Agriculture and Energy

undertaking.

ENERGY USE IN AGRICULTURE: STATEWIDE AND NATIONAL ANALYSES

ECONOMIC AND ENVIRONMENTAL IMPACTS OF THE ENERGY CRISIS ON AGRICULTURAL PRODUCTION

Dan Dvoskin and Earl O. Heady

ABSTRACT

An interregional linear programming model was used to determine the response of U.S. agricultural production to various future energy supply and price conditions. Alternatives examined include: minimization of total energy consumption; 10% reduction in total energy use; and a doubling of the price of energy, with and without a high level of agricultural exports. Two of the most important responses to energy curtailments are reductions in irrigation and in nitrogen fertilizer use.

INTRODUCTION

This study analyzes the potential pattern and behavior of U.S. agricultural production under various energy alternatives. The study concentrates on four basic issues: (a) minimization of total energy use in crop production, (b) agricultural production subject to an energy shortage, (c) agricultural production under high energy prices, and (d) high agricultural exports accompanied by high energy prices. The analysis covers several economic and resource variables including resource use and prices, crop location and utilization, food cost, commodity prices, farming methods and environmental impacts. A more detailed presentation of the results will follow in a forthcoming Center for Agricultural and Rural Development report [1].

THE MODEL

An interregional model is used for the analysis. It is a reduced version of the linear programming model developed at the Center for Agricultural and Rural Development for the 1975 National Water Assessment [2]. The five different alternatives (models) evaluated in the study are: a base run (Model A), an energy minimization (Model B), a 10% energy cut (Model C), high energy prices (Model D), and high exports (Model E). Four of these alternatives, Models A, C, D and E, minimize the total cost of producing and transporting crops. One alternative, Model B, minimizes the total amount of energy (in kcal) consumed in crop production and transportation. The minimization procedure is subject to a set of linear restraints corresponding to the availability of land, water, fertilizer, and energy supplies by regions, production requirements by location, the nature of crop production, and a final set controlling domestic and foreign demands through commodity supply-demand equilibrating restraints. The model has 880 restraints and 10,700 activities.

Activities in the model simulate crop rotations, water transfer and distribution, commodity transportation, chemical nitrogen supplies, manure nitrogen supplies and energy supplies. Endogenous crop activities are corn grain, sorghum grain, corn silage, sorghum silage, wheat, soybeans, cotton, sugar beets, oats, barley, legume and nonlegume hay. The projected production and regional distribution of all other crops and livestock are determined exogenously.

All results refer to 1985 and assume a U.S. population of 232.2 million. Models A, B, C and D assume agricultural exports at 1985 OBERS E’¹ level. Model E assumes exports at 1985 OBERS E’ high exports [4]. Because of the identical export levels and the minimization nature of the study the production levels for the first four alternatives are identical. They differ, however, from the high export alternative. Cost of production, transportation, and other inputs are in terms of 1972 prices. However, energy prices have been adjusted to reflect the real changes in energy prices between 1972 and 1974.

The base run (Model A) is the control alternative used for comparison with the other alternatives. The base run represents the normal long-run adjustment of agricultural production if energy prices do not increase much above 1974 levels, no restrictions are imposed on the amount of energy used in agricultural production and exports remain normal. The energy minimization (Model B) represents the maximum possible achievement of energy savings subject to the given commodity demands, production activities and technology defined in the study. It minimizes the total energy required for field operations, irrigation, fertilizers, drying, transportation, and pesticides regardless of how high the cost of commodities increases. A somewhat similar situation, but one which minimizes the cost of food and fibers, is analyzed under the 10% overall energy cut alternative (Model C). Under this alternative, the amount of energy available to agricultural production is restricted to 90% of the base run. The very likely situation of much higher energy prices in the future is examined in Model D. Under high energy prices (Model D), the cost per kcal is assumed to be twice that in the base run. The high export alternative (Model E) retains high energy prices and also assumes exports of agricultural products to increase substantially from the base run by 1985.

THE ENERGY CRISIS, COMMODITY PRICES AND FOOD COSTS

The results of the study clearly demonstrate the great difference between an energy reduction policy and a high energy price policy. Even a 10% national energy reduction for agricultural production leads to a sharp increase in food costs. However, doubling energy prices results in a much smaller increase in food costs. This phenomenon is explained by a very low demand elasticity for energy since doubling energy prices causes only a 5% reduction in the total energy use in agricultural production. The derived energy demand curve in agricultural production becomes more inelastic as energy use declines. Hence, additional energy reductions can be achieved only by successively larger increases in food costs (Figure 1).

Fig. 1 Effect of energy reduction on percentage change in commodity prices.

The possible increase in retail food costs cannot be obtained directly from the above results. However, most of the marketing processes such as transportation, freezing, canning, etc. are much more energy-intensive than is onfarm production [3]. If measurement of the impacts of an energy crisis were not limited to onfarm production, but also were applied to food processing and transportation, then food cost increases would be larger than indicated above for farm products only. This is, however, true only if we assume no energy waste, and no substantial energy efficiency improvements in processing and marketing of farm products.

RESOURCES USE IN AGRICULTURAL PRODUCTION

The changes in energy supplies and prices have major impacts on resources use and costs in agriculture. The most important energy saving device which occurs in the model is a reduction in energy use for irrigation and commercial nitrogen purchases (Table 1). The 10% energy reduction (Model C) is accompanied by a 41% reduction in irrigated acres. Even the 5% energy reduction that results from doubling energy prices (Model D) leads to a 22% reduction in irrigated acres. This situation is substantially different, however, if U.S. agriculture is faced with high export demands. Under high exports, irrigated acres increase 12% above the base run even when energy prices are at twice their 1974 levels.

TABLE 1

Land Use, Water Use, Nitrogen Use, Changes from the Base Run (Model A) and Resource Prices in 1985.

