SACRAMENTO, CA - Since the United States entered a war with Iran, consumers have already seen higher gasoline prices at the pump. In the fresh produce industry, suppliers are feeling the effects in a different way: through diesel surcharges.
CNN Business explained that although gasoline prices have risen by 47 cents, diesel prices have risen significantly more, by 84 cents—an overall 22 percent increase—which takes a gallon of the critical fuel up to $4.60. Tom Kloza, an independent oil analyst interviewed by the news outlet, noted that diesel prices are rising faster than gasoline prices because it is in shorter supply and predicts that diesel could hit $5 a gallon this March.
To say that transportation costs are critical to domestic production would be an understatement. With produce suppliers bearing the cost of these surcharges, a possible solution is for retailers to help cover them.
Gary Clevenger, Managing Member of Freska Produce International, offered this when we asked him to put the situation into context.
"Freight surcharges usually show up when transportation costs move faster than produce pricing can adjust. In fresh produce, margins are thin, and a sudden jump in freight can wipe out the entire return on a load,” Gary explained. “If suppliers are forced to absorb that indefinitely, product simply gets redirected to other buyers or markets where the economics work. Retailers helping share those surcharges isn’t about padding margins—it’s about keeping product moving and maintaining a consistent supply. When freight costs change dramatically, the supply chain must adjust somewhere."
A leading California grower explained that, ideally, added costs such as fuel surcharges should be built into contracts from the outset. However, when unanticipated surcharges arise, strong business relationships become crucial for finding solutions and sharing the burden. While not every customer is receptive, many retail partners are willing to absorb a modest increase per case to help offset these additional costs.
Jeff Goodale, Senior Vice President of Business Development, Duda Farm Fresh Foods, added that minor fuel price movements are often absorbed within the supply chain, and fuel surcharges are not typically built into retail pricing agreements.
“However, when geopolitical events drive significant cost shifts, sharing those costs transparently across the supply chain is the most practical and sustainable way to reflect the true economic impact,” he reflected.
Keep turning back to AndNowUKnow as we continue to monitor price increases and their effects on the produce industry.
