Robert Pore's Ag Blog

As Grand Island drivers see relief at the gas pumps with lower prices, diesel prices continue to go up and squeeze farmers as harvest time approaches.

U.S. Sen. Ben Nelson, D-Neb., and the Nebraska Farm Bureau are urging the Environmental Protection Agency to delay the Oct. 15 rule deadline that’s causing diesel prices to skyrocket.

Nelson and Nebraska Farm Bureau said delaying the deadline to Jan. 1, 2007, gives the fuel industry more time to build supplies of the new ultra-low-sulfur diesel (ULSD) product. They said they hope that would avoid a huge diesel price increase for farmers during harvest.

According to the U.S. Department of Energy, Midwest diesel prices averaged $3.02 per gallon on Wednesday. That was nearly 50 percent more than a year ago.

Nebraska AAA said the average diesel price across the state on Wednesday was $3.28 per gallon, compared to $2.60 per gallon at this time last year.

In Grand Island, AAA reported diesel prices on Wednesday at $3.28 per gallon, compared to $2.59 per gallon a year ago.

In contrast, regular gasoline was selling at a number of Grand Island stations for about the same price it did a year ago — $2.62 per gallon.

During the last 30 days in Grand Island, regular gasoline prices have declined 32 cents per gallon, while diesel prices have increased about 14 cents per gallon.
On Wednesday, there was nearly a 60 cents difference between a gallon of regular gasoline and a gallon of diesel.

What Nelson and Farm Bureau is urging is for the EPA to delay its Oct. 15 deadline for its rule requiring 100 percent of diesel fuel used on highways to meet the new “Ultra-Low-Sulfur Diesel” (ULSD) standard until at least Jan. 1.

Nelson, who was in Grand Island Wednesday, said one of the reasons for the high diesel prices is that implementing the new EPA rules are causing product delivery delays with refiners.

According to the U.S. Federal Trade Commission, diesel price increases are due to refiners converting their facilities from high-sulfur diesel fuel to ultralow-sulfur fuel, high demand this summer from irrigators because of the on-going drought and refinery production problems.

According to officials at the Nebraska Farm Bureau, an estimated 50 percent of irrigation pumps in Nebraska operate on diesel fuel. Drought conditions this summer caused those irrigation pumps to run more than normal.
According to 2002 Census of Agriculture, there are 7.6 million acres of irrigation land in Nebraska.

An irrigation pump can use between 10-20 gallons of diesel fuel per hour. With the rising cost of diesel fuel, a farmer’s fuel expense can run as high as $150 per acre.
“A low supply and high demand drives the price up,” Nelson said. “The last thing that we need to do is to keep demand for that product stronger than supply. It doesn’t make any sense about what EPA is doing.”

Nelson is contacting the EPA to urge them to delay the Oct. 15 deadline.

Farm Bureau President Keith Olsen said doing so will help assure farmers have enough diesel available for harvest.

“That will help avoid a repeat of the diesel shortages and high prices that occurred during the peak irrigation season earlier this summer,” Olsen said.

Farmers use off-road diesel, which is not yet required to meet the new low sulfur standard. But availability and price of off-road diesel is directly affected by what happens with highway diesel, Olsen said.

“Since early summer, refineries, fuel terminals and pipelines have not been able to make or distribute enough of the new ULSD to replace the older product for highway use,” Olsen said.

EPA required refiners and importers to ensure that at least 80 per cent of the volume of highway diesel met the ULSD standard by June 1. That caused a shortage at the time during the height of the irrigation season.

Olsen said diesel prices for Nebraska farmers increased 50 cents during the summer months because of logistical problems and shortages in supplying highway diesel.

“From agriculture’s perspective, the timing of the new rule could not have been worse,” he said. “The added fuel costs during the last couple of years have put some producers’ bottom line in the red.”

Olsen said the same EPA rule requires all highway diesel to be ultra low sulfur by Oct. 15.

“That will come right in the middle of the harvest season in Nebraska, which could cause another price increase for farmers,” Olsen said.

USDA Sec. Mike Johanns’ announcement Tuesday of disaster assistance will help drought-impacted Nebraska producers, but falls short of what is needed, said Rep. Tom Osborne, R-Neb.

While in South Dakota Tuesday, Johanns announced $780 million in assistance to help farmers and ranchers manage drought- and weather-related production challenges.

The funding includes a new $50 million program for livestock producers impacted by drought, focusing nearly $30 million in unused conservation funds on drought, and accelerating the delivery of an estimated $700 million in counter-cyclical payments.

