Calif. energy crisis leads to higher food prices

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01/26/2001 - Updated 08:43 AM ET Calif. energy crisis leads to higher food prices

By Jon Swartz, USA TODAY

SAN FRANCISCO California's energy crisis is pushing up some food prices, and more increases are possible. Already this month:

Jack in the Box raised prices of combo meals 10 cents in California and Washington because of soaring energy prices and a boost in minimum wages.

The Western United Dairymen, which represents half of the state's dairy producers, petitioned the California Department of Food and Agriculture to add 1 cent to 3 cents per gallon of milk to offset energy costs. California produced the most dairy products of any state in 1999.

More increases are likely, producers say. One key reason: Fertilizer and chemical costs, which vaulted 40% in the past three months because of higher natural gas prices, are hitting farmers, who will pass the higher costs on to processors and, ultimately, to consumers.

"The price of every fresh crop cherries, apples, peaches, you name it will be affected," says Steve Dugo, branch manager of Mid Valley Agricultural Services in Linden, Calif. "It's a domino effect."

If energy costs continue to rise, California's Hidden Villa Ranch may within months raise egg prices by 2 cents a dozen to offset the costs, says Michael Sencer, executive vice president. Its eggs are sold worldwide. California is the nation's No. 3 egg producer.

Meanwhile, California citrus growers have asked state regulators to avoid cutting off their power at night when heat and wind machines keep growing plants warm. In 1998, when freezing temperatures wiped out 60% of the state's orange crop, Sunkist Growers increased prices 4%.

Many California businesses, though, won't be able to raise prices and stay competitive. Flower growers, for example, compete with growers in Colombia and Ecuador. Many manufacturers also compete globally. "Small and midsize firms face major problems trying to pass on higher prices," says Mark Zandi, chief economist at Economy.com.

Coosemans Worldwide, a specialty produce distributor, says even farmers can't always raise prices. "If you're 50 cents, 25 cents a case higher than your competition, you can lose a whole sale," says James Mack, president of Coosemans' Denver office.

Supermarket chains and distributors, meanwhile, are holding the line on prices, "although some will eventually have to pass costs on to consumers," says Dave Heylen of the California Grocers Association.

Frieda's, a major distributor of specialty produce, says some suppliers have raised prices for polenta, tofu and other goods. The company is absorbing the increases so far, spokeswoman Tristan Millar says.

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-- Martin Thompson (mthom1927@aol.com), January 26, 2001

Answers

I have pet house bunnies. I buy alot of fresh food for them and I noticed that the prices have been skyrocketing. Alot of the greens come from California. I was wondering when this mess was going to hit grocery prices.

-- K. (infosurf@yahoo.com), January 26, 2001.

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