The increase in fuel costs, particularly diesel fuel, has affected all agricultural producers. In California’s Salinas Valley, the increase in fuel costs has been a “double whammy” for growers. Not only have production costs gone up due to higher fuel costs, but trucking costs to East Coast markets have also gone up. The increase in shipping costs has affected the demand for Salinas Valley grown vegetables in Eastern markets.
Shipping costs for a carton of lettuce to the East Coast have reached $10 per carton or more, which is more than the cost of production. Although the buyers traditionally pay for transportation, growers are often offered a reduced price, as the buyer tries to push the increased transportation cost back on the grower.
To see if transportation costs might be reduced by shipping by rail, the Grower Shipper Association of Central California obtained funding for a study on the feasibility of using railroads to ship fresh vegetables to Eastern markets.
The city of Salinas, the county of Monterey, and the Transportation Agency of Monterey County have each agreed to contribute $15,000 to hire a consultant to do the study on shipping fresh produce to the Eastern U.S. by rail.
Although the major focus of the study is on the economics of rail versus truck shipments, other factors must be considered, including the rail infrastructure, the willingness of the industry to use a shipping method that was used 50 years ago, and how the system can be structured.
Although the study is not yet complete, there seem to be no major obstacles to the industry moving back to rail for some portion of shipments to Eastern markets. It should be emphasized that rail shipments will not completely replace truck shipments, even for Eastern markets.
One example of how this structuring might be done is Railex, a private company that has set up a system for handling refrigerated products to Eastern markets from the West Coast. The company’s first facility in Wallula, WA, is refrigerated so products are transferred from truck trailers to refrigerated rail cars without breaking the cold chain. The rail cars are then moved by unit train to a similar facility in New York, where the refrigerated products are transferred to trucks for final delivery. By the time this column is printed, the company will have opened a facility in Delano, CA, to handle fresh fruit and vegetables grown in the San Joaquin Valley.
There are several other potential approaches to refrigerated rail shipments to Eastern markets and it will be interesting to see what type of system will be established here in the Salinas Valley.
Shipping by rail certainly will offer a reduction in transportation costs and can be promoted by the local vegetable industry as being green by reducing the environmental effects of shipping fresh vegetables to Eastern markets.