Energy Use in Agriculture: Background and Issues

CRS Report for Congress
Energy Use in Agriculture:
Background and Issues
November 19, 2004
Randy Schnepf
Specialist in Agricultural Policy
Resources, Science, and Industry Division


Congressional Research Service ˜ The Library 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 signficantly 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.



Contents
In troduction ......................................................1
Farm Energy Consumption Overview..................................2
Agriculture as a Share of U.S. Energy Use..........................2
Agriculture Sector Energy Use by Source...........................5
Energy’s Share of Agricultural Production Costs.....................8
Agricultural Energy Use by Activity..............................17
Agricultural Energy Use by Region...............................22
Agricultural Energy Use Issues......................................24
Volatile, Rising Energy Prices...................................24
Declining U.S. Fertilizer Production Capacity......................26
Farm Income and Energy Prices.................................28
Food Price Effects?...........................................30
Conclusions .................................................31
Public Laws and Bills Affecting Energy Use by Agriculture...............32
Appendix Tables .................................................34
List of 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
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......................12
Figure 11. Anhydrous Ammonia and Natural Gas Prices ..................14
Figure 12. Nitrogen Fertilizer Prices..................................14
Figure 13. Phosphate, Potash, and Nitrogen Prices.......................14
Figure 14. Fruits and Vegetables Apply More Nitrogen....................15
Figure 15. ...But Major Field Crops Harvest More Area...................15
Figure 16. Corn and Wheat Dominate Nitrogen Use.....................15
Figure 17. USDA Prices-Paid Index for Major Farm Production Inputs......16
Figure 18. U.S. Farm Production Expenditure Regions...................22
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



Table 1. Energy Uses in Agricultural Production.........................3
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 A1. Btu Conversion Chart.....................................34
Table A2. U.S. Farm Energy Costs in Production, by Activity, 2002.........35
Table A3. Energy Cost Shares of Total Production Costs, by Activity, 2002...36
Table A4. U.S. Energy Cost Shares by Activity, 2002....................37
Table A5. U.S. Farm Energy Costs in Production, by Region, 2003..........38
Table A6. Energy Cost Shares of Total Production Costs, by Region, 2003....39
Table A7. Regional Shares of U.S. Energy Costs by Type, 2003............40



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,1
applying chemicals, and transporting inputs and outputs to and from market. 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 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 both3
crops and livestock production) used an estimated 1.1 quadrillion Btu 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.


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.
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/ proj ects/03-35Ene rgyConferencepresentations.htm] .

Table 1. Energy Uses in Agricultural Production
Direct Use of EnergyFuel
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 equipmentNatural Gas (NG)
- Drying of grain or fruitLP Gas (LP)
- Ginning cottonElectricity (E)
- Curing tobacco
- Heating for frost protection in groves and orchards
- Crop flamers
- Heating/cooling of cattle barn, pig or poultry brooder,
greenhouse, stock tanks, etc.
- Animal waste treatment
- Standby generators
General farm overheadElectricity
- Lighting for houses, sheds, and barns
- Power for farm household appliances
Custom operationsDiesel, Gasoline,
- Field work (e.g., combining)NG, LP, E
- Drying
- Other
MarketingDiesel
- Transportation: elevator to terminal, processor, or portGasoline
- Elevating
Indirect Use of EnergyFuel
FertilizerNatural 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.



Figure 1. In 2002, Agriculture Accounted for 1% of
Total U.S. Direct Energy Use
Indirect Energy Use. In contrast to direct energy, agriculture’s share of two
important indirect energy uses — fertilizer and pesticide use — is signficantly higher.5
According to the Government Accountability Office (GAO), in 2002 agriculture
accounted for about 56% (12 million out of about 21.4 million metric tons) of total6
U.S. nitrogen use. 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 component in the


5 Formerly the General Accounting Office.
6 GAO, Natural Gas: Domestic Nitrogen Fertilizer Production Depends on Natural Gas
Availability and Prices, GAO-03-1148, Sept. 2003, p. 4.
7 U.S. EPA, Pesticide Industry Sales and Usage: 2000 and 2001 Market Estimates, May

2004, p.6.



