6
17.6
Wheat, all
100.0
21.5
5.7
3.6
12.1
15.7
Oats
100.0
17.3
5.0
1.2
11.1
12.3
Soybeans
100.0
13.9
3.7
7.1
3.1
10.2
Source: USDA, NASS, Acreage, June 30, 2003; and USDA, ERS, “U.S. Cost and Return Estimates;” retrieved
from http://www.ers.usda.gov/data/costandreturns/testpick.htm on Oct. 1, 2004.
Vegetables and Fruit
Fruit and vegetable production activities vary widely, from highly mechanized production with
minimal labor input to labor-intensive with low levels of mechanization. Irrigation is also used
widely in vegetable and fruit production (see Table 4), and chemicals and fertilizers are
traditionally an important part of the production process (see Figure 14). In some citrus and other
fruit growing areas, field heaters or windmills are used to minimize the potential effects of
freezing temperatures. In 2002, “vegetable and melon” energy costs of $2.0 billion accounted for
22% of their total production expenses (see Table A-2). In contrast, “fruit and tree nut” energy
costs of $1.7 billion represented 17% of total production expenses.
Greenhouse, Nursery, and Floriculture
Energy-using activities—such as temperature regulation, plant disease and insect control,
fertilization, and timely watering—comprised less than 10% of total production costs in
greenhouse, nursery, and floriculture production.
Beef Cattle Ranching
Pasture management and marketing activities are the primary energy-using activities involved in
cow-calf and other cattle grazing operations. In several locations, pasture management involves
irrigation, fertilization, and weed control. Energy costs accounted for about 12% of total beef
cattle ranching expenses in 2002. Despite its low share of total production costs, cattle ranching
accounts for a substantial share (nearly 12%) of national agriculture-related energy
consumption—including over 15% of fuel expenses and 10% of fertilizer costs used by U.S.
agriculture in 2002. The significant energy share is explained by the vast acreage involved in beef
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Energy Use in Agriculture: Background and Issues
cattle ranching in the United States (nearly 420 million acres) and the large number of animals
marketed to feedlots or slaughter houses each year (in 2003, 18.4 million head of cattle and calves
were slaughtered, while 11.8 million head were on feed as of July 1, 2004).
Aquaculture Production
Aquaculture production includes fish farming of major fish species—catfish, salmon, etc.—as
well as of shrimp and mussels. Energy needs vary with production processes and species, but can
involve specialized breeding tanks as well as grow-out tanks for fingerlings. Temperature and
water control, as well as lighting, are prime users of electricity. Aquaculture is grouped with
“other animal production activities” in the 2002 agricultural census. Together, this composite
category had energy costs of $445 million, representing nearly 8% of total production expenses.
Dairy Cattle and Milk Production
Dairy operations require electricity for operating milking systems, cooling milk, and supplying
hot water for sanitation. Pasture management, feeding operations, and marketing activities also
consume energy directly and indirectly. Total energy costs of $1.2 billion for dairy and milk
production in 2002 accounted for less than 7% of their total production expenses.
Cattle Feedlots
Feedlot operations use energy to furnish feed and water to animals, to manage animal waste, and
to market animals to packing plants and other slaughter houses. However, feedlot energy
expenses of $2.3 billion in 2002 accounted for less than 3% of total production costs. Purchasing
feeder stock and feedstuffs dominated cost outlays.
Hog and Pork Production
Most hog producers use some type of confinement production, with specialized, environmentally
modified facilities. Central farrowing houses, nurseries, and hog barns require electricity for
heating, cooling, feeding, and watering systems. Total energy costs of $526 million for hog and
pork production accounted for less than 5% of their total production expenses in 2002.
Poultry and Egg Production
As with hog production, most poultry and egg production takes place in specialized buildings.
Chickens do not need a lot of room, as long as they have adequate ventilation, proper
nourishment, and clean fresh water round the clock. As a result, poultry brooding and grow-out
houses require lighting, heating, cooling, feeding, and watering systems. Total energy costs of
$534 million for poultry and egg production in 2002 accounted for 3% of their total production
expenses.
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Energy Use in Agriculture: Background and Issues
Agricultural Energy Use by Region
Regional energy use is measured by annual survey data as reported by USDA’s NASS in its
annual report on farm production expenses. 18 Farm expenditures on energy by source for NASS’s
ten major agricultural production regions are presented in Appendix Tables A5-A7 and provide
the basis for the following discussion of regional energy uses. 19
Figure 18. U.S. Farm Production Expenditure Regions
Source: USDA, NASS, Farm Production Expenditures, 2003 Summary, July 2004.
The Corn Belt (Illinois, Indiana, Iowa, Missouri, and Ohio), with its extensive area planted to
corn and soybeans, is the dominant agricultural energy-using region, with a total energy bill of
$6.5 billion and accounting for 22% of total U.S. agricultural energy costs in 2002. However,
nearly 75% ($4.7 billion) of the Corn Belt’s energy costs are in the form of indirect energy
expenditures. The Corn Belt is the leading consumer of fertilizers and agricultural chemicals,
with national cost-shares of 27% and 24%, respectively. Also noteworthy is the Corn Belt’s
nation-leading share (25%) of LP gas expenditures for agricultural production—used extensively
for crop drying.
In contrast, the Pacific region (Washington, Oregon, and California)—which placed second in
terms of total agricultural energy costs at $4.2 billion—relied far more heavily on direct fuels
(43% of total energy costs in the Pacific region). In particular, the Pacific dominated national
electricity expenditures in agricultural production, with nearly $1 billion in outlays in 2002
(accounting for 25% of national electricity costs in agricultural production).
18
USDA, NASS, Farm Production Expenditures, 2003 Summary, July 2004.
19
NASS’s survey data includes direct responses on farm use of fuel, agricultural chemicals, and fertilizer. Farm
electricity use is approximated as 15% of farm services outlays which includes operating irrigation equipment and farm
utilities.
