PCC Sound Consumer | Extreme weather is affecting food prices

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Extreme weather is affecting food prices

Sound Consumer | June 2014

by Joel Preston Smith

Farmers impacted by drought

The people who produce our food are sweating out the current drought. Costs for water and animal feed are soaring and retail food prices are beginning to climb, too.

Nearly 63 percent of Washington is listed as "abnormally dry" or under "severe drought" conditions. In the rest of the West, from Montana to New Mexico, 73 percent is starved for rain, according to the U.S. Drought Monitor

Nearly one-third of California is in the throes of an "exceptional drought," the most severe category in the Monitor's color-coded maps. California produces about half the fruits, nuts and vegetables consumed in the United States.

According to The Wall Street Journal, retail food prices will rise as much as 3.5 percent this year, the biggest annual increase in three years. PCC is trying to absorb price increases from vendors to limit

what it passes on to shoppers. Much of the increase in U.S. costs is from higher meat and dairy prices, due in part tolow cattle supplies after years of droughtin Texas and California, andrising demand for milk in Asia.Prices also are

higher for fruits, vegetables, sugar and beverages.

From broccoli and lettuce, to melons and citrus, prices for produce are likely to climb. If not this season, then next.

Odd weather

Tom Lively, a senior account representative for Organically Grown Company (OGC), PCC's primary produce supplier, says he's watching the weather and the production numbers, and "it all looks awfully uneven."

Lively says drought hasn't affected fruit prices so much as freezing weather. Last December, Southern California had a week of temperatures below 30 degrees. "That," he says, "killed about half the citrus crop in the state."

For many California farmers, the drought means an escalating battle for water. Rich Johansen, a citrus grower in Orland, Calif., who provides PCC's organic Satsuma mandarins, clementines, navel and

blood oranges, says as of March 1 he lost his entire water allotment from his water district to competition from walnut and almond growers who have senior rights to the dwindling water supply. He says he

now has to depend exclusively on well water to irrigate - drawn from a falling water table.

Johansen says he's cutting some trees back - they'll need less water, and bear less fruit. Others are being cut out entirely. He estimates the loss of the cutback at about $75,000. "We could either watch them dry up or just cut them out," he says, "so we're taking them out."

Johansen is bidding on water that could be siphoned from a privately owned canal in central California, but estimates the switchover from a federally owned to a private source could raise his water costs tenfold. "It's like we've got a thousand straws in the same glass," he says.

The loss of income from groves combined with the money lost in developing groves, for Johansen and other growers, means citrus prices likely will spike.

PCC's produce merchandiser, Joe Hardiman, says he was warned California's San Joaquin Valley farmers might let significant acreage remain unseeded, if planting their usual tender greens, such as

lettuce and spinach, appears to be a bad bet. Supply might improve, he adds, if growers "try to make up some of that [shortages] by extending the planting season in other parts of the state." Hardiman says produce suppliers also are trying to reach beyond California to Texas, Mexico, Florida and other growing regions in the Southern Hemisphere to meet demand.

Crisis for communities

It's not just farmers and consumers who will pay. The drought also is hurting farmworkers.

Economists say it's too early to predict the drought's effect on jobs, but it's likely as many as 20,000 will be lost, according to National Public Radio (NPR). Many of those workers already are living in poverty, or paycheck to paycheck, in communities that depend on agricultural work.

For instance, Mendota, Calif., is a small farming town of about 11,000 people, most of who work in agriculture. The town's mayor, Robert Silva, told NPR, "The ordinary citizen here is going to be facing some of the most drastic situations that I've probably seen."

When the last drought hit in 2009, at the height of the nation's foreclosure crisis, Silva says, "We experienced bad problems: Crime went up. There was a lot of spousal abuse [and] expulsions from the school system as a result of those people not working."

Cattle farmers struggle

Clint Victorine, who runs the organic, grass-fed Eel River Beef (sold at PCC) operation in Hydesville, Calif., sayshe has spent about $750,000 on alfalfa and hay this year to replace thescorched forage his 2,500 cattle normally would have grazed on.Most years, he says his cost of hay has topped out at about $100,000.

"Nothing I've ever seen compares to how bad it's been," says Victorine. "Normally we'd have bought about500 more cattle to replace stock in the herd. But there's just no grass to feed them." The extra operating expenses mean higher beef prices, which he saystroubles him. But customers haven't dropped his brand. "We've gotten alot of support from buyers," Victorine says, "and they're

carrying us throughthe drought. Right now, it'd also help if they'd do some rain dances!"

Tim Koopemann, president of the California Cattleman's Association, says the state's industry has turned out about half of this year's calves "to stock." This means the calves were shipped out to places such as Montana and Idaho to forage on rangeland, because California's grass is too sparse to produce milk to feed them. The other half, he says, have gone to slaughterhouses.

The U.S. Department of Agriculture says the turnout - the largest since 1995 - is the primary reason for price hikes in beef and dairy.

Whatever hurts ranching, when weather-related, also hurts dairy. Eric Newman, vice president of sales at Organic Valley, says the company lost nine dairy producers in California over the past five years (three of them heavy drought years). Newman says milk production for the cooperative, which manages 1,500 dairies in 32 states, was down 8 to 10 percent last year.

Part of that drop was due to drought in California and Texas. Newman observes it also was due to a record number of days with triple-digit temperatures in areas around Austin, Texas, and Fresno, California. When it's excessively hot, Newman says, cows just can't make milk.

Water districts in central California have turned off the water pipeline, so dairies there are being forced to let land lie fallow. Seed production will fall off, says Sara Dorland, managing director of Ceres Dairy Risk Management in Seattle. She speculates less forage will be available next year and, consequently, milk prices may rise sharply in 2015. Some analysts are predicting a spike of $1 a gallon by next summer.

Coffee prices

Drought in Brazil, which provides about 40 percent of the world's coffee beans, is being blamed for a projected rise in coffee prices. Rains have been sparse in southeastern Brazil and the drought hit at the worst possible time - when the coffee cherries were ripening on the tree.

"It's hard to tell how much of it is damaged," says Ben Corey-Moran, director of coffee supply for Fair Trade USA, in Oakland, Calif. "Whether it's 10 percent or 50 percent … we don't know." "Brazil is known for producing tons of sun-grown, conventional coffee," says Darryl Miller of Fidalgo Bay Coffee. Fidalgo Bay and other brands, however, that make up PCC's all-organic, fair trade, shade-grown coffee sets, are unlikely to get their beans from Brazil. Still, he says, a spike in prices of Brazilian coffee reverberates throughout the market.

Coffee prices fluctuate so much that uncertainty is built into the market. Consumers rarely see a significant change at the retail level.

Brazil's coffee farmers are being hit the hardest, Corey-Morgan observes. "They already struggle to make enough to survive from year to year. This [drought] puts them in an even more precarious position." Impacting PCC prices?

Chris Jordan, PCC's pricing manager, says he doesn't expect the Western U.S. drought to have a significant impact on PCC's prices. "It's hard to pinpoint which products will go up," he notes, "because

we're working to absorb higher costs that are being passed on to us from vendors."

Jordan notes that PCC's prices rose, on average, 2 percent last year - less than the 3 percent average annual rate of inflation.

Retail grocers often get blamed when retail prices climb, especially when price increases are sudden and large. But, just like the members who shop the stores, PCC also is wondering how high the price hikes will go.

What the prices will be a few months from now for the average U.S. consumer is nervous guesswork. As dependable as the weather itself.

Joel Preston Smith is an investigative reporter and photographer based in Portland, Oregon.

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