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Two interesting articles that recently ran in the San Diego Union-Tribune are reprinted below with permission from the Union-Trib writer, Mike Gardner. The first story (“Diesel costs sting state growers”) addresses rising fuel price impacts to California farmers, and includes a quote from Family Farm Alliance Chairman Bill Kennedy. The second story (“State farmers donate despite narrow profits”) carries this issue forward, and finds that, despite fuel costs narrowing profits in commodities, California farmers have opened their wallets to Gulf Coast farmers ruined by Hurricane Katrina.
Diesel costs sting state growers
SACRAMENTO – Jolted by accelerating diesel prices, Janet Kister has fretted over how to absorb the $500-a-load fuel surcharges levied by some truckers and still keep her Sunlet Nursery in Fallbrook competitive.
"For the long-distance market, we're being shut down because we can't compete," said Kister, who sells plants and flowers from Los Angeles to the Lone Star State.
And growers might not be the only ones paying the price. In Lakeside, egg farmer Frank Hilliker said he expects the cost of the breakfast staple to edge up.
"Surely the 99-cent (a dozen) eggs are going to go away," Hilliker said.
Fuel surcharges and higher prices for feed and fertilizer have put the squeeze on farmers in California. Most, however, say they cannot easily make up the difference by raising prices in a market tightly controlled by supply contracts, middlemen and competitive supermarket chains. Instead, they tune up engines, skimp on purchases, only dispatch fully loaded trucks and dip into savings.
Consumers have yet to feel the pinch at the supermarket – and might not. "In general, there's a pretty small pass-through from ag prices to supermarket prices," said Christopher Thornberg, senior economist for the UCLA Anderson Forecast.
He said fuel costs likely will be "spread out" from the field to the cash register, minimizing the impact on shoppers. Prices will sting some in the agriculture industry, Thornberg added, but do not threaten to depress farm income dramatically.
Jose Bervejillo, an agricultural economist at the University of California Davis, said diesel prices should fall eventually.
"We don't expect fuel prices to be as high as today forever," he said. "We're in the middle of several crises: from the war in Iraq to (Hurricane) Katrina."
Diesel's share of annual farm operating costs usually amounts to 2 percent to 10 percent depending on the commodity, Bervejillo said. But price pressures have increased diesel's share of operations by 6.2 percent for cotton farmers, 4.75 percent for rice growers and 1.6 percent for those harvesting wine grapes, he said.
More importantly, truckers hauling goods to mills and markets are adding surcharges to offset their bills at the pump.
Al Nunes, owner of AC Trucking in Manteca, said his fuel bill has jumped to $22,400 for an 8,000-gallon load, from $15,400 last year.
"In most cases, we're passing those increases back to our customers and they're passing it on to the consumer," Nunes said.
Once-cheap diesel, now hovering at more than $3 a gallon, had already surpassed the price of regular gasoline, primarily because of demand and tough anti-pollution controls imposed in California. Rice harvesters can guzzle 15 gallons in a single hour.
Agriculture contributed $31.8 billion to the state's economy in 2004, shattering records. Led by nurseries and orchards, the farm sector accounted for $1.46 billion in San Diego County last year.
But the numbers belie this year's struggle to cope.
At Sunlet Nursery, Kister said an average 22 percent fuel surcharge on shipments by truck is driving prices so high that the nursery can no longer compete for out-of-state sales.
It is shipping only when trucks are full, which means it risks losing orders if the timing is not right. The gas tank is not the only place where fuel prices are painful. Petroleum-based pots and fertilizer "have gone through the roof," Kister said.
Consumers shopping for plants "may see a small increase, but right now growers are just absorbing it," she said.
For many grocers, Hilliker is the egg man. His family runs a 30,000-hen egg ranch in Lakeside struggling with the rising costs of fuel, foam cartons and other materials.
"Everything is going up," he said. "You try to pass it on and tighten your belt."
Even the popular bargain wine widely known as Two Buck Chuck – officially a Charles Shaw wine – might have to change its name.
"The Two Buck Chuck may be Three Buck," according to Ben Drake, a Temecula farmer and chairman of the California Association of Winegrape Growers.
Drake said the cost of diesel obviously will affect wine prices, but he said that might be mitigated by the evaporation of a grape glut that had depressed the market. Wineries also are consolidating.
Drake has responded to the upswing in fuel costs by putting crews in more gas-efficient vehicles. He said he also has been forced to raise the price he charges for farming other properties.
Similar stories are playing out across the state.
Cattle ranchers, who ship herds hundreds of miles in search of green pastures and later to Midwest beef processors, are fuming.
Bill Kennedy, whose cattle are in Northern California's Glenn County, said it cost $2.85 a mile to ship cattle by truck last year. This year, the price has jumped as high as $3.25, which he says has dampened his ability to compete in the Midwest.
Sacramento Valley rice grower Larry Patane said that with the rising fuel prices, farmers are getting nicked from all sides: crop dusting, petroleum-based fertilizers, harvesting and transportation.
"It seems like we never catch up," Patane said.
State farmers donate despite narrow profits
"Even when prices are low and profits thin, I still have a roof over my head, water to drink and food to eat," said lemon-and avocado-grower Sam Frye, an organizer of a farmer-to-farmer aid program based in Santa Barbara.
In San Diego County, the farm bureau is arranging jobs for some displaced victims. The bureau also will use the proceeds of an annual charity golf tournament Oct. 20 to help children of hurricane victims stay in college.
"We were all affected by this disaster in our own country," said Janet Kister, who plans to hire one of the survivors airlifted to San Diego even though it's a slow time for her family's nursery in Fallbrook. "I just wanted to do something."
Elsewhere, the California Farm Bureau has sent $87,000 – $1 for each member – to the American Red Cross while county farm bureaus are making independent efforts.
"We all think you guys are nuts out there. Then you show your true colors," said Ken Middleton, praising California's response as he tried to salvage his cotton field in the Mississippi Delta.
Katrina's wrath on agriculture is still being analyzed. Millions of chickens have been lost. Hundreds of acres of commercial pine trees are destroyed, as have rice, sugar cane, cotton and soybean fields.
But Middleton remains positive that Gulf Coast agriculture will rebound. "Things always work out," he said.
Page Updated: Thursday May 07, 2009 09:14 AM Pacific
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