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Energy Use in Agriculture: Background and Issues
Both diesel and total fuel costs are highest in the regions with the largest planted crop area—the
Corn Belt with 84.4 million acres and the Northern Plains (Kansas, Nebraska, North Dakota,
South Dakota) with 81.8 million acres. Irrigation of field crops (another important source of
energy demand) is most prevalent in the Southern Plains, Delta, Mountain, and Pacific regions,
but may be found to some degree throughout major growing areas.
Agricultural Energy Use Issues
Volatile, Rising Energy Prices
Import Dependency
U.S. petroleum import dependency has been growing steadily over the past four decades. In 1970,
U.S. petroleum imports accounted for 22% of domestic consumption; by 2003 the import share
had grown to over 55% and is projected to reach 70% by 2025.20 This problem is not unique to
the United States, but is increasingly a problem for “Western industrial countries.” For example,
Japan and OECD Europe (excluding the United Kingdom)21 are also heavily dependent on
imported oil as a share of domestic consumption, with 100% and 66% shares, respectively, in
2004.22
Because the United States depends on international sources for so much of its energy needs, U.S.
energy prices reflect international market conditions, particularly crude oil supplies. This heavy
import dependence renders the United States vulnerable to unexpected price movements and
supply disruptions in international energy markets. Agriculture appears particularly vulnerable to
energy price increases through both petroleum and natural gas markets, as well as fertilizer
markets.
During the last three decades of the 20th century, the United States has been subjected to four
major oil price shocks—1973-1974, following the Arab Oil Embargo of that same period; 19791980, following the Iranian crisis of 1979; 1990-1991, following the Persian Gulf war; and 19992000 resulting from unexpectedly strong global demand and tight supplies.23 Some analysts have
argued that reducing U.S. energy dependence on foreign sources might alleviate some or much of
the energy price volatility, but that it would likely be associated with a relatively higher price
level. 24
20
Dept. of Energy (DOE), Energy Information Agency (EIA), Annual Energy Outlook 2004 with Projections to 2025,
available at http://www.eia.doe.gov/oiaf/aeo/gas.html. Depending on low- and high-oil price assumptions, the projected
petroleum import share for 2025 ranges from 65% to 75% of consumption.
21
OECD Europe consists of Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece,
Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland,
Turkey, and the United Kingdom.
22
DOE, EIA, International Petroleum Information.
23
See CRS Report RL31608, The Effects of Oil Shocks on the Economy: A Review of the Empirical Evidence, for
information on global oil shocks and their potential consequences to the U.S. economy.
24
See CRS Report RS20727, Energy Independence: Would It Free the United States From Oil Price Shocks? for a
discussion of energy independence and its potential consequences on the U.S. economy.
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Energy Use in Agriculture: Background and Issues
In the past two years, global markets have seen monthly average crude oil prices surge first to
over $31 per barrel in February 2003 (the highest price since 1981), then to a record $43.60 per
barrel in October 2004 (see Figure 19). On October 26, the daily spot market price (FOB) for
West Texas Intermediate crude oil at Cushing, Oklahoma, reached a record $56.37 per barrel.
Natural gas prices have followed a similar pattern (but with substantially more variability than
crude oil prices), and are presently at or near record high levels. 25 Since 1999, natural gas prices
appear to be ratcheting upward to new levels. From January 1986 to July 1999, natural gas prices
(wellhead) averaged $1.86 per million cubic feet (mcf); from August 1999 to December 2002,
they averaged $3.42 per mcf; and since January 2003, they have averaged $5.12 per mcf.
Figure 19. Natural Gas vs. Crude Oil, Monthly Prices, January 1976 to July 2004
Source: Monthly average price from DOE, EIA.
Note: Data for natural gas prices begins in Januaury, 1976.
The federal government does not determine the price of natural gas; however, two federal
agencies—the Federal Energy Regulatory Commission (FERC) and the Commodity Futures
Trading Commission (CFTC)—play important roles in promoting competitive natural gas
markets by deterring anticompetitive actions. In addition, the Energy Information Administration
(EIA) is responsible for obtaining information about and analyzing trends in the natural gas
market that are used by industry and government decision makers.
Rising U.S. Demand for Natural Gas
Increased use of natural gas for electricity generation—due in part to more stringent air pollution
standards under the Clean Air Act—has contributed to steadily rising demand in the United
States.26 This has permanently raised the demand for natural gas. In contrast, U.S. natural gas
25
For more information on the market fundamentals underlying the natural gas market, see CRS Report RL32091,
Natural Gas Prices and Market Fundamentals.
26
DOE, EIA, Annual Energy Outlook 2004 with Projections to 2025, available at http://www.eia.doe.gov/oiaf/aeo/
gas.html#ngsc.
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Energy Use in Agriculture: Background and Issues
production has grown slowly since the late 1980s. Since 1990, natural gas imports have supplied
a growing share of domestic consumption.
Certain infrastructure constraints limit access to international supplies of natural gas. First, most
natural gas is transported via pipeline. Lack of pipeline access limits the viability of offshore
natural gas production in the Gulf of Mexico, where supplies are relatively abundant.
Additionally, the pipeline requirement limits access to international supplies other than from
neighboring Canada and Mexico. Second, the alternative to pipeline transport of natural gas is
liquefication into liquefied natural gas (LNG), where transportation is more feasible. However,
costly infrastructure requirements for production, transportation, and importation, as well as local
safety concerns, limit LNG accessibility.27
The tightening U.S. supply situation, and increasing dependence on imports, has contributed to
higher natural gas prices, with immediate implications for farm fuel and fertilizer costs, as well as
for U.S. fertilizer production.
Declining U.S. Fertilizer Production Capacity
According to the GAO, total U.S. nitrogen consumption in 2002 was about 21.4 million short
tons, of which agriculture used about 12 million tons (or 56%).28 The U.S. manufacturing sector
used over 9 million tons of nitrogen for industrial purposes such as promoting bacterial growth in
waste treatment plants, making plastics, and as a refrigerant.
