It’s going to be another tough year for Washington farmers, who were already facing record-low worldwide commodity prices.
While consumers benefit from lower prices on things like wheat (resulting in cheaper bread) and pork, wheat growers and pig farmers are footing the bill for these savings.
Many farmers are experiencing a triple hit on their finances from the U.S. and Israel attacks on Iran, with higher costs for fuel, shipping and fertilizer. “Unless you have perfect insight” and bought your fertilizer and stocked up on diesel fuel before the war in Iran began, explained T. Randall Fortenbery, professor and Thomas B. Mick Endowed Chair of the Washington State University’s School of Economic Sciences.
Even before the war, Washington had steep fuel prices, with one of the highest gas taxes in the country. Agricultural fuel buyers are eligible for an exemption from surcharges tied to the state’s cap-and-trade program.
Farmers in Washington export most of their crops. So their prices are set in the global marketplace and do not necessarily reflect their costs. If they try to pass along an increase in fuel costs to transport their crops, for example, buyers will just choose to do business with someone else, Fortenbery said.
“Washington grows almost 300 different commodities; most of them have an export market,” Fortenbery said. The prices for their goods are set by that global market, so increases in their costs to grow and transport wheat, alfalfa or hops cannot be passed along to the consumer.
Ed Chvatal, a major wheat and alfalfa hay and seed grower in Walla Walla, says increased fertilizer and fuel prices are a big concern for him and his neighbors.
“I’m not going to get into the politics … all I know is it’s causing some grief,” he said.
Because farming 6,000 acres requires careful planning, Chvatal isn’t experiencing war-related pain yet. He bought fertilizer for his current wheat crop last fall and he purchased a tanker of diesel in January. The farm can hold about 15,000 gallons on site, which will last them into the first part of the harvest, maybe until July. And they won’t need more fertilizer until the fall.
“I lucked out there. It wasn’t because I was brilliant,” Chvatal said, explaining that timing and planning force most of his purchasing decisions. And sometimes the results are not as good.
Even if the war ends tomorrow, most economists believe fuel and fertilizer prices will not drop before 2027, because it will take a while for production to ramp back up after the Strait of Hormuz reopens. So Chvatal will experience cost increases by late summer and he will be paying more to ship his grains to customers this year.
The shippers will add a fuel surcharge, but he doesn’t have that freedom. The market sets the price he will receive for his wheat. Prices won’t change unless there’s a production interruption elsewhere, Chvatal explained – a drought in the Midwest, for example.
“The world can produce enough food for everybody. It’s a matter of what people will pay for it. Then there’s weather and political issues,” he said.
The price of wheat has been below the cost of production for the past three years, Chvatal said. This spring’s crop was looking good and the price had been bouncing up a bit. “I took off my pessimistic hat and put it on the rack,” he said. Then Iran happened.
Chvatal has farmed on his family acreage for the past 40 years and has seen a lot of ups and downs, but things have been different since the pandemic. Input costs went up and never came back down. Labor costs have also gone up because of new state regulations around overtime and because seasonal workers are harder to recruit.
“There’s a point where it’s frustrating. I don’t have the time and effort to go protest and bitch about things. I’m just trying to put food on the table for my family. I have six full-time employees who also want the farm to succeed,” Chvatal said.
“I’ve seen it before,” he added, “but this one has a different flavor. It’s kind of like the perfect storm.”
So why do farmers stay in the business if it’s so difficult to make a profit?
Professor Fortenbery points out that they experience good years and bad. For example, wheat prices were more than double what they are now six or seven years ago. Adding high fuel and fertilizer costs to already low prices is going to make things particularly tough for farmers this year.
One of the oddities of the current situation is that most of America’s fertilizer comes from Canada, not the Middle East, but worldwide shortages will drive up prices everywhere, Fortenbery said.
Chvatal wishes the state government would help farmers out by giving them a break on new overtime regulations — an unrelated issue that also affects his input costs. He’s also concerned about the ways data centers are pushing up electricity rates. And says the debate over water rights is a constant pressure.
But Chvatal has no plans to give up on farming or dramatically change how he runs his operation.
“I love it and have done it all my life. Hopefully, my children will want to take it on,” he said, but adds back a hint of the dark cloud he is sitting under right now. “Things are tough around here. You wonder why young people aren’t coming back to farming. It’s very capital-intensive. It’s hard work.”
Washington State Standard is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Washington State Standard maintains editorial independence. Contact Editor Bill Lucia for questions: info@washingtonstatestandard.com.
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