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December 3, 1998


Cigarettes and butter

Railroad problems mount

What cost Headwaters?

Water company taps Riggs

Cigarettes and butter

If Jack Sprat's wife is a smoker, the Sprat family budget has taken a wild ride lately due to increases in butter and cigarette prices.

Butter prices nearly doubled to more than $4 a pound recently, while cigarette smokers are paying about 50 cents more per pack with another 50 cent increase coming Jan. 1.

While butter prices are returning to near normal, the factors forcing the temporary spike actually began about a year ago, according to Ralph Giannini, Humboldt Creamery sales manager. "That happened with our friend, El Niño," he said.

Giannini explained that last winter's long, harsh rainy season took its toll on cows across the country resulting in fewer gallons of milk produced per animal. The bad weather also drove up feed costs for dairymen.

"A dairy is like any other business," said Giannini. "When you have low production and high expenses you look for ways to trim expenses." This, he said, was done by not milking the cows, thus reducing their need for feed, and by selling cows to decrease herds.

With the milk supply decreased last spring, the onset of summer and better weather brought increased demand for butterfat from ice cream makers.

"It comes down to supply and demand," said Giannini. "Because the raw product supply was low for the butter producers, there were no inventories, which raised the price."

But now things are turning around. Milk production is coming back and butterfat demand from ice cream makers is less, resulting in more product available for butter. Giannini said prices are moving down toward normal as supplies increase.

While the news may be good for Mrs. Sprat, smokers' budgets won't fare as well. Tobacco companies raised the wholesale cost of tobacco products after California and a dozen other states agreed to a $206 billion settlement resolving claims for smokers' medical costs.

The recent increase of about 50 cents a pack for cigarettes hasn't changed business much so far, according to Nelo Dal Porto of Arcata's 4th Street Market.

"People seem to be buying cigarettes," he said, but added that they don't seem worried about the Proposition 10 increase of an additional 50 cents taking effect Jan. 1.

"They'll have to rearrange the way they spend their money if they want to smoke," he said.

Dal Porto, who has sold cigarettes for 60 years, said he's seen cigarette prices increase ever since they sold for 10 cents a pack.

"In the long run, people get accustomed to the price. They'll buy."

Amie Thompson, tobacco sales representative for Eureka's Costco, indicated that the small stores that purchase cigarette cartons from Costco "really stocked up" and that Costco held its price lower as long as possible. Costco now sells major brand cartons for $22.75, up from the previous $18.25.

While local stores did increase buying before the price increase, Thompson doesn't perceive consumers following suit just yet. But she does foresee the next price increase may force some smokers to quit.

"It's going to be near $30 a carton in local markets," she noted.

Railroad problems mount

Four months ago former North Coast Railroad Authority Executive Director Dan Hauser complained about Caltrans' lack of support for the rail line that runs from Eureka south to Marin County.

"There are some within (the California Department of Transportation) that are very adamantly opposed to a publicly owned railroad," he said. "And I've heard people in Caltrans say the railroads are dinosaurs and ought to be allowed to die."

That statement hasn't been proven, but what has played out is that the once-mighty Northwestern Pacific is faced with what appear to be insurmountable problems which threaten to cause the railroad's demise.

Citing safety concerns, the Federal Railroad Administration issued an emergency order Nov. 25 closing down the line's functioning tracks south of Willits. Operations were expected to be suspended for two to three months. Concerns ranged from crossings that did not work to track conditions that could cause derailment.

Railroad Authority Chairman Allan Hemphill blamed most of the programs on lack of money.

The railroad has suffered some $15 million in damage in four disasters over the past seven years and has yet to be reimbursed with federal disaster repair funds because of questions over its finances.

Caltrans is blocking release of $10 million Congress appropriated in 1996 for track upgrades and $2 million approved by the Legislature in August.

In addition, winter rains threaten to further damage tracks in the Eel River Canyon between Willits and Eureka, adding to anticipated repair costs. And until government funds are released, the railroad cannot make needed repairs.

Trains had been allowed to run at 10 mph for years over track that did not meet minimum standards.

What cost Headwaters?

The federal government has appraised the Headwaters Forest at $405 million $75 million less than what taxpayers could end up paying for the land.

The figure was immediately faulted by critics, who say the appraisal is based on unrealistic projected revenues which assume 75 percent of the land could be logged. That would be impossible, they say, given the restrictions of the Endangered Species Act.

U.S. Interior Secretary Bruce Babbitt has said the property is worth $135 million to $405 million, depending on what percentage of the land can be legally logged. Pacific Lumber Co. maintains the value of the standing timber is worth more than $500 million.

The recent appraisal was required by Congress as part of that land purchase deal.

Water company taps Riggs

Outgoing Rep. Frank Riggs will soon be heading up a company that makes gel products which release moisture into soil. DRiWATER Inc. of Santa Rosa announced Tuesday that Riggs will become a director and chairman of the board effective Jan. 6.

Riggs' "charge will be to guide the company's rapid domestic and international growth and support its dual missions of global reforestation and developing a solution for world hunger," a DRiWATER press release states.

Riggs said he would play an active role in company operations, but that day-to-day management would remain the responsibility the president and chief executive officer.

The congressman was also recently appointed to a newly created federal commission on the work force in the 21st Century and will become a visiting fellow for educational studies at the conservative Heritage Foundation. In the paid, part-time foundation position, Riggs will assist in developing programs to overhaul federal education programs.

He and his family will continue to live in Virginia.

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