Fertilizer production, especially nitrogenous fertilizers, is very energy intensive. As mentioned
earlier, natural gas accounts for a substantial portion (75% to 90%) of nitrogen fertilizer
production costs, either directly as a feedstock or indirectly as a fuel to generate the electricity
needed in production. U.S. fertilizer manufacturers are at a competitive disadvantage when
domestic natural gas prices rise. Natural gas prices in foreign countries with major nitrogen
production capabilities tend to be well below U.S. prices. For example, in early 2001, when U.S.
prices for natural gas were about $5 per million Btu, the price of gas in the Middle East was 60¢
per million Btu; 40¢ in North Africa; 70¢ in Russia; and 50¢ in Venezuela.29
As with natural gas, the federal government does not set or control prices for nitrogen fertilizer.
Furthermore, nitrogen fertilizer products imported from other countries are generally not subject
to U.S. trade restrictions such as quotas or tariffs.
U.S. fertilizer manufacturers can respond to periodic natural gas price spikes by closing plants
temporarily, and resuming production when prices drop again. But higher prices sustained over
the long run likely result in permanent loss of domestic production capacity. In recent years, high
domestic natural gas prices have resulted in the idling and/or closing of a significant share of U.S.
nitrogen production capacity. In 1998, U.S. ammonia plant production capacity was 21.4 million
tons. From 1998/99 to 2003/04, 3.5 million tons of ammonia plant production capacity was
closed and another 1.5 million tons was idled, leaving 16.3 million tons (76.5%) of active
27
For more information, see CRS Report RL32386, Liquefied Natural Gas (LNG) in U.S. Energy Policy: Infrastructure
and Market Issues.
28
GAO, Natural Gas: Domestic Nitrogen Fertilizer Production Depends on Natural Gas Availability and Prices,
GAO-03-1148, Sept. 2003, p. 4.
29
Ibid.
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Energy Use in Agriculture: Background and Issues
production capacity.30 Declining nitrogen production suggests that either nitrogen use must fall or
nitrogen imports must increase.
Advocates for the U.S. fertilizer industry—supported by the American Farm Bureau Federation
(AFBF)—argue for changes in U.S. laws and regulations that would either encourage increases in
the supply of natural gas, or that would discourage natural gas demand for power generation. 31
They suggest that increased access to federal lands that are currently off-limits to drilling and
greater tax incentives for drilling could bolster domestic natural gas production. Alternately, they
contend that relaxing environmental restrictions on coal plants, extending or expediting nuclear
and hydro licenses, promoting use of clean coal technology, and prohibiting or taxing the use of
natural gas as a fuel in power generating permits could all reduce domestic demand for natural
gas as an energy source for power generation. However, a broad range of environmentalist
organizations, renewable energy advocates, and urban pollution control groups decry these
suggestions.32
In September 2003, the National Petroleum Council (NPC) produced a report, Balancing Natural
Gas Policy, that examined the policy options to address the problem of high natural gas prices.
The report recognized the likelihood of continued high natural gas prices “for years to come,” and
concluded, among other options, that energy conservation and greater energy efficiency would
have the biggest immediate potential to hold down prices. 33
High Fertilizer Prices
Higher natural gas prices have contributed to substantially higher nitrogen fertilizer prices (see
Figures 11 and 12). In April of 1999, the wellhead price of natural gas was $1.90 per 1,000 cubic
feet (mcf), while the price of anhydrous ammonia was $211 per short ton. Two years later, in
April 2001, the wellhead price of natural gas had risen by 138% to $4.52 mcf, while the
anhydrous ammonia price had risen by 89% to $399 per short ton. Because anhydrous ammonia
is the principal ingredient in most nitrogen fertilizers, prices for the entire suite of nitrogen
fertilizers are highly correlated and afford agricultural producers few cost-saving options other
than either applying less nitrogen fertilizer or shifting to less nitrogen-demanding crops.
Fertilizer Supply Shortages?
The nexus of sharply higher natural gas and fertilizer prices and declining domestic fertilizer
production capacity came to a head in 2001 when, according to GAO, the U.S. fertilizer industry
experienced a 25% decline in nitrogen production. However, GAO contends that the domestic
30
The Fertilizer Institute, North American Fertilizer Capacity, August 2003. Historical closings between 1998/99 and
2003/04 obtained in personal correspondence with C.F. Industries in April 2004. The fertilizer marketing year ends
June 30.
31
Fertilizer industry position is from personal conversations with Glen Buckley, C.F. Industries, Long Grove, IL; for
details on the AFBF energy position, see http://www.fb.org/issues/backgrd/energy04.pdf.
32
For examples, see the policy positions on clean energy espoused by the Sierra Club at http://www.sierraclub.org/
environment/, the Natural Resources Defense Council at http://www.nrdc.org/, and the U.S. Public Interest Research
Group at http://www.uspirg.org/.
33
For more information on energy efficiency issues, see CRS Report IB10020, Energy Efficiency: Budget, Oil
Conservation, and Electricity Conservation Issues. For information on the NPC and its report on natural gas policy,
refer to http://www.npc.org/.
Congressional Research Service
27
Energy Use in Agriculture: Background and Issues
supply of nitrogen fertilizer “was adequate to meet farmers’ demand” due to two offsetting
factors: first, U.S. nitrogen imports increased 43%; and second, farm use of nitrogen fertilizer
declined by 7%.34 Although these market adjustments served to keep supply and demand in
balance, they did so at sharply higher fertilizer price levels. According to fertilizer industry
officials, although natural gas and fertilizer prices subsided in 2002, their return to high levels in
2003 (see Figure 11) threaten to “irreversibly cripple” the U.S. fertilizer industry. 35
Farm Income and Energy Prices
In February 2004, USDA projected U.S. net cash farm income at $55.9 billion. 36 However, since
the initial forecast was made, the outlook for crop and livestock prices has eroded substantially
due to record crop projections and falling commodity prices, while the outlook for production
expenses has risen due to higher energy and fertilizer prices (see Table 6).
