Manufacturing News

Crunch time comes for California processors

March 22, 2003
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Rolling blackouts and escalating energy costs already are impacting food processors throughout California, but the worst may be yet to come.

Hundreds of thousands of pounds of raw milk were dumped in January when dairy processors were forced to shut down, and the California League of Food Processors (CLFP) reports that some firms have suspended operations.

"At current spot prices, (tomato, prune and frozen vegetable processors) will experience cost of production increases ranging from 4 to 35 percent," according to Ed Yates, CLFP senior vice president. Monterrey Mushrooms, the nation's largest producer, reported a quintupling of natural gas costs in recent months.

"We do a lot of product drying, and our gas costs have been astronomical,' a spokeswoman at Hilmar Cheese Co. in Hilmar, Calif., says. The plant, located in the central San Joaquin Valley, has experienced voluntary energy curtailments. At times, two of the company's three production lines have been idled. "It's an opportunity cost," she says.

Farther South, the toll has been more severe. Areas served by Pacific Gas & Electric and Southern California Edison have born the brunt of blackouts, and many processors signed interruptible power contracts years ago in exchange for lower rates. In Tulare, home to a Kraft cheese plant and a Land O' Lakes facility, frequent power cuts have occurred. Land O' Lakes dumped 500,000 pounds of milk in a one-week period.

Refrigeration demands for produce processors are at their annual low point now, league president Jeff Boese says, but in June processors begin building up inventories. California firms process more than 40 percent of the nation's fruit and vegetables, including 95 percent of tomatoes and virtually all peaches, pistachios and fruit cocktail.

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