Rising natural gas prices and labor costs pose a serious threat to some growers in Central Oregon’s agriculture industry, according to state and local business officials.

Some Oregon trade associations’ leaders say costlier natural gas, which is used both in heating greenhouses and producing nitrogen-based fertilizer, is especially damaging to local agricultural businesses. Oregon’s high minimum wage compounds the effect, they say.

Flower growers are especially hard hit, an official said.

”The flower industry is in the critical stage now,” said Barry Bushue, president of the Oregon Farm Bureau. ”To counter high costs, some owners are raising products at cooler temperatures. But that means an increase in production time and labor hours, so it’s sort of an either-or situation.”

Several business leaders in Oregon said the solution is to increase the overall natural gas supply in the United States, which would contain, if not reduce, costs.

For Oregon agricultural interests, the stakes are high. Oregon farm products exceeded $4 billion in value for the first time in 2005. Greenhouse and nursery sales, cattle, hay and grass seed are among the state’s top agricultural products.

Farmers

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About 70 percent to 90 percent of the cost to produce nitrogen-based fertilizer is directly related to natural gas prices. As such, the cost of such fertilizer has doubled in the last six years, from $225 to $550 per ton, Bushue said.

One Central Oregon farmer said he and others have felt the pinch.

”We’re squawking-mad because we’ve got fertilizer costs going double on us, and we’ve got diesel costs going double on us,” said Gary Harris, a farmer based in Jefferson County. ”Very few farmers in Madras will be bragging about how much money they made this year. The future is not bright for agriculture right now.”

Harris, whose crops include carrot and onion seeds, said the global market for his products is ripe with international contenders who will step in with lower prices.

”I can’t pass on that (natural gas) cost because I can’t dictate my prices,” he said, pointing to cheap farm goods from countries like India and Australia. ”(Farmers) are price-takers, not price-makers.”

Gary English, owner of Landsystems Nursery in Bend, said his facility uses propane and hasn’t been hurt by rising natural gas prices.

The cost of fertilizer, however, is another story.

”(It has) jumped quite a bit,” English said. ”And we have to buy it no matter what, so I guess it’s just another operational cost increase we have to deal with.”

English estimated his nursery uses about six tons of fertilizer a year. Using Bushue’s figures, the annual cost would be $2,700.

Oregon’s minimum wage of $7.50 per hour doesn’t help, English added.

”It’s not just the minimum wage that gets driven up,” he said. ”It drives up labor costs across the board. It’s a killer.”

Oregon Farm Bureau’s Bushue said the combination of labor and natural gas costs is devastating.

”In a state where minimum wage is the second-highest in the country, (natural gas price hikes and labor costs) are basically a double-whammy,” he said.

Increasing the domestic natural gas supply would counter the problem of rising costs for agricultural industries, according to one state business leader.

”The good gas distribution networks in the Northwest mean that a good deal of the natural gas we produce here gets distributed to places like the East Coast and the Midwest,” said Richard Butrick, president and CEO of Associated Oregon Industries. ”(So) the issue is finding additional supplies in the Gulf of Mexico, where the potential is very high.”

Both the Associated Oregon Industries and the Oregon Farm Bureau have joined a coalition of the state’s business leaders, launched last week, to pressure the federal government to increase natural gas production in the Gulf of Mexico.

The U.S. Senate is scheduled later this year to debate a measure that would expand gas exploration in the Gulf region. But a moratorium in place since 1981 prevents new offshore drilling along most of the U.S. coast and has significant support in U.S. Congress.

”America needs to increase natural gas production,” Butrick said. ”Otherwise, we’ll fall way behind the (global) competition.”

Central Oregon farmer Harris said measures that can be taken to lower natural gas prices should be taken soon. The alternative, he said, would be the gradual disappearance of American farms.

”If our costs keep going up for energy and labor, all of America’s food source will soon be coming from overseas,” he said.