Table 6. Fuel Price Changes, 2003 to 2004
Fuel
Unit
Period
2003
2004
$/unit
Change
%
Natural Gas
mcfa
April
1.88
5.20
177
Gasoline
gallon
April-Oct.
1.61
1.96
21
Diesel fuel
gallon
April-Oct.
1.47
1.80
23
Producer Prices Paid Index
1990-92 = 100
%
Fuel
April-Oct.
133.9
161.8
21
Fertilizer
April-Oct.
125.0
136.8
10
Chemicals
April-Oct.
121.0
120.8
0
Source: DOE, EIA, for fuel prices at http://www.eia.doe.gov; and USDA, NASS, Agricultural Prices, various issues
for producer prices paid index at http://www.nass.usda.gov.
a.
mcf = 1,000 cubic feet.
Natural gas prices (wellhead) were running 177% above previous year levels, while national retail
gasoline prices were 21% higher, diesel prices were 23% higher; and USDA’s prices paid index
(PPI) for fuels and fertilizer were 21% and 10% higher, respectively, from a year earlier. The
agricultural chemicals PPI showed no year-to-year change.
What do these energy price changes mean for farm incomes? Because individual farmers are
“price-takers” and lack the capacity 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. Assuming composite fuel (natural gas, gasoline, diesel, etc.) and
electricity prices are 21% higher, fertilizer prices are about 10% higher, and pesticide prices are
34
GAO, Natural Gas: Domestic Nitrogen Fertilizer Production Depends on Natural Gas Availability and Prices,
GAO-03-1148, Sept. 2003, p. 3.
35
Ibid., p. 1.
36
USDA, ERS, “Farm Income and Costs: Farm Sector Income,” February 6, 2004; available at
http://www.ers.usda.gov/briefing/FarmIncome/nationalestimates.htm.
Congressional Research Service
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Energy Use in Agriculture: Background and Issues
unchanged (in accordance with the USDA PPI), then total energy costs would be about $3.6
billion (or 8.4%) higher in 2004 than originally projected. 37 Assuming roughly similar energy
usage rates, this would represent a direct reduction from net cash income. However, the higher
fuel costs would likely ripple through several other production expenditure categories such as
marketing costs and custom services, further cutting into the agricultural sector’s net returns. The
bottom line is that the agricultural sector will likely feel the pinch of higher energy prices directly
in the form of substantially lower net cash income than originally projected in 2004. If farmers
perceive the energy price changes as likely to persist into 2005, then substantial crop and activity
mix changes are likely to ensue.
Price Responsiveness to Energy Price Changes
Higher natural gas prices increase farm energy costs directly through higher fuel costs, and
indirectly through higher fertilizer and pesticide costs. How agricultural producers respond to
energy price changes depends on both the time frame under consideration (i.e., within season
versus across seasons) and the producer’s expectation of whether the price change is only
temporary or will persist into the future.
If producers perceive an energy price change as temporary (lasting only for the current crop
season), their response may be limited to some small-scale efforts to economize on fuel use,
perhaps by switching to fuel-saving cultivation methods (such as minimum or no-till
production),38 by applying smaller volumes of fertilizers and pesticides per acre than originally
planned, or by switching between fuels (such as from natural gas to propane) if meaningful price
differences exist. However, in the short run (within a single growing season), once crops have
been planted and major inputs (such as fertilizers, pesticides, and fuels) have been purchased, a
producer’s response to energy and fertilizer cost increases may be fairly limited.
If an energy price change is perceived as permanent, a producer is more likely to adjust the farm’s
activity mix and production practices from one season to the next to compensate for the new
revenue-cost structure.
Economic studies have attempted to measure year-to-year producer responsiveness to changes in
prices. In the aggregate, studies suggest that a 10% rise in fuel prices is associated with about a
6% decline in use. 39 Fertilizer and pesticide use are also negatively related to changes in their
prices. A 10% rise in prices induces a 6.6% decrease in fertilizer use and a 5.3% decline in
pesticide use. As with energy use, changes in fertilizer and pesticide use may be obtained by
switching to less intensive production methods, or to crops that use fewer inputs. However, the
ability for a producer to implement such changes is greatly diminished once a crop is planted and
the production strategy has been set in motion. Instead, producers tend to respond to input price
changes by altering their crop and activity mix from season to season. As a result, unexpected
within-season price changes can have unavoidable impacts on farm income.
37
Calculated by applying hypothetical price changes to data projections provided by USDA, ERS, 2004 Farm Income
Forecast, available at http://www.ers.usda.gov/Briefing/FarmIncome/nationalestimates.htm.
38
In 2002, 37% of the area planted to the top 22 crops (281.6 million acres) was cultivated under some type of
conservation tillage, according to the Conservation Technology Information Center at http://www.ctic.purdue.edu/
CTIC/CTIC.html.
39
Miranowski (2004).
Congressional Research Service
29
Energy Use in Agriculture: Background and Issues
Prices of Most Fuel Sources Tend to Move Together
Demand for refined petroleum products in agricultural production is determined mainly by the
number of acres planted and harvested, the production practice used to produce the crops, weather
conditions, and the relative prices for the various types of energy. Because the majority of energy
used in the United States (and the world) is derived from petroleum-based sources—gasoline,
diesel, LP gas, and natural gas—their prices tend to move together. This limits the success of
switching among fuel sources to reduce energy costs (see Figure 20).
Figure 20. U.S. Farm Fuel vs. Crude Oil Annual Prices, 1973-2003
Source: DOE, EIA, and Mranowski (2004).
Food Price Effects?
