Holloway, Milton L.

English

Research Papers in Economics

SOUTHERN JOURNAL  OF AGRICULTURAL  ECONOMICS  JULY,  1977
DISCUSSION:  NEEDED  RESEARCH WITH RESPECT TO
ENERGY USE IN AGRICULTURAL  PRODUCTION
Milton  L. Holloway
Drs.  Havlicek  and  Capps  have  made  a  beginning  decisions  to  abandon  irrigation  in  the  Trans-Pecos
in  determining  regional  sensitivity  of  agricultural  area of Texas.
production  to  rising  prices  of energy.  Although rising  The  authors  correctly  recognize  that  although
prices  and  shortages  of energy  will  have  some  effect  agricultural  production  requires  only  about  three
on  all  of agriculture,  we must know which enterprises  percent  of the nation's  energy  consumption,  produc-
and  which  areas  of the nation  will  be  most affected.  tion  of agricultural  commodities  is likely  to  be very
Prospects  are  that major  shifts  will  occur in cropping  sensitive  to  quantity  restrictions  or  large  price  in-
patterns,  regional  distribution  of agricultural  produc-  creases for energy.
tion,  irrigated  acreages, farm  incomes and land values;  Comparisons  of energy  consumption  in southern
but  these  impacts  will  obviously  not  be  equally  agriculture  among  enterprises  and  relative  to  the
distributed.  nation  is  instructive  and  a  step in  the  right  direction
The  ability  of  technological  innovations  to pro-  to  a  prescription of energy  policy for agriculture.  It is
vide  a  profitable  alternative  to current  fuel sources is  unfortunate  that attempts  to estimate  demand  func-
likely  to  be  subject  to  large  variations  among  enter-  tions  for  different  fuels  in  selected  enterprises  were
prises  and  regions.  Broiler  production  currently  so  not  successful.  In  view  of  the  inability  to estimate
dependent  on  natural  gas  or  LP  gas  appears to  be  a  demand  functions,  it  is  also  surprising  that  the
good prospect  for  solar energy applications.  The long  authors  did  not pay  more  attention  to  the  need  to
term  prospects  for  replacing  diesel  fuel  for  tractors  collect  and  report  energy  data  for agriculture.  More
and other  mobile  power units used intensively  in row  importantly,  no  mention  is made  of the adequacy  or
cropping,  however,  is  not  very  promising.  Regions  inadequacy  of  research  methods  and  techniques  to
relying  mostly  on natural  gas for irrigation face either  address the problems of energy in agriculture.
the  prospect  of  curtailments  or rapidly rising prices.  The  authors  otherwise  discuss  the  important
Texas  irrigated  agriculture  is  currently  facing  major  research  needs  regarding  rapidly  rising  energy  prices
adjustments  and  recent  studies  have  indicated  that  and  probably  quantity  restrictions.  Their  discussion
significant  changes  will  take  place  in  irrigation levels,  includes:  (1)  collection  and  reporting  of  data,
irrigated  acreages,  cropping  patterns,  farm  incomes,  (2) determination  of  direct  and  indirect  impacts  of
land  values  and  perhaps  a  loss of some  crop  produc-  high  energy  prices,  (3)  economically  feasible  options
tion  from  Texas  if the price  of natural  gas continues  available  to  agricultural  producers,  (4)  demand  for
to  rise  at  recent  rates  [1,  2].  A  major  portion  of  different  types  of  energy  in  various  agricultural
existing  irrigation  wells  are  powered  by  natural  gas  production  enterprises,  (5)  supply  of different  types
engines.  Development of these units was based on 30¢  of energy,  (6) manufacture  of agricultural  inputs, and
and  40¢  natural  gas; recently prices have risen rapidly  (7) food  processing  and distribution  energy  demand.
to $1.25 to $1.50 per mcf.  Further rises to $2.25 and  A discussion of who should collect energy data in
above may  have significant  effects  in the High Plains;  agriculture  and  exactly  which  data  should  be  col-
$1.85  gas  has already  contributed  greatly  to farmers'  lected  is needed.  Enterprise  budgets  are  badly out of
Milton  L.  Holloway  is  Director of  Forecasting  and  Policy Analysis  Division of the  Texas Governor's  Energy  Advisory Council,
Austin,  Texas.
9date  in  many states.  The  agricultural  census  becomes  of  political  issues  in  the  mistaken  belief that  their
available  too  late  and  too  infrequently.  No  agency  actions  are  in  favor  of  agricultural  producers.  Re-