(a)Shadow price refers to amount by which other costs are reduced, for a fixed output level, when an additional unit of a resource is used.

The total amount of nitrogen used varies only slightly in the first four alternatives (Table 1). On the one hand, a reduction in the per acre application of nitrogen occurs, but this is accompanied by a larger crop acreage and the net result is only a small reduction in overall nitrogen use. Commercial nitrogen purchased, however, declines sharply under both the energy minimization and the 10% energy reduction alternatives. Thus, as expected, an energy crisis in agriculture could increase the utilization of manure and legume crops as alternate sources of nitrogen. For example, under the base run (Model A) 37% of the nitrogen fertilizer used originates from manure and 31% is from legume crops. But, under the 10% energy shortage, 39% of nitrogen for crops comes from manure, and 37% from legumes. It should also be pointed out that high energy prices are not an effective means for achieving higher manure utilization. However, an absolute shortage greatly affects commercial nitrogen use and prices (Table 1). Also, under high exports (Model E), the total amount of nitrogen use increases sharply. This occurs as unused land (i.e., land not in crops) is rapidly exhausted and additional production needed to meet the higher exports demand can be obtained only by higher yields from higher fertilizer application. Thus, under high exports the increase in commercial nitrogen purchased is much greater than the overall increase in nitrogen use (Table 1).

In all the alternatives analyzed, land currently not in production is substituted for other resources–water, fertilizers, and especially energy (Fig. 2). An important part of the changes, however, involves converting irrigated land for raising dryland crops. For example, under the 10% energy reduction (Model C) irrigated crops decline by 9.4 million acres while dryland crops increase by 17.5 million acres (Table 1). Undoubtedly such changes would have great impacts on irrigated farming and rural communities in the Western states.

Fig. 2 Energy-cropland substitution among different alternatives.

The analysis of energy prices (Table 2) is based on the relationships between three different sets of energy prices: 1974 energy prices (Model A); energy shadow prices² (Model C); and high energy prices (Models D and E). The 1974 energy source prices, when applied to the quantities of energy sources used (Table 2), result in an average energy price of .858¢ per 1,000 kcal under the base run (Model A). Imposing a restriction on the total energy (in kcal) available to agricultural production under the 10% energy cut (Model C) results in an average energy shadow price of 3.505¢ per 1,000 kcal. Under both the high energy price alternative (Model D) and the high export alternative (Model E) an average energy price at twice the 1974 level (1.716¢ per 1,000 kcal) is assumed.

TABLE 2

Energy Sources Use, Changes from the Base Run (Model A), and Prices Under Different Alternatives in 1985.

(a)Energy prices are based on 1974 prices.

The energy source prices reported in Table 2 for diesel fuel, natural gas, LPG and electricity under Models C, D, and E, are derived by distributing the total cost of energy among the above energy sources. Therefore, changes in the amount of each of the energy sources consumed among different alternatives (see, for example, the great increase in use of natural gas between Model D and E) would lead to some changes in the energy source prices. This is because the amount of each energy source multiplied by their respective prices must add up to the total cost of energy in each of the alternatives analyzed.

It is important to emphasize the energy shadow price derived under the 10% energy cut (Model C). The shadow price of 1,000 kcal more than quadruples from .858¢ in the base run (Model A) to 3.505¢ in Model C. If we assume that relative fuel prices remain the same as in 1974, the above energy shadow price is equivalent to diesel fuel at $1.37/gal, natural gas at $2.40 per 1,000 cu ft (Mcf), LPG at $1.15/gal, and electricity at $.092/kwh. Energy shadow prices would be substantially higher if the energy shortage took place under high exports. This is true because agricultural production requires 29% more energy under the high export alternative than under the base run (Table 2).

The distribution of energy use in agricultural production among the different input categories is shown in Table 3. Tractors, combines, and other self-propelled farm machinery consume about two-thirds of all energy used in agricultural production. The amount of energy required for fertilizers varies according to the energy and export alternatives. Under the energy minimization (Model B), energy use for nitrogen fertilizers declines sharply as farmers cut down on nitrogen application and substitute more manure and legume crops for commercially produced nitrogen. However, high exports (Model E) require about 162% more energy for nitrogen fertilizers than does the base run (Model A).

TABLE 3

Energy Use in Crop Production and Percent Distribution for Different Alternatives in 1985.

(a)Energy for nitrogen fertilizers indicates energy for commercial purchased nitrogen fertilizers only.

Commercial nitrogen contributes about one-third of the energy reductions under an energy shortage; the reduction in irrigation contributes most of the remaining two-thirds. All other input categories contribute only minor reductions in energy use. The reduction in fuel use for field operations, which is due to a much larger proportion of reduced tillage acreages under energy minimization (88%), requires a 28% increase in the energy used for pesticides. Thus, the possibility of input substitution as well as the increased use of all other inputs might actually result in no energy savings. Therefore, an energy saving program in agriculture and elsewhere should give attention to input substitution within the industry and to the possible increased use of inputs by other industries as demonstrated by an increase in transportation under the energy minimization alternative.

FARMING PRACTICES AND ENVIRONMENTAL QUALITY

The close relationship between environmental quality and energy use has gained considerable attention in the last few years. The link between energy use and environmental quality in agriculture is not as direct as in other industries. Agricultural pollution is mainly related to the level of agricultural production. Soil loss, fertilizer runoff, and feedlot residue increase substantially as more crops and livestock products are produced. Changing farming practices, however, could allow for an increase in agricultural productivity without reducing environmental quality.

IRRIGATED VS. DRYLAND FARMING

Reduction in energy supplies, as well as high energy prices, have an important impact on irrigated farming in the United States. The main reason for a decline in irrigated acres under an energy crisis is the high energy intensity of irrigated crops (Table 4). Irrigated crop yields are much higher than dryland crop yields. But, increased energy use for irrigation is, in most cases, more than proportional to yield increases. Under the unrestricted energy supplies (Model A), the amount of energy per unit of output for irrigated crops is about twice as high as dryland crops.

