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ERS report: Agriculture’s Supply and Demand for Energy and Energy Products
Story Date: 6/18/2013
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Source: USDA ERS, 6/17/13
This report examines both sector and farm-level responses to changing market and policy drivers—such as the increased production of biofuel crops and higher energy prices—together with changes in production practices to economize on energy-based inputs like fertilizer.
What Is the Issue?
Rising energy prices over the past decade, in tandem with evolving policies promoting renewable
energy and onfarm conservation practices, have transformed the relationship between the energy
and agriculture sectors. Traditionally, agriculture used energy both directly in the form of fuel and
electricity and indirectly through use of energy-intensive inputs, such as fertilizers and pesticides.
However, record-high energy prices and expanding biofuel policies have substantially increased the
demand for agricultural products as renewable fuel feedstocks since the mid-2000s. As of 2012,
corn-based ethanol and soybean-based biodiesel supplied almost 6 percent of U.S. transportation
fuels, consuming 42 and 1 percent of U.S. corn and soybean production, respectively. Corn used for
ethanol does generate a co-product, dried distillers grains with solubles (DDGS), which is sold into
the market as livestock feed.
Even so, changing market economics and policies have brought about higher agricultural commodity
prices and have increased the costs of agricultural production. This report surveys how farmers
have adjusted which agricultural commodities to produce, how much of each to produce, and how
to produce them to better understand how recent changes in energy prices and biofuel demand have
affected the agricultural sector.
What Did the Study Find?
Farmers have adapted to rising energy prices and evolving policies by adjusting their use of energybased
agricultural inputs, altering energy-intensive production practices, and growing more energyfeedstock
crops.
Farmers have expanded production of agricultural commodities used as energy feedstocks.
In particular, corn production increased 13 percent from 2001 to 2012. A 28-percent increase
in corn plantings over that time period came partly at the expense of acreage previously allocated
to other crops (acreage grew more than production as average yields fell in 2012 as a result of the
drought); barley, oat, and sorghum production each declined by 10 percent or more over 2001-12.
The remainder of the increase in corn output came from the intensification of corn production.
The prices of all major field crops increased by more than 40 percent between 2001 and 2012
(in real terms). As production of other commodities decreased to accommodate increased corn
production, increased competition for reduced supplies helped lead to higher prices for all major
field crops.
Farmers adapted to higher energy prices and related energy and conservation policy incentives by shifting to more energy-efficient production practices and input use. Farmers reported that, to lower fuel expenses, they kept engines properly serviced and adopted production practices leading to fewer trips over their fields. To reduce fertilizer expenses, they reported reducing the use of fertilizer and increasing the efficiency of fertilizer use by conducting soil tests.
The agriculture sector’s use of energy and energy-intensive inputs generally remained constant or fell during 2001-11. Farmers were able to hold the line on energy use—while total output and the output share of corn, a highly energyintensive crop, increased—by increasing the energy efficiency of production relative to 2001.
Nonetheless, energy-related agricultural production costs increased with rising energy prices. The share of energy-based input costs in total corn production costs increased from 27 percent during 2001-2005 to 34 percent for 2006-2011.
More farmers started producing onfarm energy, though the scale of production still remains very low. From 2008 to 2011, the number of farms with renewable energy generation increased 99 percent, to about 1.6 percent of farms.
To read the full report, click here.
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