sustainable farming, energy cost, agricultural cost
After several years of relatively stable energy prices during the middle-and late-1980s, events of late-1990 in the Middle East reawakened concerns about rising energy prices. Between July 1990, prior to Iraq's August invasion of Kuwait, and October 1990, diesel fuel prices increased by 77 percent. Natural gas, a major factor of production in urea fertilizer, also experienced price increases last fall in the aftermath of Iraq's invasion. Urea prices were affected by these higher natural gas prices. Moreover, Iraq and Kuwait supplied 7 percent of the world's urea prior to last fall and also provided fuel oil for fertilizer plants in Europe. As a result of tightened supplies of oil, natural gas, and urea, analysts began to expect significantly higher farm fuel and fertilizer prices starting with the 1991 crop year. Since many pesticides are petroleum-based, pesticide prices also were expected to rise. Fuel prices in early 1991 have fallen from the levels reached last fall. Nevertheless, events of the past year have caused renewed interest in energy policy. Possible actions to become less dependent on Middle East oil could result in rising "real" (inflation-adjusted) energy prices during the 1990s. This concern about energy prices comes at a time when interest in "sustainable" agriculture is increasing because of efforts to reduce soil loss and water contamination. Since the mid-1980s, interest of farmers and the public in farming systems which rely on fewer chemical fertilizer and pesticide inputs has steadily increased. These so-called "sustainable" farming systems make greater use of crop rotations which include legumes and small grains than do more "conventional" systems. Thus, fertility and weed control are provided in part through "rotation" effects. Although sustainable systems sometimes involve more mechanical tillage, as a partial substitute for chemical herbicides, some of the techniques of conservation tillage --which leave a good deal of residue on the surface are retained. The issue which this paper addresses is whether rising energy prices will increase the ability of sustainable farming systems to compete economically with more conventional systems. Rising prices of chemical fertilizers and herbicides should reduce the profitability of conventional systems more than they reduce profitability of sustainable systems. Rising fuel costs are less predictable in their effect, since conventional and sustainable systems vary in their relative fuel use.
Department of Economics, South Dakota State University
Number of Pages
Dobbs, Thomas and Cole, John, "Impacts of Rising Energy Prices on the Attractiveness of Sustainable Farming Systems" (1991). Economics Staff Paper Series. 79.