Impact of Increasing Fuel Prices on Operation Costs

Farm Business Management Update, August/September 2004

By Robert Grisso, Extension Engineer, Biological Systems Engineering

Q. Diesel prices have increased about $0.40 per gallon in recent months. What effect will this have on production costs?

A. To determine the effect this increase will have, you first need to estimate fuel consumption. If you routinely track fuel use during farming operations for your tractors and combines, you probably already have the information you need. Simply multiply your historical fuel use by the former price per gallon and by current price and compare. Most folks, however, don't track fuel consumption by enterprise and need a research-based estimate to compute the effect of a price increase on overall production costs. A good reference for fuel use estimates is Minnesota Farm Machinery Economic Cost Estimates for 2003.

Table 1 presents the estimated fuel use per hour for power units, based on estimates in the Minnesota publications. Table 2 presents estimates of fuel consumption per acre for field operations.

Note: The fuel use per acre for field operations is independent of implement width. If one compared two disks for example, one with a 20-foot width and one with a 30-width, the 30-foot disk would require a tractor with 50% more horsepower to pull it, but since one would be covering 50% more acres per pass, the fuel use per acre would be the same for either scenario.

Acknowledgement

Fuel consumption information in Tables 1 and 2 is taken from Minnesota Farm Machinery Economic Cost Estimates for 2003 FO-6696, by William Lazarus, Extension Economist, University of Minnesota, and Roger Selley, Extension Agricultural Economist, University of Nebraska. This publication is available online at http://www.apec.umn.edu/faculty/wlazarus/MF2003.PDF

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