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
Total Energy Use by Agriculture Has Declined Over Time.9
Agricultural energy use peaked at 2.4 quadrillion Btu in 1978. 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 gasoline-powered to more fuel-
efficient diesel-powered engines, adopting conservation tillage practices (which tend


8 LP (liquified petroleum) gas is the generic name for commercial propane and commercial
butane gases.
9 Miranowski (2004).

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
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 gasoline-equivalent 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


10 USDA, ERS, Agricultural Resources and Environmental Indicators, Agricultural
Handbook No. 705, December 1994, p. 108.
11 See Table A1 for gasoline-equivalent prices.
12 USDA, ERS, Agricultural Resources and Environmental Indicators, 1996-97,
Agricultural handbook No. 712, July 1997, p. 145.

(which required working the soil many 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
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.
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


13 Ibid., pp. 149-150.

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
Figure 6. Indirect Energy Use (IEU) and Output, 1965-99
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 2000-2003 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
Annual ExpensesAverage:
Expenditure Categorya20002001200220032000-03Share
$ Billion$ Billion%
Total Energy Expenses28.529.128.028.828.614.7%
Direct energy10.010.210.110.410.25.2%
Fuels 7.0 6.7 6.5 6.7 6.7 3.5%
Electricity b 3.0 3.5 3.6 3.7 3.5 1.8%
Indirect energy 18.518.917.918.418.49.5%
Ag chemicalsc8.58.68.38.48.54.4%
Fe rtilizers d 10.0 10.3 9.6 10.0 10.0 5.1%
Livestock & poultrye18.018.518.319.018.59.5%
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.f19.920.921.120.320.610.6%
Farm servicesg22.423.423.223.123.011.9%
Farm improvementsh8.78.38.512.19.44.8%
Machinery & vehicles13.014.214.114.914.17.2%
Rent, interest, & taxesi33.934.333.532.533.617.3%
Total expenditures189.6195.2193.1198.9194.2100%
Source: USDA, NASS, Farm Production Expenditures, 2003 Summary, July 2004, p. 27.
aData 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.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 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


14 USDA, Economic Research Service, Agricultural Outlook, AO-1, June 1975, p. 9.
15 Fertilizer use and energy costs are discussed in more detail in the following section,
entitled “Fertilizer Production Costs.”

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
Figure 8. Energy Cost Shares by Source
on U.S. Farms, 1965-2003
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
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).


Figure 10. U.S. Nitrogen Fertilizer Use, 1989- 2003

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 Figures 11 and 12.) Phosphate and potash prices
are less closely linked to natural gas than are prices for nitrogen fertilizers (see
Figure 13).
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 Figures 14 and 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).


16 The Fertilizer Institute, available at [http://www.tfi.org/].

Figure 11. Anhydrous Ammonia and Natural Gas Prices
Figure 12. Nitrogen Fertilizer Prices
Figure 13. Phosphate, Potash, and Nitrogen Prices



Figure 14. Fruits and Vegetables Apply More Nitrogen...
Nitrogen Fertilizer Application Rates
So yb ean
Peanuts
Sunflower
Wh eat
Snap beans*
Sorghum
C o tto n
T o b accoPeach es
Ric e
Corn
Sweet corn*
Grapefruit
Oranges
Grap es
T o mato es*
P o ta to e s
0 50 100 150 200 250
Lbs per acre*For processing. Source: The Fertilizer Inst. From NASS, USDA; data for most years is from 1998 or 1999.
Figure 15. ...But Major Field Crops Harvest More Area
U.S. Area Harvested by Crop in 1999
So yb ean
Pe anuts
Sunflower
Wh eat
Snap beans*
Sorghum
Cotton
Peach es
T o b acco
Ric e
Corn
Sweet corn*
Grapefruit
Oranges
Gr ap es
T o ma to es*
P o ta to e s
010,00020,00030,00040,00050,00060,00070,00080,00090,0001,000 acres*For processing.
Source: The Fertilizer Inst. From NASS, USDA; data for most years is from 1998 or 1999.
Figure 16. Corn and Wheat Dominate Nitrogen Use