TABLE 4

U.S. Average Fossil Fuel (in 1,000 kcal) Required to Produce a Unit of Output, by Crop, for Different Alternatives in 1985.

An energy shortage, as simulated here by Model C, leads to more efficient utilization of energy both for dryland and irrigated crops. High energy prices (Model D) result in very minor changes for the energy requirements per unit of output both under dryland and irrigated crops. Such small changes can be explained by relatively small changes in reduced tillage acreages, fertilizer application, and in regional production patterns.

The high energy requirements of irrigated crops (Table 4) could, however, be improved. To reduce energy required per unit of output, yield must be increased and/or energy input must be reduced. Some of the results obtained under the energy minimization alternative (Model B) indicate that some irrigated farming in the West is more energy efficient than dryland farming. Under the energy minimization alternative (Model B), except for oats, all irrigated crops use less energy (per unit of output) than dryland crops (Table 4). This is somewhat surprising, but entirely possible if irrigated farming is limited to those regions where it is as energy efficient as dryland farming.

Reduction of irrigated acres because of an energy crisis can be expected to improve environmental quality. Irrigated crops, in general, are a very intensive production process. Relatively, irrigated crops use more fertilizers and require more pesticides than dryland crops in the same location.

REDUCED TILLAGE VS. CONVENTIONAL TILLAGE

Adoption of reduced tillage practices has gained considerable attention in the last few years. Reduced tillage practices are frequently recommended as a way to reduce soil erosion, increase soil productivity, and reduce production costs. Reduced tillage practices are also suggested as a way to save some of the energy used in field operations. For example, a USDA-ERS study [3] suggests: Reduced tillage practices are a major means of achieving these goals [energy conservation].

Differences in energy requirement between conventional and reduced tillage methods are the major reason for an increase in the proportion of reduced tillage under the energy shortage and high energy price alternatives (Table 5). The proportion of reduced tillage, however, increases only slightly under high energy prices (Model D) and quite substantially under the 10% energy cut (Model C). A wide variation in reduced tillage acreage proportion exists among crops and regions (Table 5).

TABLE 5

Proportion of Reduced Tillage Acreages Under Different Alternatives by Crop and Region in 1985.

The energy saving potential of reduced tillage practices is dependent both on the location of the crop and the type of crop grown. On the most intensive row crops (corn, sorghum, and soybeans) energy use can be reduced significantly if reduced tillage is used. But again, some of the energy saving under reduced tillage is offset by a greater use of herbicides. Reduced tillage practices require more knowledge, experience, and different tillage equipment than other farming methods. These requirements have restrained the trend for adoption of reduced tillage systems.

NITROGEN FERTILIZER APPLICATION

Intensive agricultural production is typically characterized by a high rate of fertilizer application, especially inorganic nitrogen fertilizers. Concern has focused particularly on the buildup of nitrate because of its possible role in methemoglobin, the disease also known as blue baby. Recently the Environmental Protection Agency (EPA) has called for a setting of maximum nitrate concentration standards in most of the nation’s water systems. The state of Illinois was especially active in conducting hearings on nitrate pollution and considering regulations to reduce nitrogen fertilizer applications.

The results of the study indicate that total nitrogen use would change very little under an energy crisis of the magnitude analyzed. Most of the changes in overall nitrogen use under the energy crisis result in reducing inorganic nitrogen use and increasing utilization of manure and nitrogen from legume crops (Fig. 3).

Fig. 3 Changes in nitrogen use as a function of energy shortage.

The average nitrogen application (lb/A) under all the energy situations is reduced below the base solution (Table 6). Some nitrogen application rates, for some crops, do not seem to decline under an energy shortage or high energy prices. That fact, however, can be explained by observing the regional reallocation of crop production because of the great decline of irrigated crops. In many cases these changes shift crops into the more intensive agricultural areas where crops respond strongly to nitrogen fertilizers.

TABLE 6

U.S. Average Nitrogen Fertilizer Application Under Different Alternatives in 1985.

An energy crisis could be beneficial to the environment. Total nitrogen fertilizer use and rate of nitrogen application per acre both decline under an energy crisis. While total nitrogen use declines only slightly, per acre nitrogen application declines significantly.

CONCLUSIONS

An energy crisis in the form of reduced energy or higher energy prices or both would have severe long-run impacts on irrigated farming in the Western states. Not only do energy costs increase sharply but an energy reduction might actually prevent farmers from irrigating their crops. Higher irrigation efficiency as well as reduced water application could help alleviate such a situation. But in the long-run the real hope for irrigated farming is increased agricultural exports and ample energy supplies to agriculture. Higher exports promise farmers higher returns for their output which more than offset high energy prices. The study shows clearly that a major part of higher exports must come from irrigated farming and increased fertilization, both of which are very energy intensive operations.

U.S. consumers and foreign buyers of U.S. farm products would experience higher commodity prices under an energy reduction and/or high energy prices. Agricultural production can sustain more than a 10% overall energy reduction, but a substantial increase in consumer food costs accompanies it.

An energy crisis as described above does not result in adverse environmental impacts if exports remain normal. Since the energy shortage reduces the per acre application of fertilizer, it also would reduce runoff of fertilizers from agricultural land into the nation’s waterways. The total use of energy for pesticides varies only slightly under all of the alternatives analyzed. Again, the per acre use of pesticides tends to decline as irrigation declines. Impacts on the environment, therefore, are associated more with changes in overall agricultural production due to higher exports than with those due to an energy shortage. If soil loss can be controlled by appropriate soil conservation practices, the study results indicate that some environmental benefits could accrue from the energy crisis.

The question of whether increased agricultural pollution and greater energy use for higher exports is justified cannot be adequately evaluated here. This question is tied not only to the responsibility of U.S. agriculture in feeding the world’s increasing population, but also to the contribution of U.S. farming to the nation’s balance of payments as well as to the rest of the nation’s well being.