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 containers, 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 that 3.5% of the cost of food is attributable to energy expenses, and 4% is
attributable to transportation expenses (see Figure 21). (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.)
Congressional Research Service
30
Energy Use in Agriculture: Background and Issues
Farmers receive 19¢ for every $1 of consumer expenditures on food. This means that 81¢ 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 for passing on their higher energy
costs through the production-marketing system, and eventually to the consumer.
Figure 21. Distribution of a Dollar Spent on Food, 2000
Source: “Food Marketing and Price Spreads: USDA Marketing Bill,” ERS, USDA, available at
http://www.ers.usda.gov/Briefing/FoodPriceSpreads/bill/.
Conclusions
Agriculture uses a small proportion of the nation’s energy. However, direct and indrect energy
inputs are critical to agricultural production. Higher and unstable energy prices can make
agriculture unprofitable. As a result, agriculture may have to find ways to become more energy
independent.
Public Laws and Bills Affecting Energy Use
by Agriculture
Several provisions of the 2002 farm bill are designed to encourage the production and use of
renewable energy sources such as biofuels, wind energy systems, solar energy, and small-scale
hydropower systems.40 In addition, other federal and state laws provide incentives for renewable
energy research and production.41 However, agricultural energy production remains very small by
40
USDA, 2002 Farm Bill, Title IX—Energy, online information available at http://www.usda.gov/farmbill/
energy_fb.html. For more information see CRS Report RL31271, Energy Provisions of the Farm Bill: Comparison of
the New Law with Previous Law and House and Senate Bills.
41
For more information, see State and Federal Incentives and Laws, at DOE’s Alternative Fuels Data Center, at
http://www.eere.energy.gov/afdc/laws/incen_laws.html.
Congressional Research Service
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Energy Use in Agriculture: Background and Issues
any standard. In 2002, the combined production of biofuels, wind, and solar energy systems
contributed only about 0.5% of total U.S. energy consumption.42
None of the current energy provisions in the 2002 farm bill directly address the difficulties
confronting the U.S. nitrogen fertilizer production sector due to steadily rising natural gas prices.
Certain provisions of pending energy legislation (S. 2095) make partial attempts to address the
natural gas shortage; however, energy legislation has had a difficult time moving through
Congress. In late 2003, energy legislation (H.R. 6, H.Rept. 108-375) stalled in Congress,
primarily over its high cost and a dispute related to a liability protection provision for MTBE
(ethanol’s principal oxygenate competitor).43 Senator Domenici introduced a revised version of
the bill (S. 2095) on February 12, 2004, with a lower estimated cost and without a controversial
provision on the fuel additive MTBE. However, S. 2095 also appears to have stalled. Major nontax provisions related to agricultural energy use and production in the conference measure and S.
2095 include:44
•
Renewable Fuels Standard (RFS)—Both versions of pending energy legislation
include an RFS requiring that 3.1 billion gallons of renewable fuel be used in
2005, increasing to 5.0 billion gallons by 2012 (as compared to 2.1 billion
gallons used in 2002).
•
Alaska Gas Pipeline—Alaska’s North Slope currently holds 30 trillion cubic
feet of undeveloped proven natural gas reserves, about 18% of total U.S. reserves
(or a little less than one-and-a-half years of U.S. consumption at current rates).
Both bills presume a public need for the gas and would provide $18 billion in
loan guarantees for construction of a natural gas pipeline from Alaska to Alberta,
where it would connect to the existing midwestern pipeline system.
•
Energy Efficiency Standards—New statutory efficiency standards would be
established for several consumer and commercial products and appliances. For
certain other products and appliances, DOE would be empowered to set new
standards. For motor vehicles, funding would be authorized for the National
Highway Traffic Safety Administration (NHTSA) to set Corporate Average Fuel
Economy (CAFÉ) levels as provided in current law.
•
Energy Production on Federal Lands—To encourage production on federal
lands, royalty reductions would be provided for marginal oil and gas wells on
public lands and the outer continental shelf. Provisions are also included to
increase access to federal lands by energy projects—such as drilling activities,
electric transmission lines, and gas pipelines.
It is noteworthy that neither bill includes a provision for a Renewable Energy Portfolio Standard
(RPS). An RPS aims to encourage electricity production from renewable energy resources such as
from wind energy systems.
42
DOE, EIA, Table 1.2, “Energy Production by Source, 1949-2003,” and Table 1.3, “Total U.S. Energy Consumption
by Source.”
43
For the status of pending energy legislation and additional related bill contents, see CRS Issue Brief IB10116, Energy
Policy: The Continuing Debate and Omnibus Energy Legislation, at http://www.congress.gov/erp/ib/pdf/IB10116.pdf.
For a discussion of the tax provisions in the bills, see CRS Issue Brief IB10054, Energy Tax Policy.
44
For more information, see CRS Report RL32204, Omnibus Energy Legislation, 108th Congress: Comparison of NonTax Provisions in the H.R. 6 Conference Report and S. 2095; and CRS Report RL32078, Omnibus Energy Legislation:
Comparison of Major Provisions in House- and Senate-Passed Versions of H.R. 6, Plus S. 14.
Congressional Research Service
32
Energy Use in Agriculture: Background and Issues
Appendix. Tables
What Is a Btu?45
A Btu (British thermal unit) is a measure of the heat content of a fuel and indicates the amount of
energy contained in the fuel. Because energy sources vary by form (gas, liquid, or solid) and
energy content, the use of Btu’s allows the adding of various types of energy using a common
benchmark (see Table A-1).