Total Nitrogen Fertilizer Use by Crop
So yb ean
Pe anuts
Sunflower
Wh eat
Snap beans*
Sorghum
Cotton
T o b accoPeach es
CornRic e
GrapefruitSweet corn*
Gr ap esOranges
P o ta to e sT o ma to es*
01,0002,0003,0004,0005,0006,0001,000 tons*For processing.
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 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

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
Share of Total
Total Costs of TotalEnergy U.S. Farm
ActivitiesaProductionEnergyShare ofEnergy Costs
(COP)CostsCOPby Activity
———— $ million————%%
Crop Activities80,34318,36422.976.4
Major Field Crops50,09113,62727.256.7
Vegetable & Fruits19,7373,75919.015.6
Greenhouse & nurseryb10,5149799.34.1
Livestock Activities95,8575,7015.923.7
Beef cattle ranching20,0382,32311.69.7
Aquaculture & other5,6174457.91.9
Dairy cattle & milk prod.18,4511,2416.75.2
Hog & pig farming11,3125264.62.2
Poultry & egg prod.17,6495343.02.2
Cattle feedlots22,1435772.62.4
United States173,19924,03613.7100.0
Source: USDA, NASS, 2002 Census of Agriculture.
aActivities 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/
vo lume 1 /us/ind e x1 .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.


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.

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.
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
Total Irrigated
CropCroplandIrrigated AreaShare
Commodity Groups1,000 acres1,000 acres%
Fruit & tree nuts6,7904,58567.5
Vegetable & melons8,6394,97557.6
Co tto n 14,590 4,766 32.7
Greenhouse & nurseryd2,49774329.7
Other cropse 54,1768,85016.3
Cattle feedlots11,5051,37912.0
Oilseed & grain204,55519,4739.5
Beef cattle ranching89,8387,7718.6
Dairy cattle & milk prod.19,2311,3797.2
T obacco 3,576 112 3.1
U.S. Total434,16555,31112.7
Individual Crops
Rice 3,198 3,198 100.0
Orchards 5,330 4,374 82.1
Potato es 1,266 1,033 81.6
Vegetables 3,433 2,360 68.7
Sugar cane (for sugar)97849750.8
Peanuts 1 ,223 463 37.8
Upland cotton12,2244,57037.4
Sugar beets (for sugar)1,36647234.5
Alfalfa hay22,6386,80930.1
T obacco 429 97 22.7
Fo rage 64,041 10,280 16.0
Corn for grain68,2319,71014.2
So yb eans 72,400 5,460 7.5
Wheat for grain45,5202,9106.4
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
Total Total Direct
Ar e a Productio n Energy Energy Che m- Fer t-
Cr o p Planted Co sts Co sts Co sts icals ilizers T otal
1,000 ac———————————$ per acre————————————
Rice 3,022 614.37 187.11 73.78 59.02 54.31 113.33
So r ghum 9 , 4 2 0 217.74 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
Co rn 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, all13,479545.25130.4438.5955.9435.9191.85
Sugar beets1,365872.29204.4250.5896.3957.45153.84
Wheat, all61,700191.4141.0710.986.9523.1430.09
Oats 4,601 156.03 27.00 7.85 1.87 17.28 19.15
So yb eans 73,404 238.49 33.04 8.73 16.92 7.39 24.31
Share of Total Production Costs—————————percent —————————
Rice 100.0 30.5 12.0 9 .6 8.8 18.4
So r ghum 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
Co rn 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, all100.023.97.110.36.616.8
Sugar beets100.023.45.811.16.617.6
Wheat, all100.021.55.73.612.115.7
Oats 100.0 17.3 5 .0 1.2 11.1 12.3
So yb eans 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 A2). 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 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.
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
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.

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).
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; 1979-1980, following the Iranian crisis of 1979; 1990-

1991, following the Persian Gulf war; and 1999-2000 resulting from unexpectedly23


strong global demand and tight supplies. 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
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,


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.