REFERENCES

1. Dvoskin, D., Heady, E.O.U.S. agricultural production under limited energy supplies, high energy prices, and expanding agricultural exports. Ames, Iowa: Center for Agricultural and Rural Development, Iowa State University, 1976.

2. Meister, A.D., Nicol, K.J.A documentation of the national water assessment model of regional agricultural production, land and water use and environmental interaction. Iowa: Misc. rpt. Center for Agricultural and Rural Development, Iowa State Univ. Ames, 1975.

3. USDA, Economic Research Service. 1974. The U.S. food and fiber sector: energy use and outlook. Rpt. for the Committee on Agriculture and Forestry, U.S. Senate.

4. U.S. Water Resources Council. 1975. 1972 OBERS projection of regional economic activities in the U.S.: Agricultural supplement. U.S. Dept. of Agriculture, Washington, D. C.

D. Dvoskin is staff economist, and E. O. Heady is distinguished professor of econ. and director. Center for Agricultural and Rural Development, Iowa State University, Ames, Iowa 50011. This research study was completed under a grant from the RANN Program (Research Applied to National Needs) of the National Science Foundation (GI-32990). Any opinions, findings, conclusions or recommendations expressed in this paper are those of the authors and do not necessarily reflect the view of NSF.

¹OBERS Projections of economic activities in the U.S. are made by U.S. Water Resources Council, an independent Executive Agency of the U.S. Government.

²An energy shadow price indicates the possible reduction in the total cost of producing the given commodity if another unit of energy would be available to agricultural production.

ENERGY INTENSIVENESS OF WASHINGTON AGRICULTURE AND THE EFFECTS OF INCREASES IN ENERGY PRICES ON WASHINGTON AGRICULTURE

Gene K. Lee

ABSTRACT

Data are presented on the quantities of various forms of energy used directly in the production of six important agricultural commodities in Washington State. Indirect energy requirements (energy used in the production of inputs into agriculture) were calculated for four sectors of Washington State agriculture, using an input-output matrix. A linear programming model was used to determine the effect on income of increases in the prices of electricity, petroleum products, and natural gas. It was found that a 50% increase in the price of electricity would reduce the state’s income from agriculture by less than 1%; a comparable increase in the prices of petroleum products and natural gas would result in an income reduction of less than 3%.

Energy intensiveness of an economic sector is one indicator of the degree to which the sector may be affected by energy scarcity and rising energy prices. The purpose of this paper is to examine physical energy uses and associated costs in agricultural sectors of Washington State. Expected burdens from increased energy prices are estimated for these agricultural sectors. The analysis opens interesting questions of cross-sectorial energy comparisons, but these are beyond the scope of the present paper. I am attempting a first step in this direction.

There are several means of quantifying energy intensiveness. Perhaps the best indicator in terms of the impact of scarcity is energy use per unit of output. This is especially appropriate as an indicator of the impact of increased energy prices, since the burden of higher prices will be approximately proportional to the amount of energy purchased per unit of output.

The paper consists of two parts. First, energy intensiveness of agricultural sectors in the State of Washington is examined. Secondly, a matrix of energy cost coefficients (energy costs per unit of output) is calculated utilizing an input-output table. This coefficients matrix then is used to estimate the effects of energy price increases on the agricultural sectors’ incomes.

ENERGY INTENSIVENESS OF WASHINGTON AGRICULTURE

Washington State’s energy situation differs from that of the nation as a whole in several distinct ways. Washington has relatively abundant hydro-electric energy but has very few natural gas, crude petroleum, and coal resources. In contrast, the nation has very little hydro-electric energy but extensive resources of oil, gas, coal and other potential energy resources such as oil shale. Therefore, Washington imports most of its crude petroleum and natural gas. Very little coal is used because coal is produced mostly in the eastern part of the U.S., and the cost of importation to the state is very high.

The demands for energy resources in Washington derive mainly from three sources: industrial, commercial, and residential. As of 1971 the pulp and paper producing sector ranked at the top of the industrial uses, consuming more than 70 trillion BTU, mostly in the form of natural gas [3]. Agriculture as a sector ranked sixth among the 35 industries classified according to SIC codes. Ref. 3 shows that the agricultural sector consumed a little more than 20 trillion BTU in 1971, two-thirds of which was in the form of natural gas and petroleum.

Table 1 presents information on direct energy use in the production of six selected agricultural commodities in 1974. Data in this table are extracted from Whittlesey and Lee [7]. Total direct energy required to produce one ton (farm weight) of green peas, for example, amounted to just over 2 million BTU. Production activities require substantial amounts of refined petroleum products, as shown by the consumption of gasoline, diesel and fuel oil given in the table. No electricity was used in production activities for green peas, but fertilizer consumption is shown in the form of natural gas use of 2.71 therms per ton of raw green peas. Potatoes and apple production use substantial amounts of electricity. Most potatoes are grown on irrigated land that requires electricity for irrigation power. Sprinkler irrigation power requirements for orchards are reflected in apple production. Fluid milk production draws heavily on electrical power for milking, cooling, and cleaning activities. This sector relies heavily upon the relatively low cost electricity in the state. The average price paid for electricity by surveyed dairy farms in the state was $.0125/kwh. Total direct energy costs of production also are shown in Table 1. These are small portions of total costs of production, ranging from 2 to 6%. Thus, we already see that modest increases in energy costs would not significantly increase production costs.

TABLE 1

Direct Energy Use and Cost of Production for Selected Agricultural Commodities, per Ton 1974 (a).

(a)Source: Ref. 7. The data presented here are in terms of one ton of farm weight product. As commodities are processed into alternative forms, however, the final product weight may be quite different from the original. One ton of green peas, for example, will produce 1.37 tons of canned peas or .92 tons of frozen peas. Products which are dehydrated will lose up to 90% of fresh weight.

