Farmers Planning Ahead for Future Diesel Fuel Costs

JONESBORO, AR (KAIT) -- As farmers across the Region 8 viewing area prepare for another planting season, many have purchased diesel fuel with hopes of avoiding expected high prices. Crude ended Monday at $47.07, up $1.55. In Jonesboro, the price of diesel fuel fell below regular unleaded at some gas stations.

It marked the first time diesel fell below regular unleaded since mid-summer last year. Many farmers have prepared for an expected mid-summer spike.

"We're trying to fill everything up, fill our big tanks up and even our well tanks so that we're prepared to have enough fuel for most of the year," said David Hodges.

Hodges has been a farmer for nearly 30 years. In 2008, he was paying well over $4/gallon. His operation uses 40-50,000 gallons of fuel during the heat of summer.

"Irrigation is where we burn up most of our fuel, and so 40-50 thousand gallons will get me up into the summer pretty good," said Hodges. "Farm fuel right now bought at tanker lots is probably at $1.35 a gallon, somewhere around that."

Hodges Monday said he's paid an estimated $54,000 up front to avoid high gas prices. He said he believes what many economists predict. They predict diesel prices to approach $4/gallon.

"All this money that's been pumped into the economy, I expect it to turn around. all the so called experts predict crude will go back up," said Hodges.

Hodges also said President Obama's stimulus package, which was signed into law in February, would provide more jobs for construction. Construction projects always use thousands of gallons of fuel.

"They came down. How long are they going to be down? As I mentioned earlier, our jobs last a year, so we still got to, if you don't factor it in you're just gambling," said Keith Chunn with Tate General Contractors.

In summer '08, Tate General Contractors, which is working on the Delta Center at Arkansas State University, had a fuel bill of $8-12,000 per month. Now, with prices back below $2/gallon, they're paying $2-3,000 per month.

Construction companies are also benefiting from the cheaper price of diesel. Each piece of equipment they use takes it.

The concern for both construction crews and farmers is that prices will rise.

"There's consensus in 2 directions. Some may continue to slide, another direction, economists are actually saying they may go up so it's like a guessing game," said Steve Culp with the Craighead County Extension Office. "Last year, on my experience, that was the most volatile year we had on basic commodities. I think we're a little more even this year and with the world economy being off, this is even affecting agriculture."

"The people that bought input cost like fuel and fertilizer at a high price, some of them were hurt," said Culp. "A lot our commodities, the demand has declined some, for example cotton, there's less clothing purchased worldwide, and so demand has slid to a certain degree."

"Other inputs are following crude as well, nitrogen fertilizer," said Hodges. "This year is a new year, lowing input costs, nut commodity prices are back pretty close to historical levels."

"Depending on how you did things last year, you could've had a very good year or you could've had one of the worst years ever," said Hodges.

Buying fuel in bulk also has its disadvantages. They have to find ways to secure it from thieves and possible leaks.