Transportation: Searching For Payback
Every now and then, the media will report that gas prices have dropped, but we’re all still remembering the good old days when you could get one gallon for less than $1. Search online, and you’ll find all kind of opinions on gas prices. Some media stories even try to convince us that high gas prices are good (because they spur online spending and ethanol research). But mostly, gas prices are a burden, especially for small businesses.
Our columnist Tim Higham shared some comparative equations in a recent edition of our Benchrunner e-newsletter. “A grower shipping 400 truck loads (averaging 1,250 miles per truck) each year is paying $83,333 more for fuel [compared to 1997 prices], just to ship the product,” he says This doesn’t include the increased costs you pay to your suppliers for their increased fuel costs.
A USA Today article reports 20 percent of 1,200 owners and managers of small businesses have delayed purchasing vehicles and other high-price items because gas costs more. And that USA Today article was written back in 2005, when the average fuel price was $2.27 per gallon, according to the Energy Information Administration (EIA), part of the U.S. Department of Energy. EIA expects the average for this summer to be $2.95.
Finding Profit Elsewhere
So what are some options for squeezing extra money out of production to pay for that higher transportation? Check our our Payback Primer on page 49. Senior Staff Editor Laura Drotleff talked favorite pieces of equipment with growers, while I heard suppliers’ thoughts and advice on return on investment for big equipment purchases.
Return on investment is personal and philosophical. What’s your approach? Look for the newest machine with the most modern capabilities? The one that provides the quickest payback?
For some ideas come wintertime, build a virtual greenhouse with Agricultural Research Service’s Plant Pathologists Jim Locke, Jonathan Frantz and Charles Krause. Their Virtual Grower software, downloadable from http://www.ars.usda.gov/services/software/download.htm?softwareid=108, lets growers experiment with different heating types and their effects. You enter location, the size of your greenhouses, building materials and heating schedule, and then compare costs using several types of heating methods. The Virtual Grower is a work in progress, so check it out and send suggestions to the guys at ARS. Get some ideas for your operation and help out others.