DEL.ICIO.USFOOD PRICES
High fuel costs help, hurt local farmers who want to deliver
The Atlanta Journal-Constitution
Saturday, October 04, 2008
Duke Lane III sure wishes he had more peaches and pecans to sell this year — demand for local produce was that good.
Not that he didn’t have a lot to sell — just nowhere near enough to satisfy demand.
Bob Andres / bandres@ajc.com
Boo Hanson inspects some flats of Mizuna mustard. Hanson owns Hanson Farms in Cumming. He sells produce at local farmer’s markets and to some area restaurants. He has a 55,000 sq. foot greenhouse and an acre and a half of growing space.
Bob Andres
An assortment of hot peppers for sale at the farm produce stand come from Hanson Farms.
FOOD PRICES:
A LOCAL LOOK
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Lane, vice president at Lane Southern Orchards in Fort Valley, has 2,500 acres for peaches and a little less for pecans.
“There was a big push this year for local produce,” he said. “We had a short crop so we couldn’t really take full advantage of the opportunity.”
It has been a good time to be local.
Driving that local opportunity was a global reality: the price of oil. Petroleum and all its byproducts have grown dramatically more expensive in the past several years.
Costs of transportation, fertilizer and packaging have all been higher — even before the post-hurricane spike.
“It costs about $10,000 to ship a refrigerated truck from the West Coast to the East Coast,” Lane said. “We can deliver to the same area (in the east) for a little over a thousands dollars. So it has some benefits.”
Yet food still arrives from far away — grapes from Chile, cheese from Italy, broccoli from California, beef from Brazil. Higher transport costs don’t yet make them unprofitable, but the more expensive they become, the more the calculation shifts toward local produce.
Layered on the economics is a clamor from some consumers for food grown closer to home. Maybe they want organic, maybe they want to reduce their “carbon footprint.” Maybe they expect the food to be fresher and safer.
Those desires help local farmers — partly because those consumers may be willing to pay a bit more.
A range of retailers — Whole Foods, Kroger, Publix and Wal-Mart — have made a point of including local produce. Local produce does tend to be fresher, but it is not necessarily cheaper. So it does better where customers are not driven only by low price.
Fuel: a plus and minus
Since local farmers are also facing higher costs, they sure would like to include those expenses in their own prices, said Ben Blanton, president and founder of Sycamore Hill Farms in Quitman, which makes mustard sauce, barbecue sauces and seasonings.
“Fuel prices and energy affect everything we get,” he said. “Everything thing we use either comes by truck or freight. And we have to pass it on.”
That’s easier with a higher-priced, luxury item — unless buyers are cutting back on discretionary purchases.
“When consumers have to deal with high gas prices, it really takes away from us because consumers will buy necessities first,” Blanton said. “When the gas prices went down 50 cents, we saw an increase in our business.”
Some farmers may have seen less of an increase in costs than their long-distance agribusiness competitors, said Bryan Hager, president of the Farmer’s Fresh Food Network, a co-owner of Crager-Hager Farm in Bremen.
The network’s activities — $3,500 worth of produce each week — are miniscule compared to big retailers. But to a small, family farm, the income might be enough.
And the margin is healthier, he said. “You get four times as much as a farmer who sells to the wholesale system. It’s $3 a pound for tomatoes versus 25 or 75 cents a pound.”
But even if $4-a-gallon gasoline and $5-a-gallon diesel have put us on the road to a locally centered food system, we have not yet traveled very far.
Big operations far away can still outdo locals in using their size to get bargains and to spread out costs. Big companies can often afford new equipment that boosts efficiency. Local growers are at the mercy of the seasons. But corporate buyers can get product year-round. Moreover, even the local advantage — being close — starts to fade as the distance from the farm grows.
A company shipping across the continent will not balk at an extra hundred miles. But for a local grower, that can be a deal-breaker.
“The max, I think, is about four hours drive, maybe 200 miles,” said Hager. “But most aren’t willing to go much beyond 50 miles.”
So any advantage that local farmers gain from higher transportation costs can be lost the same way. Boo Hanson, owner of Hanson Farms in Cumming, sells produce at restaurants and farmer’s markets, including those in Alpharetta and Buckhead.
He struggles with fuel costs.
“When we are dealing with chefs, and we are going to make a delivery, we try to find a way to go to four or five or six places so you don’t just go to make one delivery,” Hanson said.
Price: a tipping point?
Some local produce goes to once-a-week farmer’s markets — places where there is virtually no “middleman” to add costs. Yet there is also a minimum of marketing and revenues compared to the vast network of retail stores where most consumers shop.
Farmer’s markets have grown, but they are not supermarkets with wall-to-wall choices; they are not going to be the outlet for a surge in local produce, said Kent Wolfe, marketing analyst and economist at the UGA Center for Agribusiness and Economic Development.
“There are 96 farmers’ markets in the state — they are all over,” he said. “But consumers come once or twice and if they can’t find what they want — if, say, there are no tomatoes — they stop coming.”
Yet in the retail stores, too, customers have a lot of influence over the future of local produce on store shelves. But how much will they support the idea with their spending?
“Consumers are often willing to pay a higher price for locally grown, higher quality stuff — but only up to a point,” Kelley said. “We are used to cheap food in this country. Beyond a certain premium, we are not going to pay.”
Yet advocates for local produce say that consumers don’t have to make those kind of choices.
“The idea that local goods are more expensive and they are a novelty — that is not true,” said Meredith Niles, coordinator of the Washington-based Cool Foods Campaign, which promotes environmentally friendly, organic and locally grown food.
But higher energy prices are helping to shape business decisions, said Brian Girouard, head of Global Consumer Products and Retail for Capgemini.
As a consultant for retailers, Capgemini has studied consumer trends, which are driven by two factors, he said: economics and consumer preferences. “Both tend to underscore that retailers should be looking at local farms.”
But the calculation is not as simple as factoring in lower gas costs for local farms. Local produce means less warehousing — that saves money, too.
But it also means making retailers deal with more vendors, Girouard said. Economics isn’t yet the best reason for retailers to go local, Girouard said. “If your customers want it — that’s the platform to work from.”
Still the higher that oil prices go, the better local looks, he said. “The current price has been a wake-up call and a catalyst. People — at least some people — are changing their habits.”