Table A-1. Btu Conversion Chart
Unit
Btu’s per unit
GEGa
Average Price:
$ per GEGb
Gasoline
(conventional)
gallon
125,071 Btu
1.00
$1.99
Ethanolc
gallon
76,000 Btu
0.61
na
Ethanol (E85)
gallon
83,361 Btu
0.67
$2.52 - $2.99
Diesel fuel
gallon
138,690 Btu
1.11
$1.54
Biodiesel (B20)
gallon
138,690 Btu
1.11
$1.56 - $1.90
Natural Gasd
1,000 cubic foot
1,030 Btu
0.88
$1.16 - $1.75
gallon
91,333 Btu
0.73
$1.92 - $3.08
kilowatt-hour
3,413 Btu
na
na
Pesticides
pound
97,914 Btu
na
na
Nitrogen
pound
25,095 Btu
na
na
Phosphate
pound
5,609 Btu
na
na
Potash
pound
4,741 Btu
na
na
Fuel type
Direct Energy Types
LP gas or Propane
Electricity
Indirect Energy Types
Source: Conversion rates for petroleum-based fuels and electricity are from the DOE, Monthly Energy Review,
August 2004. Conversion rates for nitrogen, phosphate, potash, and pesticides are from Mahadev Bhat, Burton
English, Anthony Turhollow, and Hezron Nyangito, Energy in Synthetic Fertilizers and Pesticides: Revisited, Research
Report # ORNL/Sub/90-99732/2, Oak Ridge National Laboratory, Oak Ridge, Tennessee, Jan. 1995.
Note: na = not applicable.
a.
GEG = gasoline equivalent gallon. The GEG allows for comparison across different forms—gas, liquid,
kilowatt, etc. It is derived from the Btu content by first converting each fuel’s units to gallons; then dividing
each fuel’s Btu unit rate by gasoline’s Btu unit rate of 125,000; finally multiplying each fuel’s volume by the
resulting ratio.
b.
Prices are for mid-June 2004. The retail price per gallon has been converted to price per GEG units. DOE,
The Alternative Fuel Price Report, June 29, 2004.
c.
Net heat content used here. Gross heat content is 84,262 Btu per barrel.
d.
Converted to gallons as 4.62 million Btu per barrel or 110,000 Btu per gallon.
45
The material for this appendix is taken from “What is a Btu?,” Agricultural Resources and Environmental Indicators,
Agr. Handbook No. 705, Economic Research Service, USDA, December 1994.
Congressional Research Service
33
Table A-2. U.S. Farm Energy Costs in Production, by Activity, 2002
Direct Energy Costs
Activitiesa
Cropland
Total Production
Costs
Total Energy
Costs
Fuel &
oils
1,000 ac.
Crop Activities
Utilitiesb
Indirect Energy Costs
Total
Direct
Chemicals
Fertilizersc
Total
Indirect
$ million
294,822
80,343
18,364
3,996
2,630
6,625
6,648
7,722
14,371
Oilseed & grain
204,555
35,584
9,824
1,963
753
2,716
3,179
4,683
7,862
Vegetable & melons
8,639
9,184
2,011
359
408
766
869
784
1,653
Fruit & tree nuts
6,790
10,553
1,747
302
491
793
924
521
1,446
Cotton
14,590
3,513
1,259
215
125
340
656
388
1,044
Greenhouse & nurseryd
2,497
10,514
979
394
381
775
237
348
585
Tobacco
3,576
1,280
356
96
37
133
109
151
260
Other cropse
54,175
9,715
2,188
667
435
1,102
674
847
1,521
139,343
95,857
5,701
2,681
2,243
4,923
992
2,028
3,021
Beef cattle ranching
89,838
20,038
2,323
1,029
527
1,556
314
980
1,294
Dairy cattle & milk prod.
11,505
18,451
1,241
488
625
1,113
267
486
753
Cattle feedlots
19,231
22,143
577
231
147
378
125
220
346
Poultry & egg prod.
3,020
17,649
534
411
451
862
60
63
123
Hog & pig farming
6,288
11,312
526
215
244
458
156
156
312
Aquaculture & other
7,991
5,617
445
267
226
493
66
112
178
Sheep & goat farming
1,470
647
55
40
23
63
4
11
15
United States
434,165
173,199
24,036
6,675
4,875
11,550
7,609
9,751
17,360
Livestock Activities
Source: USDA, NASS, 2002 Census of Agriculture.
a.
Activities are organized by North American Industry Classification Ssytem (NAICS), see “Appendix A” of 2002 Census of Agriculture for details; available at
http://www.nass.usda.gov/census/census02/volume1/us/index1.htm.
b.
Includes electricity, telephone charges, internet fees, and water purchased in 2002.
c.
Includes lime and soil conditioners.
CRS-34
d.
Includes floriculture.
e.
Includes hay, sugar cane, sugar beets, and all other crops.
CRS-35
Table A-3. Energy Cost Shares of Total Production Costs, by Activity, 2002
Indirect Energy Costs
Direct Energy Costs
Activitiesa
Total Production
Costs
Total Energy
Costs
Fuel &
oils
Utilitiesb
Total
Direct
Chemicals
Fertilizersc
Total
Indirect
Percent
Crop Activities
100%
22.9
5.0
3.3
8.2
8.3
9.6
17.9
Oilseed & grain
100%
27.6
5.5
2.1
7.6
8.9
13.2
22.1
Vegetable & melons
100%
21.9
3.9
4.4
8.3
9.5
8.5
18.0
Fruit & tree nuts
100%
16.6
2.9
4.7
7.5
8.8
4.9
13.7
Cotton
100%
35.8
6.1
3.6
9.7
18.7
11.0
29.7
Greenhouse & nurseryd
100%
9.3
3.7
3.6
7.4
2.3
3.3
5.6
Tobacco
100%
27.8
7.5
2.9
10.4
8.5
11.8
20.3
Other cropse
100%
22.5
6.9
4.5
11.3
6.9
8.7
15.7
100%
5.9
2.8
2.3
5.1
1.0
2.1
3.2
Beef cattle ranching
100%
11.6
5.1
2.6
7.8
1.6
4.9
6.5
Dairy cattle & milk prod.