“While some parts of the country are experiencing very good crop conditions, drought is taking a toll on farming and ranching operations in other areas of the United States this year,” said Johanns.

The U.S. Department of Agriculture announced that $780 million in crop and livestock disaster assistance will be made available to producers affected by severe drought.

“I am pleased that Secretary Johanns is providing assistance to producers who have been struggling with the impact of this prolonged drought,” Osborne said.

He is encouraging Nebraskans who have been affected by the drought to contact their local Farm Service Agency office to determine their eligibility for these funds.

But Osborne is concerned that the funding will not be sufficient to address the wiespread impact that the drought has had in Nebraska and throughout the Great Plains.

Most of Osborne’s 3rd Congressional District has received disaster declarations because of drought conditions.

“Throughout the summer, I have been stressing the need for assistance to my fellow members of the House, and I will continue to work in Congress to provide disaster assistance for all producers,” Osborne said.

Earlier this month, an economist for the University of Nebraska-Lincoln, Brad Lubben, estimated Nebraska agricultural loss due to drought this year at $342 million.

Lubben said crop loss in Nebraska is gauged at more than $98 million, with nearly $70 million of that attributed to a bad winter wheat crop.

The Nebraska Agricultural Statistics Service earlier reported that this year’s wheat crop in Nebraska was 21 percent below last year’s harvest.

But livestock producers appear to be taking the biggest hit this year, with an estimated $193 million lost due to parched pastures, Lubben said.

In its latest weekly crop and weather report, the Nebraska Agricultural Statistics Service rated pasture and rangeland conditions in Nebraska at 66 percent poor or very poor, 26 percent fair and 8 percent good.

Both Sens. Ben Nelson and Chuck Hagel support a $4 billion drought assistance package that the Senate passed as part of the Senate’s Agricultural Appropriations funding bill.

Hagel said Tuesday Johanns’ announcement was a good start, but he will continue to push for more disaster assistance.

Hagel is urging the chairman of the appropriations committee, Sen. Thad Cochran, and the majority and minority leaders to consider the ag approps bill before the end of September.

Nelson also welcomed the news, but believes Johanns’ announcement falls short of what’s needed to help drought-stricken farmers.

“This is welcome assistance for our farmers and ranchers coping with the consequences of drought, but unfortunately, farmers need comprehensive drought relief along the lines of what I am trying to get passed in the Senate,” he said.

National Farmers Union President Tom Buis said the USDA’s response is not strong enough.

“More than 80 percent of counties nationwide were declared federal disaster areas in 2005,” Buis said. “This year we've already seen more than 50 percent of counties declared disaster areas, as drought conditions continue to get worse.”

According to Dale Schuler, president of the National Association of Wheat Growers, the disaster relief package announced by Johanns will provide no relief to wheat growers because it relies on a farm bill program that hasn’t provided for them since its inception.

“Wheat growers across the country are facing the worst droughts in decades,” he said. “A much broader, more comprehensive package is needed — now.”

Johanns said $700 million of the $780 million for disaster relief will go to producers in the form of advanced counter-cyclical payments.

But Schuler said the problem is that counter-cyclical payments don’t work during times of drought because lack of production drives prices up.

“Wheat growers have received virtually no assistance from the counter-cyclical program, or the loan program for that matter, since 2002,” he said. “Basing desperately needed disaster assistance on the counter-cyclical program will provide uneven relief, at best.”

As part of the assistance package, Johanns said the new $50 million program for livestock producers, called the Livestock Assistance Grant Program, will provide $50 million from Section 32 to states in block grant form.

States will distribute funds to livestock producers in counties that were designated as D3 or D4 on the Drought Monitor anytime between March 7 and Aug. 31.
In Nebraska, 39 counties are designated D3 or D4, according to the National Drought Mitigation Center in Lincoln.

Johanns said 64 percent of the nation’s beef cows and breeding stock are in drought-stricken areas where many ranchers are being forced to cull their herds.
The grants are designed to help livestock producers restore their purchasing power.
Rancher-members of the National Cattlemen’s Beef Association (NCBA) say funding announced by USDA to aid farmers and ranchers is a good start toward providing much-needed disaster and drought relief.

“For those struggling to cope with drought conditions, today’s announcement is a good sign that our nation’s policymakers are sensitive to the challenges being faced by our ag producers,” said Jason Jordan, National Cattlemen’s Beef Association manager of legislative affairs.

Drought assistance package and existing USDA disaster assistance information is available at www.usda.gov.