(b)In the form of fertilizer.

(c)Electricity included in total using 3,413 BTU/kwh.

MEASURING ENERGY INTENSIVENESS THROUGH AN INPUT-OUTPUT MODEL

The energy intensiveness of Washington agriculture, in an aggregated form, also can be measured through an input-output model. Table 2 shows estimated energy requirements for four agricultural sectors in the state for 1972 [2]. The first three columns list the total quantities of direct energy use. The remaining columns show direct energy use within the sectors per dollar of total sales. Notice that no natural gas is used directly. As indicated above, natural gas is used to produce fertilizer, but this is an indirect use. Also note the electricity consumption by the wheat and other field and seed crops sectors. This is due to some wheat and field crops being produced on irrigated land.

TABLE 2

Energy Intensiveness of Selected Washington Agricultural Sectors, 1972 (a).

(a)Source: Ref. 2.

Table 3 shows total direct and indirect energy requirements per dollar of sales for the four agricultural sectors. The table presents detailed energy requirements for the various producing sectors which support the unit sales. These figures are derived by utilizing the 1972 input-output table [1] and physical energy requirements data [2]. (Similar methods were used by Mulkey and Hite [6] in a study of South Carolina agriculture.) In other words, define:

TABLE 3

Direct and Indirect Energy Use (BTU) per Dollar of Output.

eij = the physical use of energy type i per dollar of output in sector j;

where i = 1 for petroleum and petroleum products, 2 for electricity, and 3 for natural gas;

j = (1, 2, …., 34) producing sectors;

E = a 3 × 34 matrix of coefficients eij;

(I-A)−1 = a 34 × 34 matrix derived from the direct and indirect requirements coefficients, Aij.

Then, the total direct and indirect energy requirements by all producing sectors will be given by E(I-A)−1. For example, the total amount of petroleum and petroleum products used directly and indirectly to produce $1.00 worth of wheat is 17,696 BTU, as the bottom line in column 1 of Table 3 shows. This figure is derived by:

Similarly, total electricity requirements are derived by:

The petroleum products used in the wheat sector are increased by 2,462 BTU’s (16% increase) as a result of taking into account the indirect requirements. This is energy required elsewhere in the state’s economy to supply the inputs purchased by the wheat sector for use in its own production process. For example, the wheat sector purchases paper and paper products which require 25 BTU of petroleum energy for each $1.00 worth of wheat output. This indirect energy use for sector 13 was derived from (e1, 13) (A¹³, ¹); similarly the figure of 159 BTU’s appearing in column 1 of Table 3 was derived from (e1, 15) (A¹⁵, ¹) and so on. Among these indirect requirements, the transportation service sector (#27) purchases the most petroleum (697 BTU) for each $1.00 worth of wheat produced. Columns (2) and (3) of Table 3 show direct and indirect requirements for electricity and natural gas respectively to produce $1.00 worth of wheat. Similar energy requirements are shown in Table 3 for the three remaining agricultural sectors.

INPUT-OUTPUT MODEL FOR ENERGY PRICE CHANGES

This section examines the income effect of an exogenous change in energy prices upon the agricultural sectors in Washington. For this purpose a method that has been developed for incorporating such exogenous price changes into an input-output model [4, 5] is used to empirically examine their impact upon the agricultural sectors of the economy.

The formal model consists of three sets of equations. All are related to standard input-output structures. The first set contains the market clearing equation which equates total output in each sector of the economy to the sum of interindustry demand plus household consumption plus exogenous final demand. Household consumption is endogenous and is a function of income. Thus, this is a closed model with respect to household consumption. The model presented in Refs. 4 and 5 enables us to show the relationship between consumption, income, and price for all levels in the economy.¹

The second part of the model consists of a single equation which defines total income in the economy as the sum of three items: autonomous income (such as government payments program for wheat); wage income (calculated for each sector by multiplying total labor used in the sector by money wage rate); and gross returns to fixed capital and returns to labor and management in owner-operated firms. In the short run, this last component is a residual which remains after all variable costs, including wages and imports for intermediate use, have been paid out of total revenue.

The third set of equations in the model expresses residual earnings in each sector as a residual. This is an attempt to show factor demand and income generation in a way which recognizes the constraints on short-run firm and industry behavior under conditions where the industry (regional industry in this case) has little control over prices of outputs and inputs. Specifically, according to the equation, the direct impact of price changes is assumed to be in changing the returns to factors of production which are fixed in the short run.

Based on the three sets of equations, the model examines the relationship between a set of endogenous variables consisting of sector outputs, factor purchases, consumption, imports, and income; and a set of exogenous variables consisting of sector final demands, prices, and autonomous income. The price set is broken down into domestic prices of goods and services which are produced, import prices, and the wage rate, though in the empirical work only the effects of domestic prices and import price changes are considered.

EMPIRICAL ANALYSIS

For the empirical analysis, a 50% increase in the price of three energy resources is assumed. This pricing scheme is chosen arbitrarily but is aimed at showing the importance of increases in energy costs on the net return to farm sectors. Recent experience with the energy crisis indicates that, for the state, price increases in electricity and the other two resources do not move hand in hand while prices of petroleum and natural gas do. Thus price increases for the latter two forms of energy are considered separately from electricity in Tables 4a and 4b.

TABLE 4a

Effect on Agricultural Sectors’ Incomes of a 50% Increase in the Price of Electricity. (All incomes in $ million.)

(a)1, Wheat; 2, Other field and seed crops and other agricultural products; 3, Vegetables, fruits, and nuts; 4, Livestock and livestock products.

(b)Total earned income includes the residual income plus wage income. The latter is unaffected by the energy price changes according to the structure of the model.

TABLE 4b

Effect on Agricultural Sectors’ Incomes of a 50% Increase in the Prices of Petroleum and Natural Gas. (All incomes in $ million.)

