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Rising Diesel Fuel Costs, Tougher EPA Regulations Create Challenges for Farmers

Published date July 28, 2010

AGCO, Your Agriculture Company (NYSE: AGCO), Duluth, Ga. – July 28, 2010 – With the Environmental Protection Agency's (EPA) Tier IV interim (Tier IVi) emissions standards for off-road vehicles rapidly approaching, many farmers are concerned about environmental compliance. At the same time, they're keeping a watchful eye on rising diesel fuel prices and wondering how the engines of these new "environmentally friendly" row-crop tractors will fare in terms of performance and fuel efficiency.

According to the U.S. Energy Information Administration (EIA) Short-term Energy Outlook from June 2010, the price per gallon of diesel fuel has been slowly, but steadily, increasing since March 2009 when the cost was $2.09 per gallon. At this time next year, diesel fuel is projected to cost $3.10 per gallon and continue trending upward.

Dennis Bartz, a corn and soybean farmer from Grafton, Iowa had his concerns regarding fuel efficiency when investigating the purchase of a new tractor for his north-central Iowa farm.

"The costs of all inputs – including fuel – seem to go up every year. That's why we've adopted precision farming practices in our operation to maximize our efficiency and squeeze every bit of value from all of our inputs," Bartz explains. "It's the same thing with fuel economy. Buying a tractor that is fuel efficient makes good business sense. It's like buying a car that offers better gas mileage. It's going to put more money in your pocket at the end of the year. I was concerned that many of the newer tractors with engines that comply with these emission standards might lose fuel efficiency."

Instead, Bartz is just one of an increasing number of growers who have found that new engine technologies can keep emissions in check while also delivering outstanding performance and fuel efficiency. A perfect example is the AGCO SISU POWER™ 8.4 L engine with e3™ selective catalytic reduction (SCR) clean-air technology that is found in Challenger® and Massey Ferguson® high-horsepower row crop tractors. SCR is a post-combustion process that doesn't interfere with the engine's ability to provide power. More efficient engine function leads to better fuel economy, which means lower operating costs.

"Right now, I can tell you that for the horsepower my (Challenger) MT645C is putting out, it's running much cheaper than the previous tractors we've owned. When it comes to horsepower and fuel consumption, it's better – by far," says Bartz. "AGCO has looked at all of the angles. They have the emissions compliance down cold, and there's no question about the fuel efficiency. All the way around, it's an ideal tractor for agriculture."

No Compromises
Test results released by the Nebraska Tractor Test Laboratory support Bartz's assertion. The Challenger MT600C and Massey Ferguson 8600 Series of 205- to 275-PTO horsepower row-crop tractors delivered from 4 percent to 20 percent better fuel efficiency than competitive tractors in this category.

For farmers looking to keep input costs down, this kind of fuel efficiency can be significant to their operation. Bruce Erickson, director of cropping systems management in the Department of Agricultural Economics at Purdue University, says the fuel efficiency of a tractor is something that warrants closer examination. Based on his experience working with the university's computer program called Purdue Crop Linear Programming model, any number of inputs will affect a grower's operation. Available as part of an annual Top Farmer Crop Workshop held at the university, farmers enter specific details about their farm including acreage, row spacing, manpower, hours worked per day, etc. As the farmer adjusts these inputs, they will see potential bottlenecks and cost savings.

"In our model, tractor fuel and repair costs per acre are components that will help a grower optimize their operation. Using a more fuel-efficient tractor will have an impact on the bottom line," says Erickson. Growers can also calculate financial benefit of using a more fuel-efficient tractor with the online fuel-savings calculator at http://www.agcocorp.com/e3/q-a/calculator.html.

More Horsepower
In evaluating new tractors, it's important to assess fuel efficiency in the context of the power a tractor delivers to get the job done. In its evaluations, the Nebraska Tractor Test Laboratory factors in engine displacement and load, rather than simply measuring fuel consumption in gallons per hour to evaluate fuel efficiency. The resulting measurement of Horsepower Hour per Gallon (HP/HR divided by GAL) represents the horsepower produced for every gallon of fuel burned per hour. The higher the horsepower hour per gallon, the more fuel efficient the tractor is.

According to Jason Hoult, product marketing manager for high-horsepower row-crop tractors at AGCO, horsepower hour per gallon provides a more accurate picture of fuel efficiency and how the tractor will perform in the field. "A lower horsepower tractor will often burn less fuel in an hour, but for most farmers, it's not going to get the job done," says Hoult. "That's the beauty of AGCO's engine technology. It balances delivering excellent power and torque while still setting records for fuel efficiency. A farmer doesn't have to sacrifice horsepower to make significant gains in fuel efficiency or achieve environmental compliance."

The Nebraska Tractor Test Laboratory is the officially designated tractor testing station for the United States and tests tractors according to the codes of the Organization for Economic Co-operation and Development (OECD). More information on the studies is available at the organization's Web site: http://tractortestlab.unl.edu/testreports.htm.

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