KANSAS CITY, Mo. — Last summer, fuel prices peaked at more than $4 per gallon, and the cost of a gallon of diesel pushed close to $5. So it only makes sense that, now that the price of fuel has fallen back to about $2.50, those in the produce industry who depend on diesel trucks delivering and/or receiving their goods are breathing a collective sigh of relief.
“I think our industry is amazing,” said Anthony Totta, a produce consultant in Lee’s Summit, Mo. “We’re very good at becoming more efficient and getting done what we need to get done.
“Transportation is over 50% of the job now. You can have the best piece of produce around, but if you can’t get it there in timely fashion and in excellent condition … it kills everything.”
High fuel prices nearly killed everything last year. It caused many produce distributorships to add fuel surcharges to the cost of orders and caused everyone to re-evaluate how they ran the transportation end of their businesses.
“Fuel prices make a big difference in profitability since there are margin pressures from customers,” said Gene Loffredo, president and chief executive officer of Loffredo Fresh Produce Co. Inc., Des Moines, Iowa, which operates 130 trucks. “We had surcharges for a while, but we took them off. We also negotiated higher freight rates last year with our customers, then took them down when fuel prices settled.”
Loffredo said he thought fuel prices will continue to rise slowly, but it would be quite some time before they reached the levels of the summer of 2008. He pointed out that insurance and operating costs of equipment also continue to rise.
Loffredo’s neighbor in Norwalk, Iowa, Capital City Fruit Inc., runs nine trucks out of its packinghouse and distributes out about 350 miles from its facility.
“We had to be very proactive dealing with energy issues,” said Brendan Comito, Capital City’s chief operating officer. “When it got up to $4.60 per gallon, we had to be very careful, make sure our trucks were fully loaded, and get as many backloads as we could. We were effective and efficient in routing.”
Comito said his company never slapped on surcharges.
“I’m not a fan of surcharges,” he said. “You can slap those on for anything. I believe you set the market for what you do and charge a fair price.”
Nick Conforti, vice president of C&C Produce, said the spike in fuel prices last summer might actually have had a silver lining.
“I don’t think it was good that gas went to $4, but it did cause us to put in place greener procedures, like putting governors on trucks, unload immediately, turn reefers off,” said Conforti, whose company runs 47 trucks. “We reduced fuel consumption 10%.”
Scott Danner, chief operating officer for Liberty Fruit Co. in Kansas City, Kan., said his company had moved to make their transportation system more efficient before the price hikes hit.
“We’d already done things to reduce routes,” Danner said. “We have GPS tracking, cut down on idle time, monitor speeds.”
Perhaps the best news to come out of the settling back of fuel costs is that consumers are paying less for produce at retail.
“Sure, (lower fuel prices have) helped,” said Doug Riley, assistant vice president of produce operations for West Des Moines, Iowa-based Hy-Vee. “Whenever you’re paying higher prices, you’re going to pass that along by charging more for produce. I think that might be why some companies haven’t made it.”