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
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 under26
the Clean Air Act — has contributed to steadily rising demand in the United States.
This has permanently raised the demand for natural gas. In contrast, U.S. natural gas
production has grown slowly since the late 1980s. Since 1990, natural gas imports
have supplied a growing share of domestic consumption.


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
[ ht t p: / / www.ei a.doe.gov/ oi a f / aeo/ gas.ht ml #ngsc] .

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.


27 For more information, see CRS Report RL32386, Liquefied Natural Gas (LNG) in U.S.
Energy Policy: Issues and Implications.
28 GAO, Natural Gas: Domestic Nitrogen Fertilizer Production Depends on Natural Gas
Availability and Prices, GAO-03-1148, Sept. 2003, p. 4.
29 Ibid.

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 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.


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/backgr d/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/].

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 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 nitrogen34
fertilizer declined by 7%. 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 Change
— $/unit — %
Natural GasmcfaApril1.885.20177
Gasoline gallon April-Oct. 1.61 1.96 21
Diesel fuelgallonApril-Oct.1.471.8023
Producer Prices Paid Index1990-92 = 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].
amcf = 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%


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].

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
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 (such38
as minimum or no-till production), 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.


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].

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.
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
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


39 Miranowski (2004).

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 food-service establishments. Transportation
fuel costs, except for those incurred for food wholesaling, are excluded.)
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
[ h t t p : / / www. e r s . u s d a . g o v / B r i e f i n g / F oodP riceSpreads/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 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 non-tax 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).


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].
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:
Comparison of Non-Tax 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.

!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.



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
A1).
Table A1. Btu Conversion Chart
Btu’s peraAverage Price: b
Fuel typeUnitunitGEG$ per GEG
Direct Energy Types
Gasoline
(conventional)gallon125,071 Btu1.00$1.99
Ethanoldgallon76,000 Btu0.61na
Ethanol (E85)gallon83,361 Btu0.67$2.52 - $2.99
Diesel fuelgallon138,690 Btu1.11$1.54
Biodiesel (B20)gallon138,690 Btu1.11$1.56 - $1.90
Natural Gasc1,000 cubic foot1,030 Btu0.88$1.16 - $1.75
LP gas or Propanegallon91,333 Btu0.73$1.92 - $3.08
Electricitykilowatt-hour3,413 Btunana
Indirect Energy Types
Pesticidespound97,914 Btunana
Nitrogenpound25,095 Btunana
Phosphatepound5,609 Btunana
Potashpound4,741 Btunana
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.
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
Converted to gallons as 4.62 million Btu per barrel or 110,000 Btu per gallon.d
Net heat content used here. Gross heat content is 84,262 Btu per barrel.


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.

Table A2. U.S. Farm Energy Costs in Production, by Activity, 2002
TotalTotalDirect Energy CostsIndirect Energy Costs
ActivitiesaProductionEnergyFuel &Util-bTotalChem-Fert-cTotal
Cropland Co sts Co sts o ils ities Direct icals ilizer s Indirect
1,000 ac.—————————————— $ million —————————————
Crop Activities294,82280,34318,3643,9962,6306,6256,6487,72214,371
Oilseed & grain204,55535,5849,8241,9637532,7163,1794,6837,862
Vegetable & melons8,6399,1842,0113594087668697841,653
Fruit & tree nuts6,79010,5531,7473024917939245211,446
Co tto n 14,590 3,513 1,259 215 125 340 656 388 1,044
Greenhouse & nurseryd2,49710,514979394381775237348585
T obacco 3,576 1,280 356 96 37 133 109 151 260
e 54,1759,7152,1886674351,1026748471,521
iki/CRS-RL32677Other crops
g/wLivestock Activities139,34395,8575,7012,6812,2434,9239922,0283,021
s.orBeef cattle ranching89,83820,0382,3231,0295271,5563149801,294
leak
Dairy cattle & milk prod.11,50518,4511,2414886251,113267486753
://wikiCattle feedlots19,23122,143577231147378125220346
http
Poultry & egg prod.3,02017,6495344114518626063123
Hog & pig farming6,28811,312526215244458156156312
Aquaculture & other7,9915,61744526722649366112178
Sheep & goat farming1,4706475540236341115
United States434,165173,19924,0366,6754,87511,5507,6099,75117,360
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. e
Includes hay, sugar cane, sugar beets, and all other crops.



