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07/04/2001 - Updated 11:01 PM ET Energy crisis a blight on farms

By Jim Hopkins, USA TODAY

WINTERS, Calif. — At age 18, Joe Turkovich vowed he would not spend the rest of his life on the family farm. He'd worked too many hours in withering August heat harvesting plums.

Eventually, the money and lure of self-employment won him over. Six years ago, the local Sunsweet Growers co-op, which dries plums into prunes, paid about $1,000 a ton, leaving farmers about $500 in profit.

But these days, baby boomers aren't eating enough prunes. Growers will be lucky to get $750 a ton this season, promising to cut profits at least in half.

Now, California's energy crisis is obliterating even that profit. Driven by a spike in natural gas prices, plum-drying costs are $275 a ton, up from $150 last year. And this month, the cost of electricity to power Turkovich's irrigation pumps soared at least 20% as the state imposed new rates.

"This is just like a nail in the coffin," Turkovich says wearily. To cut his losses, he plans to destroy two-thirds of his crop.

This is shaping up to be a nightmare summer for California's 19,000 farms and 640,000 small businesses. Farmers such as Turkovich are wondering whether their family farms will survive. Businesses are delaying expansion plans, closing or laying people off — throwing thousands out of work when the technology meltdown has already claimed tens of thousands of California jobs.

Consumers nationwide are paying a price, too. Prices are edging up for lettuce, almonds, tofu and tulips as some farmers pass on higher energy costs.

While an additional $7 billion in electricity costs this year won't bring California to its knees, it will be a drag on the $1.4 trillion economy, the nation's biggest, says state economist Ted Gibson.

But for some small companies and farmers, the drag is more like a lead weight. Small firms are the most vulnerable to sharp price increases for power and other goods because they often lack cash to fall back on. And they can't always pass higher costs to customers, because that puts them at a competitive disadvantage with other domestic and foreign suppliers, especially in a weak economy.

The result: As elected officials and big energy producers bicker about who is to blame while offering scant relief, hundreds of thousands of California businesses and farms are being squeezed.

Virtually every sector is caught in the pinch, including companies such as:

Hanson Permanente Cement, one of the biggest power users in Silicon Valley. Its electricity costs soared to $2 million a month — double what they were a year ago. The 200-employee firm uses huge electrically powered mills to produce 1.6 million tons of cement annually for California building sites. Customers pay $80 to $110 a ton. To recover its higher energy costs, Hanson raised prices $6 a ton, gambling it won't lose business to competitors. Earl Bouse, vice president of manufacturing, reserves his anger for California Gov. Gray Davis, whom he blames for shifting too much of the record electricity rate increase approved last month to the business community.

Statewide, natural gas prices have soared as much as 200%. Electricity costs for non-farm businesses have gone up as much as 49%.

"Apparently, California can operate without commerce," Bouse says bitterly. "It's an interesting economy that (Davis) has come up with."

Across California, 26% of small firms say they plan to raise prices this year, compared with 22% of all U.S. companies, says the National Federation of Independent Business trade group.

U.S. Dyeing & Finishing, a Los Angeles-area textile maker, says its energy costs skyrocketed to $300,000 a month from $50,000 last year, mostly because of higher natural gas prices. Two months ago, the company laid off 50 workers, or one-fifth of its workforce. A sister firm also closed because of higher energy costs, sending 80 into unemployment. A handful of other Los Angeles-area textile makers, who produce designer goods under such labels as Calvin Klein, have closed or scaled back because of higher energy costs. About 3,000 jobs disappeared in the dyeing and printing sectors alone, says the Association of Textile Dyers, Printers and Finishers of Southern California.

Leonard Horowitz, executive director of the Textile Association of Los Angeles, blames the mess on power producers outside California, who he says are making huge profits and are in cahoots with the White House. "They're all from Texas," he grumbles. "They're all related to the Bush family in business."

BigBallot, a marketing company in Irvine, Calif., with 54 employees, wants to move all its computer processing operations to California from Massachusetts. But higher costs and, especially, the threat of blackouts, forced managers to kill the idea for at least 12 months. That cost the state about a dozen jobs. The company is spending about $20,000 a month for backup power supplies — a new expense. "We can't afford to have systems go down," CEO Jeff Gehl says.

Steps to save the farm

On average, electricity, gas and other energy costs account for about 4% of a good's retail price. In California, the biggest electricity consumers are office tenants, retailers and factories. Combined, they suck up 57% of all the juice.

Farms and other agricultural businesses use 7% of the state's electricity. California is the nation's biggest producer of commodities that include almonds, raisins, kiwi fruit, olives and prunes. Its cheese, grapes and peaches pour into grocery stores across the nation and around the world. The state's $25 billion farm economy is the nation's biggest — twice that of Texas, the No. 2 agriculture state. That's why any impact on California farmers often spreads beyond the state's borders.

Turkovich, 44, is among those hardest hit by the energy crunch. He grows more than 25,000 plum and walnut trees in lush green rows on 160 acres owned by his parents. His father started the farm near the small town of Winters, about 30 miles west of Sacramento, when Turkovich was 4.

As a boy, he helped shake the trees until plums fell onto cloth spread around the trunks, then he hand-sorted them to remove twigs. "Back-breaking work," Turkovich says, touching a leaf on a tree heavy with green plums.

His father had as many as 50 laborers. But with automation — a machine helps harvest plums now — and other cost-saving changes, Turkovich gets by with fewer than 10 seasonal workers.

Confronted with higher energy costs, he's taking other steps to save the farm. He's converted an electrically powered irrigation pump to propane gas, and he is diversifying his crop with walnut trees, which have better market prices. After this year, he figures, only the most efficient growers will remain. Turkovich avoided the desperate step taken by a neighbor, who abandoned his orchard to weeds that now snake across the field.

Hoping to 'break even'

Turkovich is among 650 plum growers, most in Northern California, who produce virtually all the prunes in the USA. They're expected to harvest as much as 150,000 tons of plums this year vs. 215,000 last year. Much of that will be trucked to the Sunsweet co-op, where plums are dried.

Many growers can only hope to make $80 an acre after harvest starts in August. Raising prices is out of the question. Consumption isn't growing among boomers, even after the industry started calling prunes "dried plums" to escape the association with old folks and laxatives.

Like many California farm and business owners, Turkovich isn't sure how much higher his electricity bill will go. The new rates went into effect June 1.

Many plum growers will harvest only a third of their crop this year. The rest will be destroyed. "Most of them are really just hoping to break even," says Mark Dalrymple of Sunsweet Growers.

Across Yolo County (pop. 168,660), other businesses dependent on farm-related income are worried about a possible ripple effect, even as they contend with higher energy bills themselves.

John Pickerel, who with his wife owns two restaurants and a catering firm in Winters, plus a third restaurant in San Francisco, says his monthly bills jumped to $11,000 from $6,000 a year ago. "Staggering," he says.

Once intent on leaving the farm, Turkovich, who is single, now can't imagine anything else. Seated at the table in his parents' kitchen, he smiles uneasily when talking about what he'll do if his plans to boost profits fail. "I don't want to even think about it," he says.

Without relief, though, the future looks unbearably grim. "We're sunk," Turkovich says. "The prune business won't survive."

http://www.usatoday.com/money/bcovthu.htm

-- Martin Thompson (mthom1927@aol.com), July 05, 2001