“Lower energy prices are expected to lead to lower total production expenses by the agricultural sector,” say USDA economists, with savings of $5 billion, or 8 percent, this year and $5 billion in 2016, also an 8-percent savings. Farmers would spend about $60 billion on energy, much of it indirectly in fertilizer and pesticides and $22 billion directly for electricity, fuel and oil in each year.
“The agricultural sector will benefit from lower energy prices primarily because of reduced production and transportation costs,” says the report.
“Direct energy inputs such as fuel and oil account for a large share of agricultural production expenses. Energy prices – particularly, for natural gas – also strongly influence the cost of fertilizer, which is a major production expense for most crops. Additionally, energy prices influence costs of agricultural chemicals, such as herbicides and insecticides,” says the report. Crude oil prices are down more than 40 percent from a year ago and natural gas prices are down by 20 percent.