Strategies for high energy prices
This advisor advocates a go-slow approach. Still, savings can often be found.
With a barrel of oil trading at a near record price, and natural gas prices at least double from a year ago, producers across Canada are feeling the effects. Rising oil costs boost farm fuel prices, and skyrocketing natural gas values have caused price spikes in essential fertilizer products.
How can producers cope? It’s a question Gary Pike and his ag coaches hear more and more these days. He runs Pike
Management Group, a farm management and marketing firm based in Lethbridge, Alta., serving clients across Western Canada. Pike notes that, on paper, it’s easy enough to see where quick energy savings could be made: cut back on fertilizer and reduce farm equipment fuel consumption.
“The difficulty is, any steps you take will have business consequences of their own,” he says. “You could reduce energy use, but hurt the farm’s profitability even more. Start by understanding where your energy-related dollars are going, directly or indirectly, then develop a number of different strategies.” He outlines three areas where energy savings could be possible.
1. Fuel for farm equipment
Big equipment requires large amounts of fuel, making a tractor or combine the perfect place to look for savings. Not so fast, says Pike. First calculate where your fuel dollars are actually being spent.
“On most farms, the biggest share of fuel is spent on pickup trucks,” he says. “Your tractor might consume 12 gallons per hour, but you only use it for 300 hours each year. Compare that to the farm pickup truck that runs anywhere from 50,000 to 100,000 kilometres per year.” Reducing the use of the pickup could pay bigger dividends than changing usage of the farm’s field equipment.
2. Fertilizer
Since natural gas is a major component of fertilizer manufacturing, fertilizer prices often move in step with gas prices. Still, haphazardly cutting back on fertilizer could cost far more in lost revenue than it saves through lower expenses. Pike strongly advises against an across-the-board fertilizer cutback. Instead, consider a targeted reduction.
“If you must trim fertilizer use, don’t assess the farm as a whole,” he says. “Determine which crops in your area have the highest and lowest response to added fertilizer. Farmers can add more legumes to the crop mix when fertilizer prices are high. If you did this, what would the impact on your nitrogen needs be in the initial year, and in the following year?”
3. Farm buildings
Apart from ensuring that insulation is adequate, consider the risks and rewards of upgrading the heating system in your farm buildings. Coal-fired boilers and straw-fired boilers have become more popular in recent years, and can take the edge off high heating costs.
Says Pike: “You shouldn’t make big changes without considering the numbers objectively. Treat each piece
of equipment and each crop differently, so you can understand which fuel or input purchases return the most profit, and which could be reduced. That will take some time, so start by establishing a baseline today.”
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