FOOD

The Industry: Gastronomics

By MATT LEE and TED LEE

Published: October 30, 2005, The New York Times

The rise of fuel prices over the last year seems to have had little effect on how much we pay for food. That pint of raspberries imported on a gas-guzzling jet from Argentina? Still five bucks. Nevertheless, the high cost of petroleum has rattled the people in the business of putting food on the nation's table. With prices at the grocery store and in restaurants holding steady, producers and middlemen have been forced to absorb the increase.

In Poolesville, Md., Eric Spates grows No. 2 yellow corn on nearly 300 acres. His tractor and combine burn about 4,000 gallons of diesel fuel every season, which cost him $1 each last year. This year, it's $2.50 a gallon. "That's a $6,000 hit in my checkbook," Spates notes. Add to that the cost of ammonium nitrate, a fertilizer made using natural gas, which went from $85 a ton last year to $200 this year.

And, unfortunately, the price Spates will get for his corn won't rise accordingly. In fact, it is quite low now, hovering around $2 a bushel. (He starts to make money only when it rises above $2.40.) So Spates, 36, is holding on to most of his crop until January, banking on nationwide supplies running low and the price going up. And if it doesn't?

"I try to be a low-cost producer," he says. "I don't spend a lot on machinery, and I try to do all the repairs myself."

It's a refrain familiar to any small-boat fisherman, whose fuel represents a little more than 50 percent of maintainance, according to Bob Campbell, the manager of the Yankee Fisherman's Cooperative in Seabrook, N.H. Campbell has been selling diesel for $2.45 a gallon in the middle of October to dispense to the co-op's 52 members, many of whom are resorting to extreme cost-cutting measures. "A lot of these guys are fishing solo now, which is a dangerous thing to do," Campbell says. "If the price of gas doubles again, you're not going to see the price of fish go the same way - there's no correlation between them, similar to the farm business. It's just a crazy thing."

To Ephraim Leibtag, a food-price specialist with the Economic Research Service of the U.S.D.A., it's simple competitive-market economics. "Increased costs at early levels of production do not necessarily translate fully through the production chain," he says. "People at the lower end of the supply chain will have less market power when there are other options for buyers." Dealing in perishables is a zero-sum game, and the seller starts with a disadvantage. "If the buyer knows the goods are going to spoil," Leibtag says, "it gives them more market power."

But Leibtag notes that there might be hope for producers. Consumer prices rose 1.2 percent in September, a sign that energy costs were working through the system. "At the pump, we see prices rise immediately," he says. "But a grocery store might have contracted for goods months in advance." Price increases won't show up until the next contract cycle.

Fish is clearly being marked up somewhere along the supply chain. Cyril Renaud, the chef and owner of Fleur de Sel, a small Manhattan restaurant, has watched the price of scallops inch forward over the last two years to $10.75 a pound. "A year ago, I was getting them for $8.25," he says. To save money, Renaud prowls the Fulton Fish Market himself instead of paying a purveyor a premium and a fuel surcharge for delivery. "I can't keep raising prices," he says. "I'm going to hang on as much as I can for as long as I can."

He's not the only one. A recent Zagat survey shows that the average cost of a restaurant meal in New York rose only 0.4 percent in the last year. The notion that prices must be held isn't rooted in solidarity with the consumer but in reality: price your entree too high, and you risk that no one will buy it. Those bills piling up in the back office are a powerful motivator to keep pricing aggressively.

Stephen Katzman, the president of S. Katzman Produce at the Hunt's Point Produce Market in the Bronx, is in an even graver pinch. Not only does he operate under the threat of being left with rotting cabbages in a competitive marketplace, but if he can't pay the farmer enough to cover his costs, the farmer won't ship the crop at all. His diesel-fuel expense for the refrigerated trailers that the company uses as overflow storage space gobbled $68,545 in the first eight months of 2004; the same period this year cost $199,605 (though a slice of that was due to increased usage, he says). One cost-cutting tactic he's using is to maximize his delivery fleet: he's pressuring his clients to order enough to fill a truck, so a purveyor that took in five partial loads a week might now receive three.

Some restaurants are taking these pressures in stride. Joel Patraker, the purchasing manager for the Four Seasons Restaurant, surveys his bills for the day's deliveries. He adds up the various fuel surcharges that his suppliers have tacked on: $16. "It's imperceptible, really," he says. "If everyone started putting on $3.95, that would be a consideration." He's been forced to play the purchasing game with greater acuity. When the price per pound of Canadian bison tenderloin went from $19 to $21, in a blink, no note," he looked at bison from the Dakotas being offered for $19.25 per pound, which turned out to be superior in quality as well.

At Joseph Yavarkovsky Inc., which sells paper goods and packaging to Manhattan delis and restaurants, there is greater alarm. Each delivery from the paper plants in the South brings with it a new fuel surcharge of about $75. And the goods themselves are skyrocketing because of the fuel-intensive nature of their manufacture. "Anything made of plastic, a petroleum product, is up by 50 to 70 percent," says Ira Yavarkovsky, the firm's owner.

These days, the only ones not feeling the gas crunch are the restaurateurs who take a literal approach to "fresh, local food." Parker Bosley, the executive chef of Parker's American Bistro in Cleveland, orders exclusively from small farmers, most of whom don't use big diesel-chugging tractors. And their fields are within a two-hour drive of the restaurant's back door - in many cases, far less. Not a single food purveyor of Bosley's has levied a fuel surcharge or raised prices in the last year.

"I'm more than proud of what I do," Bosley says. "I'm chauvinistic and smug. To chefs who learned how to source exotic ingredients instead of learning how to cook well, I say, 'Tough beans, guys."'