UNIVERSITY PARK, Pa. -- The skyrocketing cost of fuel is hitting nearly everyone in the pocketbook. Among business owners acutely feeling the effects are farmers, who depend on petroleum products -- gasoline and diesel fuel -- to power vehicles and machines that are used in everything from planting and harvesting crops to feeding animals and spreading fertilizer.

"This is harvest time for crop growers," says Glen Cauffman, manager of farms and facilities in Penn State's College of Agricultural Sciences. "Choppers will be in the fields harvesting silage. Combines will run consistently from now to Christmas harvesting corn and soybeans. Corn dryers will remove moisture to assure grain quality. These machines use large quantities of fuel, and fuel is a major cost of harvest operations."

Cauffman also points out that many farmers buy fertilizer, feed for their livestock, seed and farm supplies. Suppliers of these inputs typically add surcharges to their prices to cover increased fuel and transportation costs. "In addition, the manufacturing of fertilizer consumes huge quantities of fossil fuel, and fertilizer prices will reflect increased energy costs."

Even if a farmer uses manure generated on the farm as fertilizer, there are costs associated with spreading it over many acres. "Even before the fuel-price climb, the fertilizer value of manure was less than the cost of manure spreading," Cauffman says. "Now, manure is an even greater economic burden."

Cauffman explains that farmers are hit again with increased fuel prices when they market their products, because farm commodities can't be delivered to market without transportation. "In general farmers are responsible for the cost of this transportation," he says. "The milk haulers add fuel surcharges. Grain haulers increase their trucking rates. And farmers lose revenue."

Unlike other business owners, farmers usually cannot pass on to consumers the increased cost of operation. "Farm commodity prices are based on straightforward supply and demand economics," Cauffman notes. "When energy costs escalate, farmers may be caught in the middle between rising production costs and falling revenues."

Jack Watson, Penn State Extension state program leader for agriculture and natural resources, says he believes farmers will be creative and strategic in how they respond to the economic pressure. "Different farmers are affected differently, depending upon the proportion of their overall operating costs that are related directly to fuel," he says. "They may have locked in fuel prices earlier, so the higher prices won't affect them immediately. Others will end up paying whatever the price is on the day of delivery.

"Decisions made by farmers about how to respond are similar to those made by other businesses," says Watson. "Just like other successful business people, they are a creative group with a 'can-do' attitude, and they will be looking at both near-term responses, as well as future options available to them."

Ironically, says Cauffman, the solution to the nation's energy crisis may be the farms. "Farms are capable of producing renewable energy," he says. "Biodiesel and ethanol -- which can be produced from soybeans, corn and other crops -- can replace some of the petroleum-based fuel sources. Methane can be generated from manure.

"The problem is that the infrastructure is not yet in place to produce fuel from farm products. Several plants are in development in Pennsylvania but will not be in operation for many months. Other than their own conservation, innovation and business acumen, there are no immediate means of relief for farmers from the energy price squeeze."

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EDITORS: Contact Glen Cauffman at 814-865-4433 and Jack Watson at 814-863-6114.

Writer/Editor: Chuck GillOffice 814-863-2713