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July 2010
Volume 8, Number 7
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Impact of Oil Spill
On April 20, the British Petroleum (BP) Deepwater Horizon drilling rig was rocked by an explosion and fire sank into the Gulf of Mexico. Tragically, eleven crew members died. The oil continues to flow from the well, and multiple attempts to completely shut off the flow of oil have failed. Leaking oil from the well has spread to affect the ecosystem, beaches, and wildlife in four states (Louisiana, Mississippi, Alabama, and Florida).
An enormous effort is underway to contain the oil spill, shut off the flow of oil, and mitigate the environmental damage. Coast Guard Admiral Thad Allen is supervising the efforts, which involve a multitude of federal, state, military, and petroleum industry participants. Currently, almost 40,000 personnel, including approximately 2,000 National Guard troops are engaged in the crisis response. There are over 6,000 ships engaged in on-site response, both skimming and recovery of oil, and monitoring of shoreline and other conditions. In addition, personnel and resources from five foreign countries are on-site to assist in the efforts, including Canada, Germany, Mexico, the Netherlands, and Norway.
In addition to the environmental consequences, this oil spill will have short- and long-term impacts to the restaurant industry, both in the Gulf region and beyond.
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Response to the Oil Spill
The broken valve is 5,000 feet below the surface of the Gulf. Without any containment, it would release up to 200,000 gallons of oil daily. To date, approximately 2.6 million gallons have been released. The oil spill may well be the worst environmental disaster in U.S. history. Over 180 miles of shoreline is affected by the oil spill. And if not contained or stopped soon the devastation will affect our shorelines and spread to foreign countries.
The exact cause of the blowout is still unclear. However, it is suspected that a build-up of pressure in the ultra deepwater caused the explosion. Normally, a device called a "blow-out preventer" would have guarded against such an accident, but there appears to have been a problem with the mechanism fitted to Deepwater Horizon. Some rigs in shallower waters have equipment called an acoustic valve fitted, which is a mobile shut-off device for emergencies, but this was not present on the BP leased rig.
To address the spillage, a number of complementary strategies are being used. Over 1.5 million gallons of dispersant have been deployed to break up the oil, boats are skimming the thickest substance off the surface and the thinnest layer of sheen is being burned. Barriers have been set up along the shore to protect the coast, including almost 5 million feet of containment and absorbent boom.
Under the surface, robots are being used to close the valve that was meant to prevent explosions. A dome to cap the gushing oil has been lowered over the leak. Oil from the containment dome is piped to ships on the surface.
Drilling on relief wells has begun, which will intersect the original well at 13,000 and 16,000 feet below the seabed. This way, cement can be poured down to seal the leak within weeks.
Impacts to the Restaurant Industry
The impacts to the restaurant industry will come in three ways:
- Traffic and sales volume in the Gulf region will be severely affected by a dramatic reduction in tourism due to the oil spill impact on beaches and other tourist destinations.
- Seafood supply from the Gulf region will be compromised, most seriously in the next 1-3 years, but potentially for the longer-term. This will have an impact on food costs and availability of some items.
- Food and fuel costs will be impacted. Fuel costs may rise, not directly by the lack of oil or gasoline production from this particular rig, but from additional safety restrictions imposed on all oil production as a result of the Deepwater Horizon disaster. Food costs will be impacted due to restrictions on transportation through the Mississippi River and Gulf of Mexico regions.
In the Gulf region, restaurant sales are down 15 percent to 30 percent, and hotels have had mass cancellations. The affected states' tourism associations are working with community leaders to get the word out to encourage visitation. In Mississippi, where beaches are not yet affected, a PR campaign is targeting travelers who are close enough to drive into Mississippi for last-minute cancelled trips.
In Florida, hotel occupancy rates were down 30 percent in May. Most of the charter fleet that operates in the Gulf was idle. Florida's tourism industry brings in $60.9 billion in travel spending and $3.65 billion in sales tax and employs almost 1 million people.
Local community and industry leaders are taking action. The primary focus of their activity has been to encourage tourism, business activity, and consumer confidence in Gulf seafood. Tourists and business travelers generally account for 15-40 percent of sales at restaurants, making travelers a key foodservice customer demographic.
The secondary focus has been to find ways to mitigate business losses, and seek some compensation for the impact of the disaster.
Susan Spicer is a well-respected chef in New Orleans, and is one of the leaders of the culinary world in the Crescent City. Now, she has also taken a lead role in dealing with British Petroleum on behalf of the restaurant industry. Spicer has filed suit against BP, and is seeking class action status for restaurant owners and seafood suppliers whose business has been hurt by the oil spill. The lawsuit argues that Louisiana and regional chefs have built their reputation and business by using fresh, local seafood specific to the Gulf of Mexico. The oil rig accident has made Gulf seafood either unavailable or significantly more expensive. In addition, these restaurateurs fear consumer demand for Gulf seafood will dramatically fall off, both through the availability of substitutes, and from fear of contamination.
