High oil prices were evident at each tractor fill up this
spring, but there are also some less obvious ways $50 US per barrel oil is
affecting agriculture.
The Globe and Mail newspaper last week ran an enlightening
series surveying the effects of high oil prices on exploration, consumers and
new energy technology.
It covered evidence that the world’s oil supply is near its
peak and that we are entering a period when the market will have to balance
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rising consumption against a supply that will become more expensive to extract.
On the other hand, predictions of peak oil supply have been
made before and have been proven wrong as high prices sparked new supply
discoveries and conservation that led to falling prices.
So there was no clear forecast of where oil prices will go.
But oil market watchers included in the series had some
peripheral observations of interest to farmers.
Globe and Mail columnist Eric Reguly noted the huge quantity
of natural gas used in the Alberta tar sands.
An estimated five percent of Canada’s natural gas production
is used to heat water for separating oil from the sand. With billions of
dollars being pumped into the oilsands to raise production, natural gas
consumption in this sector could triple by the early part of the next decade.
Given declining natural gas reserves, this could push gas
prices higher, which is bad news for farmers because natural gas is the main
component of nitrogen fertilizer.
Luckily, new technologies are being refined that allow for
oil extraction without using natural gas, but widespread adoption is many years
away.
More tentative are predictions about sugar and natural
fibres by Jim Rogers, New York-based celebrity investor, fund manager and
author of Hot Commodities: How Anyone Can Invest Profitably in the World’s Best
Market. But the forecasts might give sheep farmers and sugar beet growers a
reason to chuckle.
Rogers figures that high oil prices are pressing Brazil to
boost ethanol production. The South American country makes its ethanol from
sugar cane.
With so much sugar going into ethanol, Rogers figures the
commodity has a sweet future. Sugar prices are well below their historical peak
and have lots of room to rise, he said.
Turning to natural fibres, Rogers said rising oil costs
drive up the price of synthetic fibres used in textiles. He notes that China
and other countries are increasing their use of natural fibres like cotton.
Cotton, too, is priced well below its historic highs and has room to rise.
Could this also spark new demand for wool? Who knows, but it
is fun to consider.
But these speculations aside, the most immediate
agricultural impact of high oil prices comes when you call the fuel dealer to
come out to fill the farm tanks.
Which prompts us to wonder what farmers did this spring to
try to mitigate the rising cost of fuel.
Did you gear up and throttle down to conserve diesel?
Have you switched to zero till, bought a more fuel-efficient
tractor or used GPS guidance to reduce overlap?
Send us your strategy for coping with high fuel prices. Our
e-mail is newsroom@producer.com or reach us by post at:
Letter To the Editor
Western Producer
Box 2500 Saskatoon, Sask.
S7K 2C4
