- The Washington Times - Tuesday, March 22, 2011

Rising gas prices could be just what Midwest farmers need to compete with larger food producers out west.

As transportation costs go up, more East Coast restaurants and grocers are trying to limit shipping miles, thereby cutting expenses. Instead of buying from California — the nation’s largest agricultural producer — they are turning to states closer to home, such as Michigan, Indiana and Wisconsin. These are closer options for eastern cities that do not support enough agriculture to sustain the region.

“The irony is $4 gas, we don’t like, but it could actually be our friend,” said Jim Byrum, president of the Michigan Agri-Business Association. “Challenges for other areas might create opportunities for us. Never waste a crisis.”

Businesses have been scrambling to deal with recent oil and gas price increases. Since Feb. 15, crude-oil prices have risen $19.68, or 23 percent, to $104 a barrel, as of Tuesday afternoon.

This isn’t the first time gas prices have helped Midwest growers. In May 2008, diesel prices topped $5 a gallon in California, according to AAA, forcing East Coast businesses to turn to the Midwest for food. If that happens again, it could give Midwest farmers a home-field advantage in the coming year.

“That caused people to look at it,” Mr. Byrum said. “Now that it’s happening again, they’re looking at it one more time.”

The National Restaurant Association said rising gas prices are a driving force behind choosing food suppliers.

“They go as close as they can go,” spokeswoman Annika Stensson said. “If they can’t get what they need at the farm next door, they might go a little bit further, as opposed to picking a farm that’s on the other side of the country.”

Farmers say another benefit of reducing shipping miles is the positive impact it could have on the environment.

“A potato moving from Michigan has 1,000 less miles on it than a potato coming from Idaho,” Mr. Byrum said.

But the question arises as to whether the Midwest can handle a massive increase in production. In past summers, California alone represented about 65 percent of the nation’s tomato supply, according to Ed Beckman, president of the California Tomato Farmers. He doubts the Midwest can pick up that much slack.

“There are not sufficient supplies grown in the Midwest,” he said. “So I don’t suspect it’s going to have a huge impact on us. From the perspective of overall supply, we’re dominant.”

Weather problems also could prevent the Midwest from taking over, Mr. Beckman said. Too much rain and frost can ruin the crop season, something California farmers seldom experience.

Talk of overall supply hasn’t dampened Indiana tomato and dairy farmers’ hopes of reaping the benefits of this year’s rising fuel costs. Joe Kelsay, director of the Indiana State Department of Agriculture, said his state is known as the “crossroads of America,” because it is located within a day’s drive of 80 percent of the nation’s population.

“We’re in a great position to take advantage of this,” Mr. Kelsay said. “We can distribute at a better value.”

The central location is helping Red Gold. The tomato processor, headquartered in Indiana, expects the company’s sales volume to go up about 5 percent owing to a shift in demand, according Steve Smith, director of agriculture.

Midwest milk farmers also are better prepared to handle high gas prices. Feed costs, which account for about 33 percent to 50 percent of the production expense, are cheaper in Midwest states, because they grow their own corn and soybeans, according to Ken Nobis, president of the Michigan Milk Producers Association.

“The flow of milk production is moving back in this direction,” Mr. Byrum said. “Our farmers can make money that maybe California guys can’t.”

But that doesn’t make it easy for Midwest farmers.

“The case for the last few years is, it wasn’t a profit for the Midwest farmer, compared to the California farmer,” Mr. Nobis said. “The Midwest farmer just lost less.”

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