Almost 40% of the commercial seafood harvest comes from the Gulf Coast. However, only about 20% of the seafood served in restaurants comes from the Gulf. Regardless, consumer perception is a barrier - consumers may shy away from fresh seafood out of fear, at least until the oil spill is brought under control. The region has been under pressure in recent years due to higher supplies of similar quality seafood from foreign sources.
The Gulf region is most notably home to shrimp, oysters, crabs, clams and finfish. As the oil slick mingles with the Gulf current and threatens to sweep around the tip of Florida and into local offshore waters, the crisis could worsen. Oyster supply has already shifted from the Gulf to the Atlantic - while this would normally happen in the summer, the shift was earlier this year due to the oil spill.
Louisiana's seafood industry generates $2.4 billion dollars in sales annually. Louisiana ranks behind only Alaska in total commercial seafood production, and is the leading producer of shrimp, blue crab meat, and oysters.
At present, approximately 30% of fishing waters (78,000 square miles) in the Gulf have been closed, which will affect the supply of many forms of seafood, driving up costs.
The short-term issues are driven by damaged supply and lack of access to fishing waters and oyster beds. Longer-term, there is a risk of permanent harm to seafood production. This could occur if the oil tragically seeps into the estuaries which serve as nurseries for shrimp, fingerlings, and other wildlife.
The oil spill will have some impact on gasoline refineries that rely heavily on Port Arthur for shipments of crude oil, but it is unlikely to lead to an increase in oil or gasoline prices. The weak economy has resulted in a surplus of capacity, as well as ample inventories of gasoline and transportation fuels. Economists' expectation is that while gas prices could be disrupted, it would be less than five cents per gallon of impact, and for less than a week. The impact would be felt much more locally, as workers at idled refineries and local economies take a hit from reduced operations.
The slowdown of barge traffic in the Mississippi River is having a significant impact on shipment of grain, including corn and soybeans. All cargo ships that transport fruit, steel, rubber, grain and other items could endure delays as they get their oil-coated hulls washed to avoid contaminating the Mississippi River. These delays will drive costs up and potentially impact supply.
Average wholesale food prices were up 6 percent in the 12 months ending April 2010. Some individual commodities are showing substantially higher increases, including unprocessed shellfish (+23%), fresh vegetables (+50%), fresh fruits (+17%), pork (+22%), and beef and veal (+16%). These increases predate the oil spill, but are indicative of a tough operating environment with rising food costs.
Most restaurant operators have not increased prices to keep pace with food costs. According to National Restaurant Association research, menu prices increased 1.1 percent in the 12 months ending April 2010, which is low compared with historical standards. As seafood costs increase, it will be difficult to pass these increased costs along to consumers, particularly in casual dining where the sector is just beginning to recover from recession. Industry analysts believe that the sector has more resilience, and will be able to continue to grow without severe consequences in the capital markets.
With any crisis, there is a general risk to consumer confidence. In this particular instance, consumer sentiment could turn negative, with confidence failing as the oil leak is not contained. Restaurant sales are one of the early casualties of falling consumer confidence. Additionally, the structural factors that affect seafood availability and costs are real. Finally, the local impact to the Gulf States' economy will be severe.
At Kingston, we will continue to monitor the situation and bring you updates as they become available. At present, we are not experiencing any disruption in supply or shipment of our fresh produce. We are proud to supply our customers in the Gulf region and throughout the country, and stand ready to do whatever we can to help the Gulf region recover from this crisis.
For more information, please contact your Customer Service Representative or Jody Boline.
Sources: USDA, NOAA, Wall Street Journal, BP (DH Response), National Restaurant Association, UK Telegraph
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Broccoli
Due to weather, supplies have been highly variable. The crop has been dramatically affected by weather. Temperatures have been cooler than normal, and there have been below-average amounts of sunshine.
Price markets have reflected these variances, moving from high to low, and currently at normal levels. In July, we expect the weather to warm up, and be more consistent with seasonal expectations. With this shift, supply should be more predictable and prices steady. Quality has been fair to good, with good bead uniformity and color. There is a possibility of oversupply, especially if temperatures are hotter than normal. With oversupply, prices will fall. Given the unpredictability of the weather, we will closely monitor the situation.
For more information, please contact your Customer Service Representative or Jeb Johnson.
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Rail Information
Fuel rail surcharge for July will be $0.20 per mile.