Table A3. Energy Cost Shares of Total Production Costs, by Activity, 2002
TotalTotalDirect Energy CostsIndirect Energy Costs
ActivitiesaProductionEnergyFuel &Util-bTotalChem-Fert-cTotal
Co sts Co sts o ils ities Direct icals ilizer s Indirect
——————————————————— Percent ———————————————————
Crop Activities100%22.95.03.38.28.39.617.9
Oilseed & grain100%27.65.52.17.68.913.222.1
Vegetable & melons100%21.93.94.48.39.58.518.0
Fruit & tree nuts100%16.62.94.77.58.84.913.7
Co tto n 100% 35.8 6 .1 3.6 9 .7 18.7 11.0 29.7
Greenhouse & nurseryd100%9.33.73.67.42.33.35.6
T obacco 100% 27.8 7 .5 2.9 10.4 8 .5 11.8 20.3
e 100%22.56.94.511.36.98.715.7
iki/CRS-RL32677Other crops
g/wLivestock Activities100%5.92.82.35.11.02.13.2
s.orBeef cattle ranching100%11.65.12.67.81.64.96.5
leak
Dairy cattle & milk prod.100%6.72.63.46.01.42.64.1
://wikiCattle feedlots100%2.61.00.71.70.61.01.6
http
Poultry & egg prod.100%3.02.32.64.90.30.40.7
Hog & pig farming100%4.61.92.24.01.41.42.8
Aquaculture & other100%7.94.84.08.81.22.03.2
Sheep & goat farming100%8.56.23.69.70.61.72.3
United States100%13.73.82.86.64.35.59.9
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. e
Includes hay, sugar cane, sugar beets, and all other crops.



Table A4. U.S. Energy Cost Shares by Activity, 2002
TotalTotalDirect Energy CostsIndirect Energy Costs
ActivitiesaProductionEnergyFuel &Util-bTotalChem-Fert-cTotal
Co sts Co sts o ils ities Direct icals ilizer s Indirect
—————————————————— Percent —————————————————
Crop Activities45.676.359.854.057.487.079.282.6
Oilseed & grain20.240.829.415.523.541.648.045.2
Vegetable & melons5.28.45.48.46.611.48.09.5
Fruit & tree nuts6.07.34.510.16.912.15.38.3
Co tton 2 .0 5.2 3 .2 2.6 2 .9 8.6 4 .0 6.0
Greenhouse & nurseryd6.04.15.97.86.73.13.63.4
T obacco 0.7 1 .5 1.4 0 .8 1.2 1 .4 1.5 1 .5
e 5.59.110.08.99.58.88.78.7
iki/CRS-RL32677Other crops
g/wLivestock Activities54.423.740.246.042.613.020.817.4
s.orBeef cattle ranching11.49.715.410.813.54.110.17.4
leak
Dairy cattle & milk prod.10.55.27.312.89.63.55.04.3
://wikiCattle feedlots12.62.43.53.03.31.62.32.0
http
Poultry & egg prod.10.02.26.29.37.50.80.60.7
Hog & pig farming6.42.23.25.04.02.01.61.8
Aquaculture & other3.21.84.04.64.30.91.11.0
Sheep & goat farming0.40.20.60.50.50.10.10.1
United States100%100%100%100%100%100%100%100%
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. e
Includes hay, sugar cane, sugar beets, and all other crops.