When the price of electricity increases by 50%, the four agricultural sectors lose both residual income and earned income, but not income earned by labor. Being a factor of production, electricity at the higher price results in an increase in the cost of production for all agricultural sectors. However, the decreases in both residual and total earned incomes are minimal–less than 1% decrease in each agricultural sector. This is to be expected because electricity cost is a small portion of total costs of agricultural production as shown by the technical matrix of the 1972 input-output table. In it, electricity cost turns out to be less than 1¢ per $1.00 of output in each agricultural sector [1].

When the prices of both petroleum and natural gas are increased by 50% simultaneously, the agricultural sectors again lose income. But the amounts involved are more substantial than in the case of electricity. The wheat sector loses $3 million (down from an initial income of $151.0 million to $148.0 million) in its residual income, and another $2.6 million is lost by the livestock and livestock products sector. Again the price increases for these energy resources do not affect the income of wage-workers. The loss of total earned income ranges from .7% for sector 3 to 2.6% for sectors 2 and 4.

Another feature of the price increase for petroleum and natural gas involves increased payments to outside regions. This is because petroleum and natural gas mostly are imported from outside Washington. Thus derivation of the figures in Table 4b requires changing both output prices and input prices.

CONCLUSION

The purpose of this paper was to quantify the energy inputs in selected agricultural production and to assess the potential impacts of rising energy prices on income generation in agriculture. Results of this analysis show that despite the unquestioned importance to agriculture of energy availability in terms of time and place, the amounts of energy used in Washington State’s agricultural production activities only account for rather small portions of total input costs. Furthermore, even with postulated energy price increases of 50%, total income lost is fairly small. It is less than 3% in the case of petroleum and natural gas price increases and less than 1% in the case of an electricity price increase. This, of course, does not necessarily mean that all production activities in agriculture are outstandingly efficient in energy use.

This analysis has considered only the disembodied energy used in agricultural production. Energy embodied in tractors, trucks, processing machinery, and other such capital stock was not quantified or included in this analysis in any way. Therefore, the results are appropriate for the short run only. As technology is changed or capital items replaced, the embodied energy in these items also would be reflected in production costs, to the extent that energy prices had changed since the original capital item was purchased.

Finally, energy research in the agricultural sectors has a very short history. Survey experiences with farmers indicate that they have no records for all energy uses. Neither the Washington State government nor institutions of higher education have accurate data for energy demand and supply. Thus, all data included in this paper cannot be claimed to be absolutely accurate. However, it is believed that the data used in this paper are sufficiently accurate to warrant the analysis and conclusions included.

REFERENCES

1. Bourque, P.J., Conway, D.The input-output structure of Washington State, 1972. Graduate School of Business Administration, Univ. of Washington, 1976.

2. Butcher, W.R., Hinman, G.Guidelines for a Northwest Energy Policy. Phase II, Analysis of Energy Policies for 1980. Environ. Res. Center, Washington State Univ., 1974.

3. Hinman, G., et alEnergy in the State of Washington. State of Washington: Energy Policy Council, 1974. [January].

4. Lee, C. 1974. The effects on an exogenous change in prices on a regional economy. Unpublished Ph.D. Thesis. Washington State Univ.

5. Lee, C., L.L. Blakeslee and W.R. Butcher. 1976. Effects of Exogenous Changes in Prices and Final Demand for Wheat and Energy Resources on the Washington Economy: An I/O Analysis. Agr. Exp. Sta. Tech. Bull. #85, Washington State Univ. (to be published)

6. Mulkey, D., Hite, J.C.An I/O analysis of energy use by South Carolina agriculture. Clemson Univ., 1974.

7. Whittlesey, N.K., Lee, C.Impacts of Energy Price Changes on Food Costs. Washington State Univ., 1976. [Agr. Exp. Sta. Bull. #822].

G. K. Lee is agricultural economist, National Economic Analysis Division, Economic Research Service, USDA, Washington, D. C. 20250. The author expresses his appreciation for helpful comments by Steve Guebert, ERS, USDA, but all remaining errors are the sole responsibility of the author.

¹A detailed mathematical model is not presented here. Readers interested in the algebraic expression of the model should see Refs. 4 and 5.

ENERGY USE PATTERNS FOR AGRICULTURAL PRODUCTION IN NEW MEXICO

Neil A. Patrick

ABSTRACT

Data are presented on the energy requirements for the production of 18 major agricultural commodities in New Mexico, with total energy use divided into three components: direct, ancillary (i.e., energy required to make inputs used in a single season), and embodied (i.e., energy required to manufacture durable inputs). Results are given in terms of energy per acre, per unit of production, and per unit of value. On the last basis, the most energy-intensive product was rangeland cattle.

Scientists writing in the early days (defined as 1972-4) of concern about energy in agriculture indicated that 2.2 to 2.7% of the U.S. energy budget was used for on-farm agricultural production [2,4,6,7]. These studies provide good starting points for more accurate and definitive studies of the consumption of energy in agricultural production. They can be criticized for being highly aggregative and therefore not representative of any specific geographical area, product, or type of technology.

SEMI-ARID AGRICULTURE

Agriculture in the semi-arid regions of Southwestern U.S. is very different from agriculture in other regions. In New Mexico 70% of our cropland is irrigated. Of the total value of harvested crops, 90% is derived from irrigated cropland. Irrigation is an energy intensive process. About 65% of the water used for irrigation is pumped from groundwater sources. In east central New Mexico water is pumped from wells that extend to a depth of 500 to 600′. Some farmers in this area expend as much as $50/A for energy to pump irrigation water.

Livestock production is dominant in New Mexico. Over 60% of the gross value of agricultural products is derived from beef production. A high percentage of this production takes place under range conditions. Our preliminary studies indicate that rangeland beef production is an extensive user of energy.