Driver Shortage Could Persist
As the economy recovers and truck freight increases, a driver shortage is emerging but several factors are working against meeting the demand for drivers, speakers said at an online seminar, "The Emerging Driver Shortage," June 24.
Forecasting below-average economic growth of 5 percent to 6 percent over the next three to four quarters, Noel Perry, a senior consultant at transportation research firm FTR Associates, said, "We don't have to have a wild recovery to get a driver shortage."
Perry and Tom Kretsinger Jr., president and chief operating officer at American Central Transport, gave their views at the webinar presented by Overdrive and Truckers News.
Perry said that even though the driver shortage could average 200,000 drivers annually over the next couple years, carriers are unwilling to gamble on ramping up hiring significantly "until they see a strong, consistent, long record of earnings." He said many carriers laid off recruiters, trainers and dispatchers and aren't about to rehire them right away.
Economic conditions have created a driver shortage that will match the shortfall in 2004, Perry said. Experienced drivers are in short supply because many dropped out of the business or retired during the recession.
Perry pointed out that new federal regulatory initiatives, notably citizenship identification, the ongoing hours of service revision and Comprehensive Safety Analysis 2010 will reduce the available supply of needed drivers.
For more information, please contact your Customer Service Representative or Jeremy Teeples.
Source: eTrucker.com
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Each month in the E-News, we will share insights into the activities of the Kingston Quality Assurance team as they visit growers, packers, and distributors. We hope this will help give you more information on our commitment to food safety and security. This month's report is from Cindi Thompson, Food Safety/Quality Assurance Supervisor.
Onions
Onions, like all produce, are subject to the whims and forces of weather. Mother Nature has a way of affecting the crops, sometimes in ways we like, and sometimes in ways we don't. Simply put, just planting the crop is not a guarantee of supply or quality.
Much of our QA work focuses on selecting growers and shippers to supply us with product. These evaluations are based on consistency in past performance, willingness to grow and pack for us, and ability to follow our strict regimen for quality crops.
Even so, when we encounter poor weather - excessive rain, cold, or heat - we cannot rely solely on past performance or our quality guidelines. We must manage the crop with the grower, to ensure we get the highest possible quality and supply.
Consider a crop may be healthy from the start - planted on time, showing good color, size, and overall health. However, for example, onions put on 30% of their size in the last two weeks of their growth. So, the initial growth is not always a fair indicator of final quality. Adverse weather conditions toward the end of the growing season can severely stunt the growth and final sizing of the crop. This can leave us with a shortage in supply, or quality that does meet expectations. We always reserve final judgment on the outcome of a crop until it is spiked and ready to pack - no matter how many times we may have walked the fields to evaluate the crop.
We have strict standards for 4.25" and larger onions with single centers. So, it is not always easy to find alternative sources when any of our primary growers cannot meet our requirements. We continually work with growers around the world to ensure we have reliable sources of supply to meet our customers' needs.
For more information, please contact your Customer Service Representative or Jeb Johnson.
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Each month, one of our associates will share one of their favorite recipes using different Kingston products. We hope you will try one or all of our family recipes, and all of the great ways to enjoy our high-quality, wholesome products.
Dutch Oven Potatoes
Ingredients
8 to 10 Kingston potatoes (sliced)
2 large Kingston jumbo yellow onions (sliced)
1 lb Jimmy Dean sage sausage
2 lb hickory smoked thick bacon (chopped)
Salt & Pepper
Ground Sage
8oz Shredded cheddar cheese (optional)
For preparation, you will need a 12" Dutch oven and 1 bag charcoal briquettes.
Start your briquettes, following the instructions on the bag. Once ready, spread the briquettes out evenly and place your Dutch oven on top. Allow the oven to heat for 15 - 20 minutes before you add any ingredients.
Once the oven is hot, place the sausage, bacon and onions in the Dutch oven (they should sizzle when you first drop them in). Cook sausage and bacon thoroughly. After the meat is cooked and the onions have softened, add your potatoes and seasoning (with sage, salt and pepper) to your liking.
When you have your potatoes and meat stirred together, transfer the majority of the briquettes to the top of the Dutch oven. A good rule of thumb is to place 6-7 on the bottom, and 9-12 on the top.
Dutch oven potatoes are better if you allow them to cook slowly. Keep the lid on the oven as much as possible, only lifting to stir. After about an hour of cooking, your potatoes are ready - when they are soft, they are ready. Take your oven off the coals and sprinkle potatoes with shredded cheese. Let the cheese melt and then serve.
Hint: If you have any leftover, serve them for breakfast. They are better than hash browns!
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Kingston Service Anniversaries
Join us in congratulating our team members on their many years of service.
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April Barnes
10 years |
Shaun Cox
8 years |
Karen Skinner
2 years |
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