A Chat Over the Fence with Henry B. Wood, Harris Hollow Foods

Few people in Rappahannock County can speak as authoritatively about the effects of inflation on the business of farming and food processing these days than Henry B. “H.B.” Wood. A tenth-generation descendant of one of the oldest apple-growing families in the county, H.B. now runs Harris Hollow Foods LLC, a national supplier of fruit products. In the past two years of the Covid pandemic, supply chain problems have wreaked havoc. 

 “Basically, we’re sales agents for processors of agricultural products, primarily fruit,” he says of his staff of seven based in Little Washington. They source their produce from Mexico, the U.S., and Canada—apples, berries, exotic mangos, passionfruit and melon, and veggies like carrots and rhubarb—all preserved and packaged as juices, purees, in sugar, or flash-frozen.

 “I grew up in it in Rappahannock. We were raising apples and peaches. There was a strong fresh market. Then South Carolina, Washington state came in, growing gorgeous fruit.” Concentrated juices began to come in from China and Europe. Labor costs increased. The family land on Red Oak Mountain in Woodville was relatively hard to farm. 

 “Dad said, I’m ripping it out and you got to go do something else.”

 H.B. came back from college at William and Mary with a degree in business administration. He spent a few years in Washington DC as an accountant for Arthur Anderson, but he missed home. 

 “Then one day I came across Jimmy Cannon and Jimmy DeBergh gigging frogs in one of our ponds.” James DeBergh, also from old Rappahannock farming stock, had started the Harris Hollow Frozen Fruit company in the early 1980s, supplying strawberries for Smuckers jam.

 “I went to work for him in 1996,” said H.B. “Jimmy said, ‘You’re the only guy around with a business and ag background.’ But I’d been exposed to the larger business world. I brought in Welch’s to sell industrial produce”—that is, the company’s surplus fruit. He expanded the line to include Concord grapes, raspberries, blackberries, and blueberries. Thirteen years later, he and his wife Angela bought the company.

 “Inflation has been hugely impactful,” he says, caused by the pandemic’s effect on the supply chain. “The roots of inflation start from the ground up”—in this case, literally. From fertilizer, to labor, to pallets, to cold storage, to shipping, “everything you touch in production is going up. It used to cost 8 to 10 cents a pound to truck produce cross-country. Now it’s 40 cents a pound—a four-fold increase. That hits everything coming from the breadbasket of California. Everything has that cost built-in.”

 “I’ve never experienced anything like this in this business. We see cycles in crops. We’re very accustomed to it. Without a doubt I’ve never seen this before.”

Take fertilizer. H.B. said, “I read today that only 50% of the fertilizer we need for the coming season is available right now.” Scarcity drives up prices. The Ukraine war adds to the problem. Russia supplies 13 percent of the world’s fertilizer, and prices are already soaring—a cost that is sure to be passed on to customers.

 Labor shortages in West Coast farmland mean higher cost to harvest fruit. Strawberry growers are having to adapt to a shortage in the plastic sheeting they use to shield neighboring fields from pesticide contamination, resulting in smaller crops.

 And “cold storage capacity is shrinking as suppliers pre-buy product.” Suppliers of all kinds are stockpiling to hedge against higher prices down the road. At one San Diego facility, H.B. says he’s being crowded out by meat suppliers stocking up. Even the pallets used in shipping are expected to become pricier over time. And the cost of shipping itself is exploding. “Yesterday a supplier called to discuss a contract, and basically declared a force majeure fuel surcharge based on the cost of diesel. Normally it costs about $8,000 to bring produce cross the country, calculating $2 to $5 per gallon. Now he’s saying it could go as high as $10 this summer.”

 Not all has been a disaster for Harry Hollow Foods, though. “Covid came and our business was in a great position. We supply fast food, drive-through, and grocery store retail,” rather than restaurants, which suffered during the pandemic. “Businesses like McDonalds, Dairy Queen, Sonics went through the roof. We experienced extreme demand like we’d never seen before. Strawberries, Concord grapes, raspberries, blackberries were in demand. But then there were crop disasters out West. In late June of 2021, it was 120, 130 degrees in Oregon and Washington and they lost their berry crops.” Prices doubled. Suppliers, including H.B., could basically name their price.

 The key is to stay nimble in a global economy. “We sell a commodity. As long as the guys we represent are viable, we’ll be in business. But there’s always someone trying to eat your lunch. We bring Mexican strawberries into San Diego, but they’re now also coming from Egypt, Morocco.”

 Growers must also adapt. “The war in Ukraine impacts us because it’s the breadbasket for raspberries to Poland and Europe. So we’ve got to get more domestic product going because Europe is going after other sources.”

 He repeats the adage about inflation: the best cure for high prices is high prices. “The question is, how long will the consumer accept the costs being passed through?

 “I compare it to the Titanic versus a rowboat. Our economy is so big that it takes a long time to correct course. We thought pandemic-induced inflation might correct itself by mid-2022. What with lingering Covid, this war—it may be 2024 before we see any relief. If the FED raises interest rates, demand start to taper off, prices drop. But if we don’t mitigate the effects, the smart people say it could create a recession.”

The short answer: “We’re in it for a long time.”