How Energy Factors into Farm Production Costs

Direct and indirect energy use averages about 15 percent of total farm operating costs [3,4]. Changes in the cost of energy can increase production costs, but the significance of the increase depends on energy’s share of production costs and on total overall energy expenditures. If energy costs are a minor portion of production costs, energy cost changes will have less of an impact.

In crop production, direct and indirect energy input has been decreasing since the mid 1990’s (4. Energy input and operating costs tend to be highest for wheat and corn grain production while soybean tends toward the lowest energy input at about 20% of production costs [3].  Reducing energy costs can make a large impact on farm income on these farms. Regional variation of energy input also affects operating costs. For example, in regions where irrigation is essential for crop production, energy input costs are generally higher due to the fuel cost associate with irrigation. In livestock operations, direct energy costs are generally 3-7 percent of total operating costs. Indirect energy costs on these operations include feed production and transportation costs, which can rise significantly when energy costs rise [3].