Fuel prices a growing problem for Calif. farmers

FRESNO, Calif. - Farmers in California's agricultural heartland say record-high gas and diesel prices are putting pressure on their bottom lines, but economists say it is unlikely that will translate into significantly higher food prices across the nation.

Keith Nilmeier, a fourth-generation farmer in Fresno County, has cut down on using his farm equipment to compensate for climbing fuel costs.

Among other changes, Nilmeier - who grows fruit on 300 acres near Sanger - makes only one pass, instead of three, through the orchards and vineyards with his disking machine linked to a furrower. And he keeps farm supervisors driving smaller, fuel-efficient cars around his fields.

"I'm trying to figure out how to get more efficient about using the equipment and saving more fuel," Nilmeier said. "But we're getting down to the point where I keep looking at what else can I cut out, and I'm running out of options."

When it comes to rising fuel costs, farmers get hit with a double whammy: They are spending more to refuel farm equipment such as harvesters and tractors, and they must pay fuel surcharges to people mechanically harvesting or transporting their produce. Yet they are reluctant to impose surcharges on anyone for fear of being less competitive when they sell their products.

The rise in California gas prices has slowed, but the price Tuesday was still a state record and the highest in the nation. The average price for regular gas in the state was a little over $4.67 a gallon, according to AAA's Daily Fuel Gauge Report. The cost increased only a fraction of a cent overnight, however - compared with nearly 50 cents in the last week.

The price for diesel in California averaged $4.38 per gallon as of the first week of October, according to the U.S. Energy Information Administration. California and U.S. diesel prices have climbed steadily from about $2 per gallon in 2009.

The recent surge in gas prices came after a power outage at a California refinery that reduced supply, and corrosion issues in an important pipeline, analysts said. The refinery came back online Friday.

California's Central Valley produces much of the nation's fruit, vegetables, nuts, and dairy products; Fresno County is the No. 1 agricultural-producing county in the nation.

But customers nationwide should not expect food prices to rise significantly because of higher fuel costs, said Daniel Sumner, an agricultural economist at the University of California Davis. That's because fuel is only a small percentage of the cost of farming and getting a product to store shelves. Food prices will go up only a few pennies on the dollar at most, Sumner said.