100%
6.7
2.6
3.4
6.0
1.4
2.6
4.1
Cattle feedlots
100%
2.6
1.0
0.7
1.7
0.6
1.0
1.6
Poultry & egg prod.
100%
3.0
2.3
2.6
4.9
0.3
0.4
0.7
Hog & pig farming
100%
4.6
1.9
2.2
4.0
1.4
1.4
2.8
Aquaculture & other
100%
7.9
4.8
4.0
8.8
1.2
2.0
3.2
Sheep & goat farming
100%
8.5
6.2
3.6
9.7
0.6
1.7
2.3
United States
100%
13.7
3.8
2.8
6.6
4.3
5.5
9.9
Livestock Activities
Source: USDA, NASS, 2002 Census of Agriculture.
a.
Activities are organized by North American Industry Classification Ssytem (NAICS), see “Appendix A” of 2002 Census of Agriculture for details; available at
http://www.nass.usda.gov/census/census02/volume1/us/index1.htm.
b.
Includes electricity, telephone charges, internet fees, and water purchased in 2002.
CRS-36
c.
Includes lime and soil conditioners.
d.
Includes floriculture.
e.
Includes hay, sugar cane, sugar beets, and all other crops
CRS-37
Table A-4. U.S. Energy Cost Shares by Activity, 2002
Indirect Energy Costs
Direct Energy Costs
Activitiesa
Total Production
Costs
Total Energy
Costs
Fuel &
oils
Utilitiesb
Total
Direct
Chemicals
Fertilizersc
Total
Indirect
Percent
Crop Activities
45.6
76.3
59.8
54.0
57.4
87.0
79.2
82.6
Oilseed & grain
20.2
40.8
29.4
15.5
23.5
41.6
48.0
45.2
Vegetable & melons
5.2
8.4
5.4
8.4
6.6
11.4
8.0
9.5
Fruit & tree nuts
6.0
7.3
4.5
10.1
6.9
12.1
5.3
8.3
Cotton
2.0
5.2
3.2
2.6
2.9
8.6
4.0
6.0
Greenhouse & nurseryd
6.0
4.1
5.9
7.8
6.7
3.1
3.6
3.4
Tobacco
0.7
1.5
1.4
0.8
1.2
1.4
1.5
1.5
Other cropse
5.5
9.1
10.0
8.9
9.5
8.8
8.7
8.7
54.4
23.7
40.2
46.0
42.6
13.0
20.8
17.4
Beef cattle ranching
11.4
9.7
15.4
10.8
13.5
4.1
10.1
7.4
Dairy cattle & milk prod.
10.5
5.2
7.3
12.8
9.6
3.5
5.0
4.3
Cattle feedlots
12.6
2.4
3.5
3.0
3.3
1.6
2.3
2.0
Poultry & egg prod.
10.0
2.2
6.2
9.3
7.5
0.8
0.6
0.7
Hog & pig farming
6.4
2.2
3.2
5.0
4.0
2.0
1.6
1.8
Aquaculture & other
3.2
1.8
4.0
4.6
4.3
0.9
1.1
1.0
Sheep & goat farming
0.4
0.2
0.6
0.5
0.5
0.1
0.1
0.1
United States
100%
100%
100%
100%
100%
100%
100%
100%
Livestock Activities
Source: USDA, NASS, 2002 Census of Agriculture.
a.
Activities are organized by North American Industry Classification Ssytem (NAICS), see “Appendix A” of 2002 Census of Agriculture for details; available at
http://www.nass.usda.gov/census/census02/volume1/us/index1.htm.
b.
Includes electricity, telephone charges, internet fees, and water purchased in 2002.
c.
Includes lime and soil conditioners.
d.
Includes floriculture.
CRS-38
e.
Includes hay, sugar cane, sugar beets, and all other crops.
Table A-5. U.S. Farm Energy Costs in Production, by Region, 2003
Direct Energy Costs
Regionsa
Area
Planted
Total
Production
Costs
Total
Energy
Costs
Diesel
Gas
LP
Gas
Other
Fuelb
1,000 ac
Total
Fuels
Indirect Energy Costs
Electricityc
Total
Direct
Chemicals Fertilizers
Total
Indirect
$ million
Corn Belt
84,425
35,810
6,362
564
230
225
71
1,090
542
1,632
2,030
2,700
4,730
Pacific
11,014
32,300
4,173
395
246
54
105
800
983
1,783
1,280
1,110
2,390
No. Plains
81,844
26,070
4,076
603
247
81
99
1,030
416
1,446
1,200
1,430
2,630
Lake States
35,022
19,290
2,987
373
139
134
44
690
347
1,037
880
1,070
1,950
So. Plains
34,904
17,170
2,308
388
213
43
106
750
368
1,118
430
760
1,190
Appalachian
16,164
16,250
2,074
235
171
92
32
530
294
824
510
740
1,250
Mountain
24,902
16,510
1,994
291
202
54
23
570
344
914
440
640
1,080
Southeast
8,472
12,850
1,965
172
97
111
29
409
276
685
570
710
1,280
Delta
15,761
9,850
1,844
251
90
78
21
440
204
644
710
490
1,200
Northeast
12,650
12,800
1,289
158
125
48
59
390
249
639
300
350
650
U.S. Total
325,158
198,900
29,069
3,430
1,760
920
589
6,699
4,020
10,719
8,350
10,000
18,350
Source: Area data is for major crops: USDA, NASS, Acreage, June 30, 2004. Farm production expenses data: USDA, NASS, Farm Production Expenditures, 2003 Summary,
July 2004.
a.
The 14 regions consist of the following states: Northeast: CT, DE, ME, MD, MA, NH, NJ, NY, PA, RI, VT; Lake States: MI, MN, WI; Corn Belt: IL, IN, IA, MO, OH;
Northern Plains: KS, NE, ND, SD; Appalachian: KY, NC, TN, VA, WV; Southeast: AL, FL, GA, SC; Delta: AR, LA, MS; Southern Plains: OK, TX; Mountain: AZ, CO, ID,
MT, NV, NM, UT, WY; and Pacific: CA, OR, WA.
b.
