Oregon’s $5 billion agriculture industry struggles with high gas prices – Oregon Capital Chronicle
Soaring energy prices are hammering Oregon’s farmers and ranchers, and the war in Ukraine will likely only make matters worse, experts say.
Turmoil also comes at the wrong time.
The state’s $5 billion agriculture industry has endured two tough years during the pandemic as well as an ongoing drought, and although commodity prices are on the rise, farmers’ and ranchers’ finances are under strain. pressure, said Lauren Smith, director of government affairs for the Oregon Farm Bureau. .
“There’s inflation on everything they buy — all of their inputs,” Smith said. “Their supply costs exceed the price of agricultural products.”
It hit their bottom line.
“It just eats away at our margins,” Smith said. “There is no more wiggle room there.”
Oregon’s agricultural sector accounted for just 5% or $2.6 billion of overall Oregon commodity sales, valued at nearly $50 billion in 2020, according to Business Oregon economist Mike Meyers. the state economic development agency. “Agriculture is a low value industry,” Meyers said, with low wages and low profits.
But the The industry employs a lot of people: The sector employs 86,000 farm workers and others, contributing $30 billion in wages, according to a report last year from the Oregon Council of Agriculture.
Farms are spread throughout the state, with more than 2,500 each in northeast, central, and southeast Oregon. Southern Oregon has almost twice as many, but the greatest concentration is in the region from Columbia to Lane counties, home to about 19,000 farms.
The state has another 10,000 cattle ranches, according to Todd Nash, president of the Oregon Cattlemen’s Association.
All of these establishments have been affected by rising energy prices, which have soared since Russia invaded Ukraine on February 24. The futures market, which indicates the direction that traders expect prices, shows that crude oil and fuel oil prices have climbed invading, and have continued to rise. Monday, however, was an exception.
After President Joe Biden announced a US ban on Russian oil imports, the price of crude oil, heating oil and natural gas fell. But the war in Ukraine is likely to keep gas prices high, economists say.
They predict that farmers and ranchers in Oregon will feel the effects.
“They use a lot of diesel for their machines,” said Jeff Reimer, a professor of applied economics at Oregon State University.
Fertilizer prices are also tied to the price of oil, and during the pandemic the cost of pesticides and other materials used by farmers has increased, Reimer said.
“All over the world, factories have closed,” Reimer said. “Trucks have stopped, transports have been stopped. So you can’t get things when you want them.
The other big expense for Oregon farmers is labor. Unlike many other states, which have acres and acres devoted to corn, for example, and rely on mechanization, Oregon’s sector is diverse, producing about 220 specialty crops that require manual labor. During the pandemic, finding enough agricultural workers has been difficult and it has driven up wages, experts say
High commodity prices
The war will likely have a mixed impact on Oregon farms, Reimer said. While the price of gas and other prices is high, so is the cost of raw materials.
“Prices are likely going to be higher for all products,” Reimer said. “It’s good for agriculture, but it’s not good for cattle farmers because they use these products as raw materials. And that will make it harder for ranchers to fatten their animals in stockyards.
One of Oregon’s top agricultural exports is wheat. Most Oregon soft white wheat grows in eastern Oregon, with some production in the Willamette Valley. A large part is exported to Asia. China, Japan and Korea are the state’s top export markets in that order, according to Business Oregon. Russia is also a major wheat producer. He grows hard red winter wheat, which is sent to Egypt, Turkey and other countries. Oregon wheat is often used for flatbread while Russian wheat, which has a higher protein content, is good for crispbreads and raw ingredients.
Although the two are not in direct competition, economists say a slowdown in production in Russia and lower exports could push up wheat prices in general, Reimer said.
But Amanda Hoey, general manager of the Oregon Wheat Board, doubts Oregon producers will benefit. “There is a lot of volatility in the futures market,” Hoey wrote in an email. “Given the short harvest, a lot is already sold.”
Another commodity that has grown is corn, and Ukraine is a major producer of corn, which feedlots, for example, use to fatten animals for slaughter.
A rise in the price of corn is likely to hurt Oregon ranchers, Nash said. A few years ago, producers paid up to $1 for every pound of weight added to a cow.
“Now we’re looking somewhere north of $1.50 a pound,” Nash said. “That’s good, if you’re in the corn and wheat business, but if you’re a corn and wheat consumer, it can be quite difficult for you.”
Another factor weighing on Oregon agriculture is rising temperatures. Last year’s heat dome reduced pasture, Nash said, forcing herders to spend more on grain.
“They had to feed longer because the pastures weren’t producing as much forage as they normally would,” Nash said.
Beef prices also rose, but Nash said Oregon ranchers didn’t benefit due to market structure. Ranchers often sell their cattle to packers, companies that accompany cattle through the production process, from feedlot to product for retail sale. There are four major packers in the United States, and they control cattle prices, Nash said.
“We’ve been frustrated in the cattle industry because beef prices have skyrocketed, but we haven’t been able to capture that,” Nash said.
He expects more ranches to fold.
“I heard about it just two days ago,” Nash said. “He was struggling to find pasture because of the drought. … Someone offered him money for his cows and he left.
Farmers are trying to cope
Those who remain in the business may change their production methods to cope.
“They find different ways to try to do it in pencil,” Smith said of the farm office.
She said farmers could use less fertilizer or reduce labor costs, which would reduce production.
Or they will switch to crops that cost less to produce.
“Input costs here are a lot — more than in other states,” Smith said. “If labor costs are just too high, they will choose less labor intensive crops.”
Oregon farmers are still bristling with the recent passage of House Bill 4002 by the Legislative Assembly. The bill, which Governor Kate Brown is expected to sign into law, will phase in overtime pay for farm workers over five years starting in 2023, while giving employers tax credits to cushion the financial impact. The agricultural bureau, many farmers and Nash, for the Oregon Cattlemen’s Association, warned that the bill would incentivize farmers and ranchers to sell to commercial buyers. But no one knows for sure what the impact of the bill will be – and the current turmoil.
“It’s hard to say what our farmers will do this year,” Smith said. “Every year is a gamble – our farmers know that.”