The belief that agricultural production in New Mexico is very sensitive to changes in energy prices and availability has been held by many for several years. However, without area, crop, and technology specific information on energy consumption, it has been only that, a belief. New Mexico is a net exporter of energy. Nevertheless, the curtailment of natural gas for use by irrigation equipment came very near reality in the summer of 1975. One of the reasons suggested for this proposed curtailment was that national energy consumption figures were being considered without recognizing that the area specific energy consumption information was quite different.

THE RESEARCH PROJECT

On the basis of the above, the New Mexico Energy Resources Board funded a research project to be conducted by the author in the Department of Agricultural Economics and Agricultural Business at New Mexico State University. The objective of the project was to determine amounts of energy inputs currently utilized in New Mexico agriculture.

The project will encompass the total agricultural sector of the state of New Mexico extending from the manufacture of agricultural inputs through retail sales of food products. Fig. 1 is an illustration of the energy flows for the agricultural sector. This paper will discuss only the energy consumption in the on-site production stage. Complete results of the study will be available in early fall, 1976.

Fig. 1 Energy flow model for agriculture. Adapted from Ref. 8.

STUDY PROCEDURES

Primary data concerning production practices, input utilization, machinery and equipment usage, and energy consumption were gathered from a sample of 210 farmers and ranchers from all areas of New Mexico. The data collected allowed a study of 18 agricultural products representing 94% of the cash receipts from agricultural marketings in the state during 1974.

Table 1 indicates the gross value of farm and ranch marketings in New Mexico during 1974 (the most recent year of complete information). The percentage of the total for each product is also shown. It is of interest to note the obvious dominance of cattle. Although 1974 was a poor year for the cattle industry in New Mexico, 60.9% of total cash receipts were derived from marketing cattle and calves. The percentage in normal years is about 70 to 75% of total cash receipts.

TABLE 1

Cash Receipts From Farm Marketings in New Mexico, 1974.

*Products included in the study.

The products marked with the askerisk in Table 1 were considered in the energy consumption study. For convenience, and since a definitive division of energy utilization was impossible, cotton lint and seed as well as sheep meat and wool production were considered as single products. Two products, eggs and pecans, were not studied, although they are relatively important products compared to some others which were included. The reason for their exclusion is that the production of these two commodities is dominated by one large producer who, because of this dominance, chose not to divulge the information necessary to complete the study. Apples were included because of their relative importance in one geographical area of the state.

Two products, wheat and grain sorghum, were studied under both irrigated and dryland cultures. These are the only crops in New Mexico that are raised in significant quantities under dryland conditions. Cattle were considered using two technologies. Rangeland cattle were studied separately from feedlot produced cattle. Sheep were studied only under rangeland production. Sheep presented the problem of meat and wool production combined in a single enterprise. The animal unit was defined as 1000 lb of meat plus 204 lb of wool produced.

Three major categories of energy utilization coefficients were calculated and reported. Direct energy refers to the gasoline, diesel fuel, electricity, natural gas, etc. consumed in the production activity itself and in the refining, or generation, and delivery of this direct energy. For example, the fuel used for ground preparation, seeding, pumping irrigation water, cultural operations, and harvesting are considered as direct energy requirements for crops.

The non-direct energy requirements are subdivided into two categories. Ancillary energy requirements are involved in the manufacture of agricultural inputs which are depleted in one production period. Fertilizers, chemicals, seeds, commercially prepared feeds, etc., are included as ancillary energy. Embodied energy is that energy required to manufacture durable inputs such as tractors, machinery, buildings, fences, etc.

Direct energy consumption was calculated from the survey data in the form of average quantities of individual fuels used per acre or per animal unit in the production process. These average quantities were converted to kilogram calories (kcal) using the Handbook of Chemistry and Physics [1] to obtain a Usable Energy coefficient. The indirect energy required to refine, market, and transport these fuels was derived using information from the 1963 energy input-output model of Herendeen [3]. These two resulting energy coefficients were summed to develop the total direct energy requirement for each agricultural product per acre of animal unit.

The ancillary energy utilization was calculated beginning with the average quantities of inputs used per acre or animal unit derived from the survey data. These physical data were revised to kcal per acre through the use of energy conversion factors for fertilizers and chemicals as reported by Miles [5].

Embodied energy requirements were calculated using durable input inventories collected as a portion of the survey data. Machinery and equipment inventoried was depreciated¹ to determine the annual dollar value to be distributed among all uses. The annual dollar value of depreciation per acre or per animal unit for each product was determined from survey data indicating proportions of total usage of each item for each product. The data on energy required to manufacture this annual dollar value per acre or per animal unit were obtained from Herendeen [3], deflated to the average year of machine manufacture. Data on energy consumption by product, type of fuel, and component of the production process will be published in three research reports by N. Patrick et al., by New Mexico State University.

ENERGY CONSUMPTION BY PRODUCT

Table 2 summarizes the main results of these calculations. The quantity of energy consumed per acre or per animal unit for each of the 18 products is shown as a total and also is divided into the three categories of energy utilization. The percentage of the total for each category is also indicated.

TABLE 2

Energy Requirements per Acre or Animal Unit of Eighteen Agricultural Products of New Mexico, 1975.

(a)An animal unit (AU) is defined as: 1000 lbs. for beef, 1000 lbs. meat + 204 lbs. wool for sheep, 1000 lbs. for hogs, and 9704 lbs. milk representing the average annual production per dairy cow.

In an effort to emphasize differences and similarities in energy utilization the energy requirements were calculated on the basis of kcal per pound of production and also kcal per dollar value of production (1975 product prices). Tables 3 and 4 indicate these results. Again the total energy consumption is shown along with the three energy utilization categories. The yields in pounds per acre or per animal unit and the price per pound of production are indicated in the respective tables.

TABLE 3

Energy Requirements per Pound of Production of Eighteen Agricultural Products of New Mexico, 1975.

TABLE 4

Energy Requirements per Dollar Value of Production of Eighteen Agricultural Products of New Mexico, 1975.