collects  adequate  price  data  on  agricultural  inputs.  search  to  indicate  the  individual  input price  to  farm
Important  energy  policy  decisions  are  being  made  income  relationships  is  therefore very important. The
now  and  we  are  grossly  unprepared  to  guide  those  companion  question  of  equal  importance  is  the
decisions with  reliable  data and  analyses.  relationship  between  changes  in  various  agricultural
Another  area of major  importance  overlooked  in  input prices  and the consumer  surplus for agricultural
the  discussion  of  options  available  to  individual  products.
producers  is the  importance  of research  to  guide  the  An  opportunity  also  exists for provision  of "spin
allocation  of  RD&D  funding  in  agriculture.  The  off"  benefits  from  the  agricultural  research  com-
primary  source  of federal  funding  of research  in new  munity to other  disciplines  and  institutions currently
energy  technology  for agriculture  will come from the  involved  in  energy  research.  The  commonly  used
Energy  Research  and  Development  Administration.  research  tools of budgeting, regression  analyses,  linear
Guidance  from the  agricultural  research community  is  programming  and  others  are  now  being  applied  to
greatly  needed  both  in  terms  of identification  of the  other industries  for  the  first  time. The federal  energy
most  critical  areas  for  new  technology  development  agencies  are  searching  for  a  "delivery  system"  to
and  the most effective delivery  system for putting the  reach millions  of United States  citizens  and business-
technologies  in place.  men  with  new  information  on  energy  options.  The
A  very  useful  addition  to  the  paper would  be a  many  years  of  experience  with  these  tools  and
discussion  of  the  importance  of  past  FPC  price  systems  in  agriculture  can  be  very  helpful  to  other
controls  and  allocation  priorities  on  the completion  researchers  and  institutions  to  avoid  pitfalls  and  to
position  of various  irrigated  areas.  To  some  extent,  take advantage  of agriculture's  successes.
the  Texas  High  Plains  and  Trans-Pecos  areas  have  As  an  ending  comment,  the  authors  could
enjoyed  relatively  lower  fuel  cost  (natural  gas)  than  have  included  a  discussion  of  policy  alternatives
areas  without  natural  gas  supplies;  more  recently  the  available  to  states.  The  Texas  legislature  is  now
sudden  rise  in  energy  prices has been much greater in  considering  a  bill  to  place  agriculture  under  natural
natural  gas and,  therefore,  Texas  irrigated agriculture  gas  utility  price  regulation  for  the  first  time.  The
is loosing a part of its competitive  advantage,  intent  is  not  to  maintain  low  prices  per se,  but  to
The  authors'  discussion  of  the  impacts  of  in-  insure  this  class  of  users  the  opportunity  to  be
creased  energy  prices  point  out an' important  result  heard  regarding  contract  abuse,  curtailments,  unfair
not widely  recognized.  The  fact that input prices and  practices,  etc.  Universities  in  Texas  are  also  devoting
net  farm  incomes  do  not  always  move  in  opposite  considerable  resources  to means of improving  current
directions  is not  commonly understood by any group  pumping,  distribution  system  and  engine efficiencies;
outside  of the  discipline  of economics.  Misinformed  they  are  also  testing  wind  and  solar applications  for
decision  makers  continually  support  the  wrong  side  irrigation.
REFERENCES
[1]  Lacewell,  Ronald  D.  "Impact  of  Energy  Cost  on  Food  and  Fiber  Production,"  College  Station,  Texas,
Department of Agricultural  Economics, Texas A & M  University,  March  1976.
[2]  Young,  Kenneth  B.  and  Willard  F. Williams.  "A Preliminary  Assessment of the Impact of Rising Natural  Gas
Prices on  West Texas  Agricultural  Crop  Production  and  on Competition  with Other Irrigated  Regions,"
Draft Report for the Texas Governor's  Energy Advisory Council, December 1976.
10

A Preliminary Assessment of the Impact of Rising Natural Gas Prices on West Texas Agricultural Crop Production and on Competition with Other Irrigated Regions,&quot; Draft Report for the Texas Governor's Energy Advisory Council,

DISCUSSION: NEEDED RESEARCH WITH RESPECT TO ENERGY USE IN AGRICULTURAL PRODUCTION

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Research Papers in Economics