Table A5. U.S. Farm Energy Costs in Production, by Region, 2003
TotalDirect Energy CostsIndirect Energy Costs
Prod- Total
Ar e a uc tio n Energy LP Othe rb Total Elec-c Total Che m- Fer t- Total
RegionsaPlanted CostsCostsDieselGasGasFuelFuelstricityDirecticalsilizersIndirect
1,000 ac———————————————————— $ million ————————————————————
Corn Belt84,42535,8106,362564230225711,0905421,6322,0302,7004,730
Pacific 11,014 32,300 4,173 395 246 54 105 800 983 1,783 1,280 1,110 2,390
No. Plains81,84426,0704,07660324781991,0304161,4461,2001,4302,630
Lake States35,02219,2902,987373139134446903471,0378801,0701,950
So. Plains34,90417,1702,308388213431067503681,1184307601,190
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
iki/CRS-RL32677So utheast 8 ,472 12,850 1,965 172 97 111 29 409 276 685 570 710 1,280
g/wDelta 15,761 9,850 1,844 251 90 78 21 440 204 644 710 490 1,200
s.or
leakNo rtheast 12,650 12,800 1,289 158 125 48 59 390 249 639 300 350 650
://wikiU.S. Total325,158198,90029,0693,4301,7609205896,6994,02010,7198,35010,00018,350
httpSource: 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.



Table A6. Energy Cost Shares of Total Production Costs, by Region, 2003
Direct Energy CostsIndirect Energy Costs
To t a l Total
P r o duct io n Energy LP Othe rb Total Elec-c Total Che m- Fer t- Total
Re gio ns a Co sts Co sts Diesel Gas Gas Fuel Fuels tr icity Direct icals ilizer s Indirect
——————————————————————— Percent —————————————————————
Corn Belt100%17.81.60.60.60.23.01.54.65.77.513.2
P acific 100% 12.9 1 .2 0.8 0 .2 0.3 2 .5 3.0 5 .5 4.0 3 .4 7.4
No. Plains100%15.62.30.90.30.44.01.65.54.65.510.1
Lake States100%15.51.90.70.70.23.61.85.44.65.510.1
So. Plains100%13.42.31.20.30.64.42.16.52.54.46.9
Appalachian 100% 12.8 1 .4 1.1 0 .6 0.2 3 .3 1.8 5 .1 3.1 4 .6 7.7
M o unt a i n 100% 12.1 1 .8 1.2 0 .3 0.1 3 .5 2.1 5 .5 2.7 3 .9 6.5
iki/CRS-RL32677So ut he a s t 100% 15.3 1 .3 0.8 0 .9 0.2 3 .2 2.1 5 .3 4.4 5 .5 10.0
g/wDelta 100% 18.7 2 .5 0.9 0 .8 0.2 4 .5 2.1 6 .5 7.2 5 .0 12.2
s.orNortheast 100% 10.1 1 .2 1.0 0 .4 0.5 3 .0 1.9 5 .0 2.3 2 .7 5.1
leak
://wikiU.S. Total100%14.61.70.90.50.33.42.05.44.25.09.2
httpSource: Area data is for major crops: USDA, NASS, Acreage, June 30, 2004. Farm production expenses data: USDA, NASS, Farm ProductionExpenditures, 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.



Table A7. Regional Shares of U.S. Energy Costs by Type, 2003
TotalDirect Energy CostsIndirect Energy Costs
Prod- Total
uc tio n Energy LP Othe rb Total Elec-c Total Che m- Fer t- Total
Re gio ns a Co sts Co sts Diesel Gas Gas Fuel Fuels tr icity Direct icals ilizer s Indirect
—————————————————————— Percent ——————————————————————
Corn Belt18.021.916.413.124.512.116.313.515.224.327.025.8
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. Plains13.114.017.614.08.816.815.410.313.514.414.314.3
Lake States9.710.310.97.914.67.510.38.69.710.510.710.6
So. Plains8.67.911.312.14.718.011.29.110.45.17.66.5
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
iki/CRS-RL32677So utheast 6 .5 6.8 5 .0 5.5 12.1 4 .9 6.1 6 .9 6.4 6 .8 7.1 7 .0
g/wDelta 5.0 6 .3 7.3 5 .1 8.5 3 .6 6.6 5 .1 6.0 8 .5 4.9 6 .5
s.or
leakNo rtheast 6 .4 4.4 4 .6 7.1 5 .2 10.0 5 .8 6.2 6 .0 3.6 3 .5 3.5
://wikiU.S. Total100%100%100%100%100%100%100%100%100%100%100%100%
httpSource: 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.