Other fuels includes natural gas, coal, fuel oil, kerosene, wood, etc.
c.
Electricity is approximated as 15% of farm services expenses.
CRS-39
Table A-6. Energy Cost Shares of Total Production Costs, by Region, 2003
Direct Energy Costs
Regionsa
Total
Production
Costs
Total
Energy
Costs
Diesel Gas
LP
Gas
Other
Fuelb
Total
Fuels
Indirect Energy Costs
Electricityc
Total
Direct
Chemicals Fertilizers
Total
Indirect
Percent
Corn Belt
100%
17.8
1.6
0.6
0.6
0.2
3.0
1.5
4.6
5.7
7.5
13.2
Pacific
100%
12.9
1.2
0.8
0.2
0.3
2.5
3.0
5.5
4.0
3.4
7.4
No. Plains
100%
15.6
2.3
0.9
0.3
0.4
4.0
1.6
5.5
4.6
5.5
10.1
Lake States
100%
15.5
1.9
0.7
0.7
0.2
3.6
1.8
5.4
4.6
5.5
10.1
So. Plains
100%
13.4
2.3
1.2
0.3
0.6
4.4
2.1
6.5
2.5
4.4
6.9
Appalachian
100%
12.8
1.4
1.1
0.6
0.2
3.3
1.8
5.1
3.1
4.6
7.7
Mountain
100%
12.1
1.8
1.2
0.3
0.1
3.5
2.1
5.5
2.7
3.9
6.5
Southeast
100%
15.3
1.3
0.8
0.9
0.2
3.2
2.1
5.3
4.4
5.5
10.0
Delta
100%
18.7
2.5
0.9
0.8
0.2
4.5
2.1
6.5
7.2
5.0
12.2
Northeast
100%
10.1
1.2
1.0
0.4
0.5
3.0
1.9
5.0
2.3
2.7
5.1
U.S. Total
100%
14.6
1.7
0.9
0.5
0.3
3.4
2.0
5.4
4.2
5.0
9.2
Source: Area data is for major crops: USDA, NASS, Acreage, June 30, 2004. Farm production expenses data: USDA, NASS, Farm Production Expenditures, 2003 Summary,
July 2004.
a.
The 14 regions consist of the following states: Northeast: CT, DE, ME, MD, MA, NH, NJ, NY, PA, RI, VT; Lake States: MI, MN, WI; Corn Belt: IL, IN, IA, MO, OH;
Northern Plains: KS, NE, ND, SD; Appalachian: KY, NC, TN, VA, WV; Southeast: AL, FL, GA, SC; Delta: AR, LA, MS; Southern Plains: OK, TX; Mountain: AZ, CO, ID,
MT, NV, NM, UT, WY; and Pacific: CA, OR, WA.
b.
Other fuels includes natural gas, coal, fuel oil, kerosene, wood, etc.
c.
Electricity is approximated as 15% of farm services expenses.
CRS-40
Table A-7. Regional Shares of U.S. Energy Costs by Type, 2003
Regionsa
Total
Production
Costs
Total
Energy
Costs
Direct Energy Costs
Diesel
Gas
LP
Gas
Other
Fuelb
Total
Fuels
Indirect Energy Costs
Electricityc
Total
Direct
Chemicals Fertilizers
Total
Indirect
Percent
Corn Belt
18.0
21.9
16.4
13.1
24.5
12.1
16.3
13.5
15.2
24.3
27.0
25.8
Pacific
16.2
14.4
11.5
14.0
5.9
17.8
11.9
24.5
16.6
15.3
11.1
13.0
No. Plains
13.1
14.0
17.6
14.0
8.8
16.8
15.4
10.3
13.5
14.4
14.3
14.3
Lake States
9.7
10.3
10.9
7.9
14.6
7.5
10.3
8.6
9.7
10.5
10.7
10.6
So. Plains
8.6
7.9
11.3
12.1
4.7
18.0
11.2
9.1
10.4
5.1
7.6
6.5
Appalachian
8.2
7.1
6.9
9.7
10.0
5.4
7.9
7.3
7.7
6.1
7.4
6.8
Mountain
8.3
6.9
8.5
11.5
5.9
3.9
8.5
8.5
8.5
5.3
6.4
5.9
Southeast
6.5
6.8
5.0
5.5
12.1
4.9
6.1
6.9
6.4
6.8
7.1
7.0
Delta
5.0
6.3
7.3
5.1
8.5
3.6
6.6
5.1
6.0
8.5
4.9
6.5
Northeast
6.4
4.4
4.6
7.1
5.2
10.0
5.8
6.2
6.0
3.6
3.5
3.5
U.S. Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Source: Area data is for major crops: USDA, NASS, Acreage, June 30, 2004. Farm production expenses data: USDA, NASS, Farm Production Expenditures, 2003 Summary,
July 2004.
a.
The 14 regions consist of the following states: Northeast: CT, DE, ME, MD, MA, NH, NJ, NY, PA, RI, VT; Lake States: MI, MN, WI; Corn Belt: IL, IN, IA, MO, OH;
Northern Plains: KS, NE, ND, SD; Appalachian: KY, NC, TN, VA, WV; Southeast: AL, FL, GA, SC; Delta: AR, LA, MS; Southern Plains: OK, TX; Mountain: AZ, CO, ID,
MT, NV, NM, UT, WY; and Pacific: CA, OR, WA.
b.
Other fuels includes natural gas, coal, fuel oil, kerosene, wood, etc.
c.
Electricity is approximated as 15% of farm services expenses.
CRS-41
Energy Use in Agriculture: Background and Issues
Author Contact Information
(name redacted)
Specialist in Agricultural Policy
#redacted#@crs.loc.gov, 7-....
Congressional Research Service
42
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