Will Higher Shipping Costs Drive the U.S. to Source More Localized Produce?
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The recent wide fluctuations in diesel fuel costs and subsequent trucking costs has raised speculation within the produce industry of potential structural shifts in the location of production. Recent increases in demand for local produce seem to further support speculation toward this end. A component pricing model is used to actually examine the impact of fuel prices on farm gate and retail produce prices for strawberries, lettuce, and potatoes. The study finds that distribution costs, while significantly increasing in absolute value, have surprisingly little contribution to changes in retail prices even in markets distant to the primary production regions. These results suggest that factors other than lower distribution costs for local produce will ultimately need to drive the supply for these products.