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Energy Use in Agriculture: Background and Issues

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Abstract:

Agriculture requires energy as an important input to production. Agriculture uses energy directly as fuel or electricity to operate machinery and equipment, to heat or cool buildings, and for lighting on the farm, and indirectly in the fertilizers and chemicals produced off the farm. In 2002, the U.S. agricultural sector used an estimated 1.7 quadrillion Btu of energy from both direct (1.1 quadrillion Btu) and indirect (0.6 quadrillion Btu) sources. However, agriculture's total use of energy is low relative to other U.S. producing sectors. In 2002, agriculture's share of total U.S. direct energy consumption was about 1%. Agriculture's shares of nitrogen and pesticide use -- two of the major indirect agricultural uses identified by the U.S. Dept of Agriculture (USDA) -- are signficantly higher at about 56% and 67%, respectively.

U.S. farm production -- whether for crop or animal products -- has become increasingly mechanized and requires timely energy supplies at particular stages of the production cycle to achieve optimum yields. Energy's share of agricultural production expenses varies widely by activity, production practice, and locality. Since the late 1970s, total agricultural use of energy has fallen by about 28%, as a result of efficiency gains related to improved machinery, equipment, and production practices. Despite these efficiency gains, total energy costs of $28.8 billion in 2003 represented 14.4% (5.2% direct and 9.3% indirect) of annual production expenses of $198.9 billion. As a result, unexpected changes in energy prices or availability can substantially alter farm net revenues, particularly for major field crop production.

High fuel and fertilizer prices in 2004, and increasing energy import dependence for petroleum fuels and nitrogen fertilizers has led to concerns about the impact this would have on agriculture. High natural gas prices have already contributed to a substantial reduction in U.S. nitrogen fertilizer production capacity -- over a 23% decline from 1998 through 2003. In the short run, price- or supply-related disruptions to agriculture's energy supplies could result in unanticipated shifts in the production of major crop and livestock products, with subsequent effects on farm incomes and rural economies. In the long run, a sustained rise in energy prices may have serious consequences on energy-intensive industries like agriculture by reducing profitability and driving resources away from the sector.

This report provides information relevant to the U.S. agricultural sector on energy use, emerging issues, and related legislation. It will be updated as events warrant.