Some Strapped Agriculture Sectors Wilting as Power Shortage Persists

The double whammy of spiraling natural gas prices and costly power interruptions has slammed many sectors of California agriculture, making tough times even worse for businesses already feeling the pinch of low commodity prices.

Dairy farmers may be able to get consumers to shoulder part of their growing financial burden through price increases. But others, such as Carpinteria greenhouse owner Rene Van Wingerden, who uses gas boilers to warm his daisies and chrysanthemums, have no choice but to swallow the escalating costs.

“When we say we’d like to add a penny to our plants for energy costs, they scream and holler,” Wingerden said of his customers. “We can’t pass these costs on.”

That strain will soon begin to push some struggling businesses under, economists predict. “For some producers, this will be the last straw,” said Dan Sumner, an agricultural economist at UC Davis. “Times are bad out there in agriculture and bad in a pretty widespread way.”

With a December gas bill of about $160,000, four times what he paid last year, Wingerden said he could be forced to abandon his 25 acres of flowers in a couple of months and get out of the business--if natural gas prices remain anywhere close to where they are now.

Although the prices are beginning to ebb now that December’s extreme cold weather has moderated, they’re expected to spike again in the summer, when more farmers are harvesting their crop and more food processors are canning or freezing it.

And commercial electric bills should only increase in coming months, analysts say, upping the pressure.

“This is a prelude of what’s going to happen to the rest of [California] agriculture, and that’s what’s scaring everyone at this stage,” said Michael Boccadoro of the California Agricultural Energy Consumers Assn. California is the nation’s top farm production state.

Farmers have already been slapped this year with higher costs for labor and other essentials, such as fertilizer, pesticides and diesel fuel, even as prices for their crops have remained low.

Not everyone’s suffering equally. The state’s citrus growers, while dealing with power outages at packing houses and juice plants, seem to have escaped the major threat that power outages would have posed: an inability to operate wind equipment to ward off damage from freezing. With temperatures rising, growers probably won’t need to run this equipment.

Processors, meanwhile, are coping with higher electricity prices and frequent interruptions, which have forced many to dump perishable products, such as the 10 tanker trucks of milk Land O’Lakes had to sacrifice when its power was interrupted three consecutive days recently.

In lean times, farmers and processors have traditionally had a somewhat adversarial relationship, and energy costs could prove to be even more divisive.

The state’s dairy farmers have already petitioned the state to raise the minimum price they are paid for their milk--which could add a penny or two a gallon to the retail price--a request the state is still considering. Now, dairy processors are considering asking the state for an adjustment that would increase their share of the milk price and lower the amount paid to farmers.

Jim Gomes, executive vice president of California Dairies Inc., a cooperative that processes 40 million pounds of milk a day, acknowledged that such a move would be unpopular with its producer-owners, but he said it is necessary to keep its natural-gas powered evaporators and pasteurizers running and to pay for higher electric costs.

“When your choices are all bad, you have to wind up making bad choices,” Gomes said.

Many of California Dairies’ 25 customers for fluid milk, mainly ice cream and cheese makers, had to return the milk to the cooperative when their electric service was interrupted.

“California needs to build new generation. It needs to do something to maintain a vibrant economy with a low cost structure on the goods and services companies here produce, whether it’s technology or agriculture,” said Bob Christensen, an analyst with First Albany Corp. in New York.

The Agricultural Energy Consumers Assn. has proposed a solution to Gov. Gray Davis that would allow agricultural operations and food processors to operate their diesel generators during Stage 2 and Stage 3 power emergencies to reduce the load on the system.

The plan also seeks financial relief such as grants for processors and growers to buy backup generators--including sales tax exemptions and accelerated depreciation for this equipment.

Garlic dehydrator Frank DeFrancesco of Firebaugh, Calif., said he would like to become less reliant on the electricity grid. He is looking for a gas generator to generate power for his plant while providing exhaust that could be used to heat the dryers needed to make granulated, minced and chopped garlic.

As a relatively light electricity user, he said it might even allow him to sell excess power to his neighbors.

But there’s a hitch. “I’d have to have the assistance of the government,” he said. The gas-powered generator would set him back at least $5 million, he said, and after paying $1 million for natural gas to dry his products in December, up from $167,000 the year before, he’s out of cash--and out of patience.

Customers in other states “are not paying nearly what we are paying,” DeFrancesco said. “We are being taken advantage of.”