The reader should be cautioned that the kcal per dollar of production calculation will vary with variation in the market price of the specific commodity. Therefore, the coefficient of energy use per dollar of beef produced is overstated for the 1975 year since cattle prices during 1975 averaged about half of their long run average. This explains the apparent excessive energy requirement per dollar value of production shown in Table 4. Using long run average prices the energy requirement would be about 26,683 kcal per dollar for rangeland production and about 12,085 kcal per dollar for feedlot beef production.

The bar graphs of Fig. 2 represent the total energy required per dollar of production for the 18 commodities of the study. The length of the bar indicates the total energy required. Each bar is divided by the percentage of direct, ancillary, and embodied energy consumed.

Fig. 2 Kcal per dollar of production of 18 agricultural products of New Mexico, 1975.

SUMMARY

The energy requirements for the on farm and ranch production of 18 major agricultural commodities were determined using data collected from producers. Energy consumption was calculated using per acre or animal unit, per pound of production, and per dollar value of production as the reporting unit. Energy utilization was divided into three categories: direct, ancillary, and embodied energy.

Apples require the greatest energy input per acre at 122,982,000 kcal, while dryland wheat utilizes the least at 377,000 kcal/A. Dairy production creates the greatest energy demand per animal unit at 14,519,000 kcal. Rangeland sheep is the livestock product with the smallest energy demand at 7,877,000 kcal/AU.

Energy consumption per pound ranged from 199 kcal/lb for onions to 38,660 kcal/lb for rangeland sheep. The energy requirements per dollar of production ranged from a low of 1,267 kcal/$ for onions to a high of 53,366 kcal/$ for rangeland cattle.

REFERENCES

1. Handbook of Chemistry and Physics. 1957. Thirty-ninth Edition. Chemical Rubber Pub. Co., Cleveland.

2. Heichel, G. Agricultural production and energy resources. American Scientist. 1976; 64:64–72.

3. Herendeen, R.A. 1973. An energy input-output matrix for the United States, 1963: User’s guide. CAC Document No. 69. Center for Advanced Computation, Univ. of Illinois, Urbana.

4. Hirst, E. Food-related energy requirements. Science. 1974; 184:134–138.

5. Miles, J.A. 1975. Energy saving through alternative fuel utilization in desert agriculture. Paper No. 75–1004. Presented at the 1975 Annual Meeting, American Society of Agricultural Engineers, University of California, Davis.

6. Pimentel, D., Hurd, L.E., Bellotti, A.C., Forster, M.J., Oka, I.N., Sholes, O.D., Whitman, R.J. Food production and the energy crisis. Science. 1973; 182:443–449.

7. Slesser, M. Energy subsidy as a criterion in food policy planning. J. Sci. Food and Agric. 1973; 24:1193–1207.

8. U.S. Department of Agriculture, Economic Research Service. 1974. The U.S. food and fiber sector: Energy use and outlook. Report for the Committee on Agriculture and Forestry, U.S. Senate, Washington, D. C.

N. A. Patrick is assistant professor. Dept. of Agric. Econ. and Agric. Business, New Mexico State Univ., Las Cruces, New Mexico 88003. Thanks go to Mr. Fred Worman and Mr. Merritt Taylor, research specialists in the Dept. of Agric. Econ. and Agric. Business at New Mexico State University for their assistance in the preparation of this paper.

¹The straight line method of depreciation was employed using Internal Revenue Service guidelines for useful life and salvage values of 20% of purchase price for tractors and other powered machinery and 10% of purchase price for all other items.

CROP PRODUCTION

POTENTIAL OF DRYING GRAIN WITH SOLAR ENERGY

Gene C. Shove

ABSTRACT

Recent price increases and shortages of petroleum-based fuels have led to increased research efforts on solar grain dryers. Grain drying is a particularly suitable area for using solar energy, since it requires only small temperature differences and can be interrupted, so that no energy storage system is needed.

INTRODUCTION

Although the sun’s energy has been used to dry crops from the very beginning of man’s attempt to harvest and preserve grains for later use, it wasn’t until recently that efforts were made to capture and apply the sun’s energy to the drying of grain by the use of solar energy collectors. Buelow [4, 5] investigated the possibility of using solar energy to dry agricultural crops as early as 1958. In the early 1960’s, Sobel and Buelow [14] presented designs of solar energy collectors for heating air that could be used for drying crops or modifying the temperature in livestock buildings. In 1968, Hall [7] reported on the pre-heating of ventilation air by passing it along the underside of roofs of livestock buildings. Bailey and Williamson [1] described a solar dryer in which solar radiation was collected directly by the material to be dried.

SOLAR ENERGY RE-EVALUATED

These early experiments resulted in very few operating grain drying systems employing solar energy because an abundant supply of relatively low cost energy was available from other resources. However, increased energy costs and in some instances a scarcity of petroleum-based fuels have kindled a renewed interest in the potential of applying solar energy to crop drying and livestock shelter heating. Funds from the National Science Foundation in 1974 and the Energy Research and Development Administration in 1975, which were administered through the Agricultural Research Service, U.S. Department of Agriculture, prompted the establishment of solar drying projects at several agricultural experiment stations.

RECENT EXPERIMENTS

In 1975 Peterson and Hellickson [13] reported that relatively simple, low-cost solar collectors mounted on the walls of circular steel bins can provide the necessary temperature rise for low temperature grain drying. Morrison and Shove [12] conducted a drying experiment using a bare plate collector on the sidewall of a corn drying bin and concluded that such collectors may be economically feasible when relatively inexpensive materials are used for the construction of the collector. Bauman, Finner and Shove [3] reported on a bare plate collector which consisted of the galvanized roof of a metal building located adjacent to a low temperature drying bin. The experiment indicated that substantial amounts of heat for low temperature drying can be obtained from the roofs of buildings located near grain drying