California Agriculture and Global Challenges: Resources Prices and Prospects 2012 California Ag Summit uary 27, 2012 Daniel A. Sumner University of California Agricultural Issues Center
Outline and Main Points GOAL OF THIS TALK: SET THE STAGE FOR THE PRESENTATIONS AND DISCUSSION TO FOLLOW. California agriculture is large, diverse and integrated with world markets Over many decades real commodity prices have declined, but recent increases may signal are reversal for global commodities and many California crops Major questions: will the supply/demand balance return to the trend of lower real prices, which allows better diets for the world poor? What challenges face production agriculture here and globally? Asking where agriculture is heading requires considering forces driving both the supply side and the demand side.
California 2010 cash receipts and acreage, by commodity grouping Grains and cotton 9% Nursery/green house 10% Vegetables and melons 19% Cash receipts Dairy 16% Other livestock 10% Grains and cotton 38% Acreage Hay and forage crops 19% Fruits 15% Tree nuts 14% Fruits 23% Nursery/green house 0.004% Vegetables and melons 9% Tree nuts 13%
California 2010 exports, by commodity group and destination Commodity Group Destination Wine 7% Vegetables 7% Tree Nuts 27% Other products and mixtures 13% Animal Products 10% Field Crops 16% Fruits 20% Australia 1% India 2% Taiwan 2% United Arab Emirates 3% South Korea 5% Rest of World 20% Mexico 6% Japan 9% China / Hong Kong 11% Canada 23% European Union-27* 18%
California has a variety of climate and land use zones This natural diversity allows diverse agriculture to thrive A relatively small share of the total land mass is suitable for high-productivity irrigated crops
Geographic diversity of alfalfa acreage Alfalfa acreage is not concentrated and is spread across climate zones within the state Production occurs from Shasta County in the North to Imperial County in the South
Geographic diversity of tomato acreage Most tomato acreage is for processing tomatoes Tomato acreage is mainly in the Central Valley from Chico to Bakersfield Production takes place in several different climate zones
1866 1871 1876 1881 1886 1891 1896 1901 1906 1911 1916 1921 1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 1948=100 Index of real corn and wheat prices, 1866-2011 200 Corn Wheat 150 100 50 0
Gross domestic product from crop and animal production as a share of total gross domestic product in California and the United States, 1963-2009 3.5 3.0 2.5 United States California 2.0 1.5 1.0 0.5
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Index of real prices of California wine grapes, lettuce and almonds, 1980-2010 200 180 160 Wine grapes Almonds Lettuce 140 120 100 80 60 40 20 0
U.S. indexed real wheat prices, 1972-78 and 2006-2011 400 350 300. 1972-. 1978. 2006 -. 2012 250 200 150 100 50
U.S. indexed real rice prices, 1972-78 and 2006-2011 300. 1972-. 1978 250. 2006 -. 2012 200 150 100 50
U.S. indexed real milk prices, 1972-78 and 2006-2011 185 175. 1972-. 1978 165. 2006 -. 2012 155 145 135 125 115 105 95 85
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Index of real U.S. wheat production, price and revenue (1991=100) with coefficient of variation for revenue at 5 year intervals 250 1.0 200 Production Price Revenue 0.9 0.8 0.7 150 0.6 0.5 100 0.4 0.3 50 0.2 0.1 0 0.0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 250 Index of yield and real revenue per acre for wheat in Sumner County, Kansas (1991=100) Yield 200 Revenue per acre 150 100 50 0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Index of real U.S. milk production, price and revenue (1991=100) with coefficient of variation for revenue at 5 year intervals 250 1 0.9 200 150 Production Price Revenue 0.8 0.7 0.6 0.5 100 0.4 0.3 50 0.2 0.1 0 0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 250 Index of milk and real revenue per cow in Tulare County, California (1991=100) Milk per cow 200 Revenue per cow 150 100 50 0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 $ per metric ton for corn and alfalfa hay Real prices for alfalfa hay, corn and all milk with 2011 USDA projections for corn and milk 28 350 300 Corn Alfalfa hay Milk 26 24 22 250 200 150 100 20 18 16 14 12 $ per cwt for all milk 50 10
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Dollars per cwt 22 U.S. price for all milk, 1980-2010 with projections 20 FAPRI August 2011 Baseline Update 18 FAPRI Winter 2011 USDA Winter 2011 16 14 12 uary 2012 USDA WASDE (2012 midpoint) 10
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 $ per ton Real Price of California Alfalfa: Data, Fitted Values and Projections (2005 dollars) 230 data points 210 Projection with linear trend 190 170 P A = a+bp C +dp M +G year, R 2 = 0.82 150 130 110 90
What forces are driving these recent and ongoing trends? The Prof. McCalla develops the economic reasoning and data. I foreshadow a few issues Use of farm resources to produce fuel Increased demand from income growth in developing countries And, importantly: Dampened commitment to agricultural R&D leading to slowing productivity growth
Outline and main points
Real world per capita income vs. world per capita protein for food, (natural logs) 1969-2007 4.40 4.35 4.30 Slope = Income effect = 0.37 A 10% increase in income is associated with a 3.7% increase in human use of protein 4.25 4.20 4.15 4.10 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 9
Thank you. www.aic.ucdavis.edu