Calif. farmers hit by energy costs, water cuts Updated 2:35 PM ET April 20, 2001

By Spencer Swartz SAN FRANCISCO, (Reuters) - Soaring energy costs and local drought threaten to cut deep into the bounty of California's huge $27 billion agricultural industry, sending fruit and vegetable prices higher across the country.

"There is a farm crisis in California right now...and higher energy costs and water shortages will only make it much more difficult for farmers to operate," said Bob Krauter, a spokesman for the California Farm Bureau, the state's biggest farm group.

Adding to higher electricity and fuel costs, many farmers here are also struggling with crop surpluses, rising fertilizer and labor costs, and a strong dollar that puts their goods at a competitive disadvantage to imported produce, Krauter said.

Stacking the cards against California's growers is the fact that farmers elsewhere are not stuck with steep power bills, which are forcing farmers here to slash profit margins or risk failing to find a market for their crops.

"Many people wouldn't recognize the situation as a crisis right now because most prices for fruits and vegetables in stores are affordable. Farmers don't have the ability to pass on these energy costs to consumers," Krauter said.

But prices for such California staples as lettuce and tomatoes are set to head higher as supermarkets and produce wholesalers start adding "energy surcharges" to reflect the soaring cost of such industry essentials as refrigeration.

"I think it's kind of inevitable. They could be just small increases depending on supply and demand, but we will see them. Everyone's energy costs are going up," said Pete Carcione of Carcione's, a produce wholesaler in South San Francisco.

Alarmed by skyrocketing energy costs, about 1,000 farmers led a parade of tractors past the state capitol building in Sacramento Monday to highlight their plight.

DEEPENING POWER CRISIS

At the heart of the problem is a tenfold surge in California's wholesale power prices in just 10 months, the result of a disastrous attempt to deregulate the state's electricity industry while demand from the state's 34 million residents overwhelmed what its aging power plants could provide.

The growing imbalance between power demand and supplies has plunged the state into four days or blackouts so far this year -- with more expected this summer -- and unleashed emergency programs to cut demand and raise retail power rates.

The higher rates will hit industrial users especially hard.

Canning companies and produce packers face a doubling of their power bills this year, a move likely to drive smaller companies out of business and larger ones out of state, Jeff Boese, president of the California League of Processors, said.

For California's dairy farmers and its vast wine industry, the chronically tight power supplies could spell economic havoc.

Dairy farmers, whose products require constant refrigeration, face huge losses from spoilage caused by long-lasting or repeated power outages.

For vintners, blackouts can ruin the crucial July-November crushing and fermentation processes, dealing a potentially severe blow to what the California Wine Institute estimates is a $33 billion a year industry.

DRY WINTER

Meanwhile, a dry winter has left parts of the state begging for water, with state and federal water projects warning they can send only 30 to 40 percent of their usual flow this year to the 40 percent of the state's farmers that rely on them for irrigation.

The shortage has already forced farmers to cut back their acreage for water-intensive produce, like cotton and tomatoes, and estimate overall vegetable acreage in the state will be down 8 percent this year, the California Farm Bureau said.

Analysts said fewer acres under cultivation means less time in the fields for workers and less spending by growers, all of which hurts tax revenues and the economies of the farm towns that dot California's vast Central and Imperial Valleys.

While most farmers have access to underground aquifers, they are reluctant to tap them because of the high cost of electricity needed to pump the water into the fields -- an operation that accounts for a staggering 7 percent of all power used in California.

Despite the cost and slim chances of recovering it in the market, Woolf Farming in Huron, about 30 miles west of Fresno in the heart of the Central Valley, said it expects its pumping bill to more than double from last year to an estimated $2 million for the 2001 growing season.

http://news.excite.com/news/r/010420/14/utilities-california-agriculture

-- Martin Thompson (mthom1927@aol.com), April 20, 2001