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CHICAGO -- The impact of war with Iraq was already being felt in the U.S. farm belt this week with farmers facing soaring costs for oil-based fuel and fertilizers, analysts said.
With Midwest spring planting just weeks away, prices for corn fertilizers like anhydrous ammonia have climbed about 40 percent in some areas. Anhydrous ammonia is made from natural gas, which hit an all-time record high late last month.
"We've noticed that the anhydrous ammonia has really spiked up here in the last six weeks," said Chris Hausman, a central Illinois corn and soybean farmer. "That price has peaked at about $400 a ton, where last fall we were buying it for approximately $275 a ton," he said.
Many farmers like Hausman booked their nitrogen fertilizer supplies months ago. But some will also feel the sting of higher diesel fuel prices once they fire up their tractors to begin tilling and seeding fields.
"I'm worried sick about what diesel fuel is going to cost. I already have all my nitrogen booked," said Ben Riensche, a corn and soybean farmer from Jesup, Iowa.
An American Farm Bureau Federation study in February said fuel costs for seeding, treating and harvesting crops such as corn and cotton could rise by $5 to $10 per acre this year. Costs for soybeans and wheat could climb $3 to $5 per acre.
While such production costs are rising, farmers and economists were uncertain about how the conflict with Iraq would affect grain prices and exports.
The United States launched a war on Iraq with dawn air raids in Baghdad on Thursday. U.S. officials said an all-out air and ground onslaught might be days away.
Some hope U.S. exports could get a lift from a post-war Iraq hungry for food from the United States. Food aid could be especially helpful for U.S. wheat and corn exports, which continue to lag behind last year's sales.
U.S. government sources on Wednesday said that between 300,000 and 800,000 tons of U.S. grain could eventually be sent to Iraq as part of emergency post-war food programs.
Matt Roberts, an agricultural economist with Ohio State University, said a key question is how long the United States will maintain a presence in Iraq, helping to build a market for U.S. goods.
"If...the administration is willing to stay on for an extended period of time, I think that there are significant opportunities for American exports. But that is primarily going to be a political decision," Roberts said.
In the short term, uncertainty surrounding the Iraq situation has turned U.S. grain markets edgy. Speculators this week drove Chicago Board of Trade corn prices to new season lows, focusing on expected record plantings after last year's drought losses rather than on prospects for food aid.
"Speculative traders don't want to be holding a long position in corn until they know what's going on. There's a nervous, kind of choppiness to the corn and bean market," said Jack Hartman, a director of the United Soybean Board who also farms corn and soybeans near Sumner, Iowa.
That type of price activity makes the farm community anxious and unwilling to sell crops, despite the approach of the planting season.