March 17, 2000

Everyone seems to be talking about the rise in gasoline and diesel fuel prices. Each trip to the gas station in recent weeks has become a bit more expensive. The news media has given this topic a lot of air time in both national and local newscasts. A 20 cent to 30 cent per gallon increase in the cost of gasoline gets everyone’s attention.

Like most folks, the majority of my fuel purchases are made at the combination self-service filling station and convenience store. Last summer, when gasoline prices were at a 20-year low, I found it ironic that the cost of my favorite soft drink brands continued to increase during the past three summers. A prime example is the 20-ounce plastic bottle, with the screw off cap, which is well suited for travelers.

When these plastic pop bottles were first introduced in the 16-ounce size, most sold for 69 cents. Two years ago these were phased out and replaced with the 20-ounce size and the price jumped to 79 cents, but the consumer did get four additional ounces of product for the dime increase. The next summer the prevailing price for the 20-ounce soda jumped to 89 cents. This past summer the price escalated to 99 cents at most convenience stores, although less popular brands sold cheaper.

It was then that I started to boycott my old, favorite brands of soda water and wondered if other consumers shared my concerns about these steady price hikes. After all, it is difficult to see where a cent per ounce (20 cents per 20 ounces equals 1 cent per ounce) increase was justified in a time of record low inflation. The ingredients on the bottle label states that carbonated water, high fructose corn syrup, caramel color, phosphoric acid and artificial flavors are the primary ingredients. There hadn’t been anything in the news to indicate than an "evil empire" had shut off the flow of carbonated water in the U.S., and with corn selling at such low prices, it is not likely that corn syrup was the ingredient causing "pop" manufacturers and retailers to jack up their prices.

Folks don’t seem to get concerned when a small item costs them 10 cents to 20 cents more if it occurs over the course of a couple of years. Yet, according to my calculation, a cent per ounce of the cost of my favorite soda pop equates to $1.28 when you look at it on a per gallon basis. The recent 30 cents per gallon hike in gasoline prices is only one-quarter of the amount that major brand soft drinks increased in recent years. It is hard to believe that the cost of producing a gallon of soda pop could even be remotely close to the expense involved in producing a gallon of petroleum fuel.

The markets for agricultural commodities, with the exception of cattle, are still struggling to work their way up from the lows that closed out 1999. During February, the cotton market made some modest advances which were due in part to a slight upswing in export demands. Feedgrains continue to have difficulty in sustaining a rally toward stronger prices.

Uncertainty about the markets and the weather are age-old problems that continue to bewilder agricultural producers. These variables, along with the "cost-price" squeeze, have made profit difficult to achieve. Fertilizer, crop protection chemicals, planting seeds, fuel, machinery and labor are the input items that have the greatest influence on the cost of production for farmers.

February and March are high fuel usage months for South Texas farmers who are involved in tilling and planting their fields. The recent escalation in fuel costs will certainly contribute to higher production costs for the crops grown in the Coastal Bend. This is particularly bad news for farmers who are not able to levy a fuel charge—like certain other industries—on every ton of production.

Agriculture had very few profitable years during the decades of the ’90s and the same could be said for independent oil producers in Texas. Low crude oil prices resulted in abandonment of a great many lower-yielding wells throughout the state. This resulted in a downturn in drilling activity, the disappearance of many oil field services, fewer good paying jobs and lower sales and property taxes. All of this had a negative effect on the South Texas economy. And in South Texas, when both agriculture and the oil and gas industry are plagued with low prices, few other businesses or individuals prosper.

Now that crude oil prices have made a recovery, let’s hope that our depressed agricultural commodity prices will be able to do the same. If not, it is likely that the thin margins will turn into red ink for a lot of farmers.

On a lighter note, look on the bright side. We can be thankful that our cars, trucks and tractors don’t run on cola. If they did, a 30-gallon fill-up—even using last year’s prevailing price of 89 cents for a 20-ounce bottle—would cost you about $170.70 (hard to believe until you do the math)!