April 14, 2011. Drilling for a solution: finding ways to curtail the crushing effect of high gas prices on small business. U.S. House of Representatives. Small Business Committee Document Number 112–011
JIM EHRLICH. I speak on behalf of the 170 different potato growers in the San Luis Valley of South Central Colorado. Colorado ranks as the second largest shipper of fresh market potatoes in the country, a fact that many people do not know. These growers typically produce about 2.2 billion pounds of potatoes a year with a market price of 175– to $240 million depending on the price of potatoes that year. The San Luis Valley is a high alpine desert, base elevation of 7,600 feet with less than 7 inches of moisture annually.
Irrigation supplies are dependent on abundant snowpack and sustained utilization of a vast underground aquifer.
This 6-county region of Colorado is dependent upon agriculture as the economic engine for the valley’s 50,000 residents. Unfortunately, we possess some of the poorest counties in Colorado with many rural families having incomes below poverty level and without opportunity for better jobs.
Today I am going to focus on three things: the impact of high energy prices and gas prices on potato producers in the valley, the inability of the United States to increase domestic production of our vast energy reserves, and the cost of regulation to potato producers, the impact of high energy and gas prices on potato producers.
I recently read a report claiming that for every 10 cent increase in gas prices there is a net loss of $5 billion to the United States’ economy. When you consider the fragile state of the worldwide economy and our economy in the United States, this has great significance. When you consider that petroleum-based products are the only source for most of the transportation needs in the world today, there is no real mystery why when you have one supply and limited supply of that one item and worldwide demand is growing like it is, why there is a problem.
Agriculture requires energy as a critical input to production.
Potato production uses energy directly as fuel and electricity to operate tractors and equipment, cool potato cellars, process and package product indirectly, and fertilizers and chemicals produced off the farm are needed as critical inputs for crop production.
Total energy costs of an irrigated potato crop in the San Luis Valley can be as great as 50 percent of the total production expenses.
Unlike areas of the country where irrigation is unnecessary or no-till practices are common, this is not the case with potato production in the San Luis Valley. It requires large amounts of electricity to irrigate and large amounts of tillage.
Crops must be stored at the correct temperature and humidity year round to ensure marketable condition for consumers.
The crop must be shipped in refrigerated trucks to distant markets across the country throughout the year.
So what happens when gas prices rise like they have this year? Because farmers are price takers and lack the capacity to pass on higher costs through the food marketing chain, the net result is a loss in farm income. The reality is prices of most fuel sources tend to move together. So as gas prices typically rise, other energy prices rise in concert. Fertilizer prices are dependent upon natural gas prices and potatoes require large amounts of nitrogen, phosphate, and pot ash fertilizers.
Harvest, sorting, grading, and shipping are all heavily mechanized energy-dependent steps. The San Luis Valley is located in an isolated mountainous region. High diesel prices affect freight rates and truck availability cutting into the growers’ bottom line.
Because the United States relies on imported sources of oil for over 60 percent of our oil needs, we export wealth daily, primarily to countries that are hostile to us. This not only causes economic stress but is a threat to our national security. Without a stable source of relative economical energy for agriculture, our nation’s food security is at risk also, and as a result, our national security. As the proud father of a U.S. Marine serving in Afghanistan currently, I speak from my heart.