High gas, diesel prices hurt Calif. farm industry
FRESNO, Calif. (AP) — Farmers in California's agricultural heartland say record-high gas and diesel prices are putting pressure on their bottom lines, but economists say it's unlikely that will translate into significantly higher food prices across the U.S.
Keith Nilmeier, a fourth-generation farmer in Fresno County, has cut down on using his farm equipment to compensate for climbing fuel costs.
Among other changes, Nilmeier — who grows fruit on 300 acres near Sanger — makes only one pass, instead of three, through the orchards and vineyards with his disking machine linked to a furrower. And he keeps farm supervisors driving smaller, fuel-efficient cars around his fields.
"I'm trying to figure out how to get more efficient about using the equipment and saving more fuel," Nilmeier said. "But we're getting down to the point where I keep looking at what else can I cut out, and I'm running out of options."
When it comes to rising fuel costs, farmers get hit with a double whammy: They're spending more to refuel farm equipment such as harvesters and tractors, and they're having to pay fuel surcharges to people mechanically harvesting or transporting their produce. Yet they are loath to impose surcharges on anyone, because they're afraid of being less competitive when they sell their products.
The Fresno County Farm Bureau says farmers are hoping that, as economists predicted, gas prices will stabilize in the coming days. Gov. Jerry Brown on Sunday ordered state smog regulators to allow winter-blend gasoline to be sold in California earlier than usual to bring down prices.
The rise in gas prices has slowed, but the price on Tuesday was still a state record and the highest in the nation. The average price for regular gas in the state was a little over $4.67 a gallon, according to the AAA's Daily Fuel Gauge Report. The cost increased only a fraction of a cent overnight, however — compared with nearly 50 cents in the past week.
The price for diesel in California averaged $4.38 per gallon as of the first week of October, according to the U.S. Energy Information Administration. California and U.S. diesel prices have climbed steadily from about $2 per gallon in 2009.
The recent surge in gas prices came after a power outage at a California refinery that reduced supply, and corrosion issues in an important pipeline, analysts said. The refinery came back online Friday.
California's Central Valley produces much of the nation's fruit, vegetables, nuts and dairy products, with Fresno County as the No. 1 agricultural producing county in the U.S.
But customers nationwide should not expect food prices to rise significantly due to higher gas and diesel costs, said Daniel Sumner, an agricultural economist at the University of California, Davis.
That's because fuel is only a small percentage of the cost of farming and getting a product to store shelves. Food prices will go up only by a few pennies on the dollar at most, Sumner said.
Still, higher gas and diesel prices may make California food less competitive with overseas imports, he said. Produce that's shipped via the ocean to a supermarket near the port would not reflect higher gas costs that U.S. produce shipped on trucks via highways would.
While food prices may see a small increase, the money won't trickle down to the growers.
"We farmers don't have any way to recoup the higher gas costs or pass them on to consumers, so we have to swallow them," said Nilmeier, who grows apricots, peaches, nectarines, grapes and oranges.
To harvest grapes with a mechanical harvester, for example, Nilmeier must refuel two tractors pulling gondolas. They use 100 gallons of diesel per night, while the machine picks 140-150 tons of grapes.
That means an extra $45 per night in fuel costs, he said. And it takes many days to pick the grapes. That's not even counting the higher cost of gas for driving workers from field to field.
But once products leave the farm gate, packers, refrigeration facilities, shippers, freight companies and processors all add a fuel surcharge to their customers' bills, Nilmeier said.
Many trucking companies that haul agricultural products to storage and to market impose fuel surcharges on farmers and other customers to protect themselves against fuel price fluctuations, said Michael Shaw, spokesman for the California Trucking Association, whose members move 80 percent of the cargo on California's roads each year.
But the truckers who don't add fuel surcharges — especially small independent truckers — may find themselves in financial troubles, and may even stop driving, Shaw said.
"For now, we're trying to ride it out. But if diesel goes over $5, I'm going to have to stop," said Joel Vargas, an independent trucker from Porterville who hauls produce from fields to packing houses. "With that kind of price, I won't be able to support myself and my family."