Energy woes may impact produce costs

Jeff Donaldson RENO GAZETTE-JOURNAL April 30th, 2001

Stuart Wolfe converted 20 large electric water pumps on his California farm from electricity to natural gas over the past year to hold down the cost of watering his tomatoes.

But with natural gas prices at up to 10 times last year’s rates, Wolfe isn’t really seeing much relief at his Visalia spread.

According to produce distributors and grocers in the Truckee Meadows, neither will customers.

“Marketers here are going to see unbelievable price increases,” said Janice Canisso, sales manager of Custom Produce in Reno.

The Kingsburg, Calif.-based company is near Fresno, where many farmers like Wolfe are facing higher prices for fertilizer, labor, water and seedlings. Increased production costs will offset expected bumper California crops, even as consumers face added energy costs of their own.

Reno shopper Melinda Cruz said she expects to cut back her produce buying if prices rise as industry officials predict.

“You don’t want to do without these things, but it’s at times like these you realize you can,” Cruz said.

Naturally the problem has affected California’s many large produce processors -- companies like Custom Produce that will pay 50 percent more for electricity and 100 percent more for natural gas than a year ago, according to the California League of Food Processors.

“We have to tack on cooling and palletization charges and those are hard to figure,” Canisso said. “People have to set the amount and hope it’s enough.”

“One shipper/grower said they paid $400,000 last year at their cooling facilities, but that the cost for electricity could reach $1 million this year.”

At about $26 billion a year, California grows most of the nation’s fruits and vegetables and is far and away the largest agricultural state. In part because of global competition, experts say, farmers can raise produce prices only moderately.

Besides meaning higher prices for consumers nationwide, farmers will be forced to eat chunks of their energy costs.

“We’ll have a train wreck this summer,” Wolfe said. “I think there’s a lot of guys who are going out of business. I don’t see how you avoid this.”

California’s two largest valleys between the Sierra Nevada and the Pacific coast have one of the world’s great climates for growing produce, and the state has 250 to 350 crops. Agriculture’s main limiting factor has been the constant battle between farmers and a swelling population over limited water.

But farmers face other problems, too:

• Increased imports, with some foreign governments subsidizing agribusinesses.

• Supermarket consolidation that has led to chains being able to pay farmers less.

• Urban sprawl eating up farmland.

• A worldwide glut of nearly all commodity crops.

“I’ve been in this business for 25 years and it’s the first time that not one single crop is profitable for either growers or processors,” said Jeff Boese, president of the California League of Food Processors. “I have real concerns for the future of California ag of the size and scale it is today.”

The higher costs also will hit consumers, and not just because of the soaring cost of electricity and natural gas.

Trucking companies that bring produce from Washington and California to Reno will have to make up for losses in high fuel prices too, said Brad Shirley, vice president of Reno Food Distributors, which distributes dry products, frozen foods and produce to area grocers.

“When trucking companies talk about an increase in delivery charges, they usually mean one percent across the board,” Shirley said. “It may not seem like much, but over time it can really accumulate.”

To highlight farmers’ plight, the California Farm Bureau is sending a delegation to Washington, D.C., on May 5 to talk with lawmakers and Agriculture Department officials on issues ranging from eliminating the estate tax to trade dumping, said bureau spokesman Bob Krauter.

That probably won’t do much to help Wolfe, who built a processing plant with other local farmers so they could process their tomatoes into ketchup and spaghetti sauce. Now the plant faces a $45 million fuel bill — 10 times last year’s, Wolfe said.

And, predicted rolling blackouts could ruin the processed tomato products, and take days to clean up and re-sterilize the plant, he said.

Reporter Doug Abrahms of Gannett News Service contributed to this story.

© 2001 Reno Gazette-Journal

http://www.rgj.com/cgi-bin/printstory.cgi?publish_date=20010430&story=988692435

-- Martin Thompson (mthom1927@aol.com), April 30, 2001