Texas survives Rita, but freight rates delivering severe blow
Texas survives Rita, but freight rates delivering severe blow
While the Texas produce industry avoided a direct hit from last month's Hurricane Rita, there are short- and long-term effects from that storm as well as Hurricane Katrina, said John McClung of the Texas Produce Association.
"We lost no crops or acreage," said Mr. McClung, and the hurricane didnt disrupt any immediate shipments of fresh fruits and vegetables.
Additionally, he said that the imports that typically come into Texas enter by truck via the southern border with Mexico, which also wasnt affected by Hurricane Rita.
But just as quickly, the associations chief executive officer said that the resulting skyrocketing fuel prices from both Hurricane Katrina and Hurricane Rita are greatly affecting the Texas fruit and vegetable industry. He said that the high cost of getting product to market is influencing the decisions made by buyers all over the country.
There are many instances where the freight rate is higher than the cost of the product itself, said Mr. McClung. That is not a good situation.
Obviously when freight rates climb to such lofty rates, retailers look for places closer to the destination to fill their orders. Most of the Texas produce industry is located at the southern tip of the state in the Rio Grande Valley, where Mr. McClungs office is located.
That near-term impact of the storms has no positive end in sight. In fact, oil industry experts are predicting that fuel rates are going to continue to rise in the near future. Some are talking about gasoline rates approaching $4 per gallon. And some groups are even advocating a fuel tax on top of the increasing rates as a way to pay for some of the damage caused by the hurricanes.
Mr. McClung said that paying for the hurricane damage is another problem altogether, which may have very negative long-term consequences for the fresh produce industry. Estimates for rebuilding New Orleans and other cities on the Gulf of Mexico damaged by the two hurricanes range from $200 billion to $300 billion. So far, President Bush has steadfastly refused to even consider a tax hike to pay for the rebuilding effort.
Where the money is going to come from is what everyone is asking. Mr. McClung said that it seems obvious that it is going to come from cuts in spending in virtually every area of the federal budget including agriculture. He said that as the United States moved into its current fiscal year on Oct. 1, only a couple of the nearly two dozens appropriation bills that keep the country running had been passed. Consequently, there is still opportunity to cut spending in many different areas, either area by area or with an across-the-board 5, 10 or 15 percent cut.
The agricultural appropriations bill is one of the many that is still being debated. Both the Senate and the House passed their own versions. Both bills have to be reconciled in conference committee and then returned to each chamber for a final vote before being sent to the president for his approval and signature.
What particularly worries Mr. McClung is that less than 20 percent of the agricultural appropriations bill is discretionary funding; most of the funding is dedicated spending, such as food stamps or the Women, Infants & Children program, which cannot be cut.
By and large, the fruit and vegetable industry gets its money from that 15 or 20 percent that is ripe to be cut. Thats where things such as research dollars come from, said the Texas produce industry executive, who offered that while this battle will be fought over the next few weeks, it may affect the produce industry for years to come.
"We lost no crops or acreage," said Mr. McClung, and the hurricane didnt disrupt any immediate shipments of fresh fruits and vegetables.
Additionally, he said that the imports that typically come into Texas enter by truck via the southern border with Mexico, which also wasnt affected by Hurricane Rita.
But just as quickly, the associations chief executive officer said that the resulting skyrocketing fuel prices from both Hurricane Katrina and Hurricane Rita are greatly affecting the Texas fruit and vegetable industry. He said that the high cost of getting product to market is influencing the decisions made by buyers all over the country.
There are many instances where the freight rate is higher than the cost of the product itself, said Mr. McClung. That is not a good situation.
Obviously when freight rates climb to such lofty rates, retailers look for places closer to the destination to fill their orders. Most of the Texas produce industry is located at the southern tip of the state in the Rio Grande Valley, where Mr. McClungs office is located.
That near-term impact of the storms has no positive end in sight. In fact, oil industry experts are predicting that fuel rates are going to continue to rise in the near future. Some are talking about gasoline rates approaching $4 per gallon. And some groups are even advocating a fuel tax on top of the increasing rates as a way to pay for some of the damage caused by the hurricanes.
Mr. McClung said that paying for the hurricane damage is another problem altogether, which may have very negative long-term consequences for the fresh produce industry. Estimates for rebuilding New Orleans and other cities on the Gulf of Mexico damaged by the two hurricanes range from $200 billion to $300 billion. So far, President Bush has steadfastly refused to even consider a tax hike to pay for the rebuilding effort.
Where the money is going to come from is what everyone is asking. Mr. McClung said that it seems obvious that it is going to come from cuts in spending in virtually every area of the federal budget including agriculture. He said that as the United States moved into its current fiscal year on Oct. 1, only a couple of the nearly two dozens appropriation bills that keep the country running had been passed. Consequently, there is still opportunity to cut spending in many different areas, either area by area or with an across-the-board 5, 10 or 15 percent cut.
The agricultural appropriations bill is one of the many that is still being debated. Both the Senate and the House passed their own versions. Both bills have to be reconciled in conference committee and then returned to each chamber for a final vote before being sent to the president for his approval and signature.
What particularly worries Mr. McClung is that less than 20 percent of the agricultural appropriations bill is discretionary funding; most of the funding is dedicated spending, such as food stamps or the Women, Infants & Children program, which cannot be cut.
By and large, the fruit and vegetable industry gets its money from that 15 or 20 percent that is ripe to be cut. Thats where things such as research dollars come from, said the Texas produce industry executive, who offered that while this battle will be fought over the next few weeks, it may affect the produce industry for years to come.
