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Dairy farmers struggle with rising fuel costs

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Already faced with higher supply than demand and restrictions on what they can charge, dairy farmers in Washington County are trying to find ways to deal with rising fuel prices.

"There are high energy costs, especially in this area, and while UPS and everyone else can add a surcharge for their fuel costs, in the agriculture industry it’s hard to adjust to that," said Brian Ziehm, president of the Washington County Farm Bureau.

Ziehm said the dairy industry is especially susceptible to high fuel prices because farmers do not have control over the pricing of milk. While a supplier can pass along a fuel surcharge to a farmer, he continued, the farmer can’t add $2 to the price of his product.

Looking forward, prices at the pump are anticipated to be on the rise.

The U.S. Energy Information Administration forecasts regular-grade motor gasoline retail prices will rise 6 percent by 2012, but it cautions there is significant uncertainty surrounding the forecast.

The national average retail price for regular gasoline could climb 13 to 27 percent by this summer, according to the administration, breaking $4 per gallon.

"It’s somewhat cyclical, but it tends to trend continually upward. If anyone thinks we re going back to $2, we re not," said Amy Walker-Bailey, who runs the full-service Walker Farm in Fort Ann.

Walker Farms is in a unique position, as it manages multiple businesses, including a dairy farm, a retail supply store and a trucking company.

"In retail or wholesale, you can make price adjustments like fuel surcharges, but that doesn’t work on the farm," she said.

With multiple operations, the Walker Farm uses all types of fuel-related vehicles.

"It’s all the time. There’s always something running," she said.

"We can’t say we’re not going to cut any hay because the fuel cost is high. That’s not an option."

Instead, Walker-Bailey said the farm tries to watch the market and lock in good pricing to save some money.

While fuel surcharges have to be absorbed by dairy farmers because the cost charged for milk is regulated, when the cost of fuel rises, it affects everything from diesel-operated farm machinery to the cost of fertilizer.

The annual average price paid for fertilizer rose 264 percent from 2002 to 2008, according to the USDA. Prices paid declined in 2009, partly due to a decline in the cost of natural gas, the primary source for nitrogen fertilizers.

Jessica Ziehm, a spokeswoman for the state Department of Agriculture and Markets, said gasoline, fuel, and oil expenses account for about 5 percent of the costs on dairy farms in New York, and about 6.5 percent of all farm costs in the state.

Farm owners are trying to be more fuel-efficient by not leaving machines idling, or by changing field practices such as making less passes when planting crops.

Cost-saving suggestions from the National Center for Appropriate Technology include ensuring vehicles and equipment use the recommended grade of fuel, choosing the smallest, lightest tractor appropriate for the job, and avoiding unnecessary driving by using cell phones and radios to solve problems from the field, rather than driving.

Inevitably, some experts say, regulations have to change to enable dairy farmers to be able to better compete against things like perpetually rising fuel costs.

"Nationally, we’re producing more than we consume," said Frank Ketchum, a Greenwich-based agriculture consultant, who works with dairy farms in Washington County.

While exports picked up this year, they were low last year, which flooded the market and drove down the price, according to Ketchum.

"Ultimately, what has to happen sooner or later to maintain our dairy infrastructure is that these guys have to be paid more for milk, and consumers have to spend more for milk," he said.

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