Tuesday, August 01, 2006

Northwest Wheat Farmers Squeezed by Rising Production Costs - Renewables Can Help

Rising production costs are squeezing Northwest wheat farmers, according to the Sustainable Industries Journal (SIJ).

Across the country, rising fuel and fertilizer costs have dampened the acreage of wheat planted, with more farmers now planting soybeans instead. Wheat growers in Oregon and Washington already face the highest production costs in the country, SIJ reports, in large part because of irrigation demands and land value.

On top of these already high costs, rising costs for fertilizer and other costs of production are putting the squeeze on already thin profit margins for the Northwest's wheat farmers.

Fertilizer costs have shot up 35 percent in the last year, said Fred Fleming, a founder of the Food Alliance-certified Shepherd’s Grain cooperative in Washington. “It’s a heck of a concern,” he said. Many farmers are facing costs that far outstrip current market prices for their crop, and without change many could be forced to shut down, Fleming said.

Many Northwest wheat farmers turned to cooperatives, like Fleming's Shepherd's Grain coop in Washington, for the increased value their product certification programs can provide. But these coops can only grow so big, so fast, and many farmers are being turned away.

“We have to develop the market,” Fleming said. “The last thing I want to do is bring a bunch of farmers in but not be able to produce the market. Then they sit and lose market opportunities that are out there right now to sell their crop.”

As an alternative, some wheat growers have applied to put most or all of their acreage into the Conservation Reserve Program, Fleming said. He estimates roughly 250,000 acres of land are being considered for the program, but it only has space for about 8,200 acres.

“I think this tells you that the farmers - especially farmers in their mid 50s and up - are looking for any way they can farm and know for 10 years they’ll have a living income,” Fleming said. “There is a lot of anxiety out here, more so than I have seen in past years.”

Despite the fact that that Northwest is home to less than 10 percent of U.S. wheat farms, wheat is one of the leading commodity crops in both Oregon and Washington, valued at upwards of $700 million in 2005.


So what does this all have to do with energy, you might be asking. Well, renewable energy development in the Northwest, and wind development in particular, can offer some much needed relief to Northwest wheat farmers and rural communities suffering from the falling profitability of their traditional farm-based economies.

In the Northwest, plentiful wind resources abound in the very same rural counties that traditionally rely on wheat and other farmed products, particularly counties bordering the Columbia River in Northeastern Oregon and Southeastern Washington those in Central Washington [see map above].

Wind power development offers farmers and communities in these wind-rich counties a new crop to harvest: the wind.

Large, utility-scale wind energy projects can add to a county’s tax base and support essential services such as schools and fire departments. These projects also can generate revenue for individual farmers as well as local and regional businesses. Wind turbines are compatible with farming, occupy little land and can pay farmers many times what they earn per acre harvesting crops.

Sherman County is a prime example of a rural community that is harnessing its wind resource and reaping the benefits. A report from the Renewable Northwest Project titled “Windfall from the Wind Farm; Sherman County, Oregon” details the economic development benefits to the county and to Oregon businesses resulting from the 24 MW first phase of the Klondike Wind Farm. Revenue from the wind farm is helping to diversify this historically single-engine wheat-based economy that is under increased stress from low wheat prices and decreasing harvests.


PPM Energy, an energy company based in Portland, Oregon owns the Klondike Wind Farm. The first phase of the project, which came on line in 2001, consists of sixteen wind turbines that can generate up to 24 megawatts (MW) of electricity [see picture above]. A second phase, consisting of an additional 50 turbines, was completed in 2005. The total capacity of both phases totals 99 MW; enough to power approximately 25,160 homes in the Pacific Northwest.

The project is located on land cultivated for wheat farming and removes less than 25 acres of land from production. While the physical footprint of the wind farm is small, the economic benefit is substantial.

Property taxes generated by Phase 1 of the Klondike Wind Farm has boosted the county's total tax base by 10% and now contributes over $350,000 per year in property tax revenue. This revenue has helped support schools, fire departments, roads and other public services in this cash strapped county.

The Phase 2 of the Klondike Wind Farm, which quadruples the size of the original project, is located in an 'Enterprise Zone' and is exempt from property taxes until 2009. At that point, the tax revenue from the Klondike Wind Farm can be expected to roughly quadruple to over $1 million/year, infusing even more money into Sherman County's public services.

Additionally, farmers who lease their land to wind developers earn royalty payments that greatly increase the profitability of their farms.

Wheat farmers in Sherman County who lease their land to wind developers receive annual royalty payments of between $2,000 and $4,000 for each turbine sited on their property. According to Lee Kaseberg, a local wheat and wind farmer, the turbines are compatible with farming operations. “Put them up, we can farm around them easily,” declares Kaseberg.

A neighboring farmer, John Hilderbrand, adds, “The new roads [added to service the turbines] allow easier access to my fields. Plus, the turbines make money in the winter when I can’t work my land.”

Wind farms are also capital intensive and infuse money into the local economy. Wind farm construction workers patronize local restaurants, hotels, gas stations and other services and developers often hire a variety of local and regional businesses to take part in the planning, development and construction of the wind farm.

Clearly, wind farm development offers rural counties feeling the brunt of increased production costs for wheat and other crops an excellent opportunity to diversify their local economy, tap into another plentiful natural resource, and help keep their farms profitable and their public services well-funded.

Renewable energy development in general offers another added benefit. Skyrocketing fertilizer costs making up the bulk of recent increases in wheat production costs, and the cost of fertilizers is largely tied to the cost of natural gas (production of nitrogen-based fertilizers consumes a considerable amount of natural gas).

Increased development of renewable energy helps stabilize and even decrease rising natural gas prices as it offsets demand for natural gas for electricity generation (natural gas-fired plants have been the main alternative to wind and other renewables to meet Northwest load growth). This not only helps stabilize and decrease electricity rates - a crucial factor for farmers as electricity prices drive irrigation costs - but also helps stabilize the cost of fertilizers.

Thus, renewable energy development offers farmers another benefit: helping to reduce production costs by stabalizing irrigation and fertilizer costs.

Clearly, Northwest farmers have a lot to gain from Renewable Energy development.

To address the concerns faced by us all - from farmers in Sherman and Kittitas Counties to city slickers in Portland and Seattle - the Northwest needs to make a smart investment in a clean energy future, for today and tomorrow.

We must develop our own abundant renewable energy potential - much of it located in rural counties. Renewable energy development keeps money and jobs in our communities, provides a second source of income for farmers and ranchers, and helps build a healthy future for our children.

Resources:

  • Windfall from the Wind Farm; Sherman County, Oregon - Klondike Wind Farm study white paper - Renewable Northwest Project

  • Klondike Wind Farm study fact sheet (2 pages) - Renewable Northwest Project


  • [Full disclosure: I currently work for the Renewable Northwest Project, so you know where my sympathies lie...]

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