Thursday, 14 March 2013 09:12

Farmers will pay more for their fuel this year

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The cost of doing business in agriculture just got more expensive for those who haul their crops and livestock as well as use implements on their farms. The cost of doing business in agriculture just got more expensive for those who haul their crops and livestock as well as use implements on their farms. File photo

The agricultural industry took a blow in the Alberta budget released March 7.

It included bad news for producers in the form of the elimination of the six-cent-per-litre Farm Fuel Distribution Allowance. It was applied to marked diesel, marked renewable diesel and heating fuel for eligible farming operations.
Producers participating in the Alberta Farm Fuel Benefit Program will still receive the nine-cent-per-litre provincial tax exemption on marked gasoline and diesel.
Enchant grain producer Greg Stamp says the loss of the distribution allowance came as a surprise. Fuel is a big expense for his farming operation.
“It means an immediate six per cent increase in my fuel costs,” he says. “Everything is budgeted and we try to stick as close as possible to that budget. We can’t pass it on to our customers.”
Alastair and Lynn Olsen, who operate TLC Farms near Whitla, were also surprised to hear about the cut.
They don’t have a large operation, but it still equates to the loss of about $2,000 a year. Because their business is structured that they sell directly to consumers, they do deliver to their customers. The cut could mean those delivery costs are increased slightly, because of the fuel used, pointed out Alastair Olsen.
He said the public has a view that producers get cheap fuel. He points out to many people that filling up a car with 20 litres of gasoline at the pump is a lot different than ordering between 300 to 500 litres of marked diesel from a fuel company. That’s how producers receive their fuel — in large quantities all at once.
“We can’t operate our business without it. We have no choice to put in $20 or $30 at a time,” says Olsen.
He was surprised to learn about the cut and disappointed in the news.
“It’s hitting a sector that doesn’t have an option to do anything about it. On the surface, it looks like it’s not a big deal because it’s only six cents. When you start adding it up, with the amount of fuel used by farmers it’s going to have an impact. It’s just one more thing, one more pressure to add to the cost (of doing business).”
Olsen points out that the six cents per litre farmers received was also likely being put back into their communities. That money may now not be spent as readily when it isn’t available.
Patrick Fabian runs a grain business near Tilley. He’s likely facing a shortfall of more than $4,000 per year with the loss of the Farm Fuel Distribution Allowance.
He says society is based on cost plus. Most businesses purchase at wholesale prices and sell products at retail prices. In agriculture it’s opposite because producers are purchasing at retail prices and selling at wholesale prices.
“It’s disappointing in one sense. After so many years of financial burden and hardship, agriculture was starting to see some improvements,” he says about the cut.
“It will remove some of the advancement we’ve been making as far as profit potential.”
Fabian also questions how much of an “Alberta advantage” remains with the current government in power.
“Clearly we’re seeing that stripped away and eroded.
“Is this something that is going to break the farmers? Absolutely not, but once again it’s one more cumulative burden that primary producers have to face.”

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Rose Sanchez

Assistant Managing Editor

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