Fuel costs add strain but give a proximity edge to Michigan growers

06/09/2011 10:31:00 AM
Dan Gailbraith

As rising fuel costs have growers, packers and shippers across the country worried about the bottom line, Michigan producers find themselves in the unique position of being both challenged by and benefiting from rising fuel costs.

“Anything related to fuel is going through the roof,” said Russell Costanza, owner of Russell Costanza Farms, Sodus, Mich. “You could lose a lot of vegetable producers in the state this year unless something changes.”

High fuel cost has meant high transportation cost, which have particularly hurt Michigan marketers who also sell California produce and rely on cross-country shipping. Talbert Nething, general manager of Hearty Fresh, Byron Center, Mich., said he expects a drop in transportation costs after Memorial Day.

“Just as we did the last couple of years as rising fuel costs came into play, we just have to deal with it as it comes,” said Gene Talsma, president of Hudsonville, Mich.-based Crispheart Produce Inc.

Another worry for Michigan marketers is the availability of trucks to make the cross-country journey to and from California. As costs for drivers rise, fewer stay in business, and lagging demand in seemingly unrelated industries like furniture and lumber can cause trucks that would normally carry produce on one leg of a trip and lumber on the other can be less plentiful.

“So far, availability of trucks has been adequate for our needs both regionally and nationally,” said Larry Ensfield, vice president of operations for Grand Junction-based MBG Marketing. “Fuel costs are always a concern as our organization has regional and national product distribution.”

Todd DeWaard, sales manager for Hudsonville-based Superior Sales, said the company has found it harder than ever to find trucks May through October.

“More trucking companies continue to go out of business as they can’t keep up with the rising costs,” DeWaard said. “Demand on what few trucks exist is strong, forcing rates to continue to climb over the last five years.”

Jerry Van Solkema, owner of Van Solkema Produce, Byron Center, Mich., said he had not heard of a truck shortage this season, but he expects freight rates to increase with rising fuel costs.

Those costs have to be made up somewhere, but growers worry about the effects of rising food costs for the consumer.

“How much is a consumer going to be willing to pay?” said Dave Miedema, president of E. Miedema & Sons Inc., Byron Center. “You can’t just keep raising prices.”

Miedema likened the situation to an the undesirable cycle that some colleges have seen when they raise tuition to cover their costs, but in doing so cause a drop in their enrollment that creates the need for another tuition hike.

Joe Pirrone, president of Mussey, Mich.-based Mike Pirrone Produce Inc., said prices at retail need to stay at a level that will keep the product moving.

“We need to get prices to where at retail people will pick up the product, and hopefully it will be there,” Pirrone said.

Todd Miedema, marketing director and principal in Hudsonville, Mich.-based Miedema Produce Inc., said although the high fuel costs will translate to higher food costs at retail, and that is worrisome, that it could also bode well for growers in his part of the country.

“We’re going to be able to compete more favorably against California,” Todd Miedema said.

Bruce Heeren, vice president of Belding-based Michigan Fresh Marketing, said he didn’t expect to encounter difficulties beyond the normal occurrences of a season.

“But being in Michigan we are close to many major markets in the country and thus hours from a receiver as opposed to two to three days,” Heeren said. “The impact on transportation isn’t as great for us in those cases and can be an advantage at times.”

Miedema said high input costs are putting some growers out of business or causing them to switch over to less labor-intensive products like field crops.

“If it continues, you’ll see fewer growers in vegetables and an upward trend in prices,” Todd Miedema said.



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