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EU natural gas situation might influence U.S. agriculture

An economist says the potential impact of natural gas shortages in the European Union this winter will likely have a big impact on agriculture.

Tanner Ehmke with CoBank tells Brownfield the EU has been stockpiling natural gas, but with the flow from Russia interrupted by war and the potential for a hard winter, he’s concerned about fuel rationing. “They’re not going to let their people freeze, so what’s going to get turned off? It’s going to be gas flows to the heavy industry, the mills producing steel and aluminum, but it could also very well be the dairy processors and those powder plants are powered by natural gas.”

Ehmke says if the EU powder plants shut down, it would add support to Class IV milk prices in the U.S., which are already benefiting from a strong butter market. Also, Ehmke tells Brownfield American dairy farmers might be reluctant to step up production to meet that need because of production costs. “We still have very high production costs, especially with feed and hay prices. If you look at hay prices, it’s been commonly talked about out west, and a record high out in California.”

Ehmke says if U.S. dairy farmers ramp up production to take advantage of a potential powder export market, he expects it to happen between Texas and South Dakota where production costs are lower. “When you’ve got these really high production costs on the farm nationwide, the question is how much of that demand can we potentially fill for this export market and I don’t know. It’s going to be hard. I know the American farmers are going to be able to do some improvement and recovery in the dairy herd, but it’s going to be gradual, I think.”

Brownfield has also reported on the potential impact of less natural gas on the production of nitrogen fertilizers made in the European Union.