	Introduction

Agriculture, as a production-oriented sector, requires energy as an important input to production. U.S. farm production—whether for crop or animal products—has become increasingly mechanized and requires timely energy supplies at particular stages of the production cycle to achieve optimum yields. Several key points that emerge from this report are:
agriculture is reliant on the timely availability of energy, but has been reducing its overall rate of energy consumption; U.S. agriculture consumes energy both directly as fuel or electricity to power farm activities, and indirectly in the fertilizers and chemicals produced off farm; energy's share of agricultural production expenses varies widely by activity, production practice, and locality; at the farm level, direct energy costs are a significant, albeit relatively small component of total production expenses in most activities and production processes; when combined with indirect energy expenses, total energy costs can play a much larger role in farm net revenues, particularly for major field crop production; and energy price changes have implications for agricultural choices of crop and activity mix, and cultivation methods, as well as irrigation and post-harvest strategies. This report provides background on the relationship between energy and agriculture in the United States. Agriculture as a Share of U.S. Energy Use

			Direct Energy Use

In 2002, the U.S. agricultural sector (encompassing both crops and livestock production) used an estimated 1.1 quadrillion Btu of total direct energy. Agriculture Sector Energy Use by Source

Of the estimated 1.7 quadrillion Btu of total energy used by the U.S. agricultural sector in 2002, 65% (1.1 quadrillion Btu) was consumed as direct energy (electricity, gasoline, diesel, LP gas, and natural gas), compared with 35% (0.6 quadrillion Btu) consumed as indirect energy (fertilizers and pesticides). Efficiency Gains in Farm Energy Use

The large declines in agricultural sector use of direct and indirect energy sources since the late 1970s has not come at the expense of lower output. Agriculture appears to have made dramatic efficiency gains in energy use. The tightening U.S. supply situation, and increasing dependence on imports, has contributed to higher natural gas prices, with immediate implications for farm fuel and fertilizer costs, as well as for U.S. fertilizer production. In recent years, high domestic natural gas prices have resulted in the idling and/or closing of a significant share of U.S. nitrogen production capacity. Farm Income and Energy Prices

In February 2004, USDA projected U.S. net cash farm income at $55.9 billion.
Agriculture requires energy as an important input to production. Agriculture uses energy directly as fuel or electricity to operate machinery and equipment, to heat or cool buildings, and for lighting on the farm, and indirectly in the fertilizers and chemicals produced off the farm. In 2002, the U.S. agricultural sector used an estimated 1.7 quadrillion Btu of energy from both direct (1.1 quadrillion Btu) and indirect (0.6 quadrillion Btu) sources. However, agriculture's total use of energy is low relative to other U.S. producing sectors. In 2002, agriculture's share of total U.S. direct energy consumption was about 1%. Agriculture's shares of nitrogen and pesticide use—two of the major indirect agricultural uses identified by the U.S. Dept of Agriculture (USDA)—are significantly higher at about 56% and 67%, respectively.
U.S. farm production—whether for crop or animal products—has become increasingly mechanized and requires timely energy supplies at particular stages of the production cycle to achieve optimum yields. Energy's share of agricultural production expenses varies widely by activity, production practice, and locality. Since the late 1970s, total agricultural use of energy has fallen by about 28%, as a result of efficiency gains related to improved machinery, equipment, and production practices. Despite these efficiency gains, total energy costs of $28.8 billion in 2003 represented 14.4% (5.2% direct and 9.3% indirect) of annual production expenses of $198.9 billion. As a result, unexpected changes in energy prices or availability can substantially alter farm net revenues, particularly for major field crop production.
High fuel and fertilizer prices in 2004, and increasing energy import dependence for petroleum fuels and nitrogen fertilizers has led to concerns about the impact this would have on agriculture. High natural gas prices have already contributed to a substantial reduction in U.S. nitrogen fertilizer production capacity—over a 23% decline from 1998 through 2003. In the short run, price- or supply-related disruptions to agriculture's energy supplies could result in unanticipated shifts in the production of major crop and livestock products, with subsequent effects on farm incomes and rural economies. In the long run, a sustained rise in energy prices may have serious consequences on energy-intensive industries like agriculture by reducing profitability and driving resources away from the sector.
This report provides information relevant to the U.S. agricultural sector on energy use, emerging issues, and related legislation. It will be updated as events warrant.