California Agriculture 2001: Trends and Issues Daniel A. Sumner Professor, Department of Agricultural and Resource Economics, UC Davis Director, University of California Agricultural Issues Center
The Importance of Agriculture Contributions to global economy. Contributions to local economies.
Economic Impact of California Agriculture, 1998 Share of Income Share of Employment California 6.60% 7.37% Sacramento Valley 8.17% 8.61% San Joaquin Valley 31.65% 36.91%
Most Issues are Perennials Some issues are unique to selected commodities or sub-sectors, but most span the industry. And, issues for one group are also important to customers, competitors and neighbors.
National, State and Local Policy Exotic pests and diseases (GWSS and many more) Farm land conversion and urban edge issues Agribusiness consolidation and competition policy
National Farm Policy Farm payment programs, the baseline spending levels and the 2002? farm bill Crop insurance and risk management program reforms and implementation of 2000 changes Dairy supports and milk marketing order implementation issues
Global Policy Implementation of commitments and trade disputes Biotech controversies as demand drivers and global policy issues Finalize China accession to the WTO, EU Agenda 2000 implementation The new WTO round
Current Commodity Prices Low current prices are not sustainable. High prices in the past for some commodities were also not sustainable. That does not tell us when the turnaround is coming. Supply/demand fundamentals differ by commodity but are connected on both sides of the equation.
140 Index of California Agricultural Commodity Prices, 1960-2000 1965-1967 = 100 130 Based on Constant $1996 120 110 100 90 80 70 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000
30,000 California Cash Receipts from Farm Marketings, 1960-1999 25,000 Million 1996 dollars 20,000 15,000 10,000 5,000 0 1960 1965 1970 1975 1980 1985 1990 1995 2000
3,000 California Cropland Harvested by Crop, 1964, 1982, and 1997 2,500 1964 1982 1997 2,000 1,000 Acres 1,500 1,000 500 0 Land in Orchards and Vineyards Hay - all types Vegetables and Melons Cotton Wheat for Grain Rice Other
Based on constant $1996 150 130 110 90 70 Price Indices for California Fruit and Tree-Nuts, 1960-2000 (1965-67=100) Peaches, Clingstone Walnuts, English Strawberries 50 30 1960 1965 1970 1975 1980 1985 1990 1995 2000
Based on constant $1996 140 130 120 110 100 90 80 70 Price Indices for California Vegetables, 1960-2000 (1965-67=100) Carrots, All Lettuce, Head Broccoli, All 60 50 1960 1965 1970 1975 1980 1985 1990 1995 2000
160 Price Indices for California Cattle and Milk, 1960-2000 (1965-67=100) Based on constant $1996 140 120 100 80 60 Cows Steers and Heifers Milk 40 1960 1965 1970 1975 1980 1985 1990 1995 2000
Based on constant $1996 180 160 140 120 100 80 60 40 Price Indices for California Field Crops, 1960-2000 (1965-67=100) Cotton, Upland Hay Rice 20 0 1960 1965 1970 1975 1980 1985 1990 1995 2000
Input Prices and Availability Energy and energy based materials Big jumps from low prices in recent years. Water Continues to be influenced by legal and regulatory forces. Process is evolutionary.
California Farm Production Expenses, 1997 Electricity 3% Machinery and Repairs 8% Pesticides and Fertilizer 10% Farm Labor 29% Interest, Rent, Taxes 11% Other Expenses 19% Animals and Feed 20%
120 United States Producer Price Index, 1991-2001 100 80 (1982=100) 60 40 Energy Gasoline 20 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
160 Prices Paid by U.S. Farmers 1996-2001 140 1990-92=100 120 100 80 60 All Production Items Fertilizer Fuel 40 1996 1997 1998 1999 2000 2001
240 Ammonium Nitrate Average Monthly Prices 220 200 Dollars 180 160 140 120 AN-SE(DEL) AN-PNW(DEL) AN-CAL(DEL) 100 1996 1996 1997 1998 1999 2000 2001
California Rice Operating Costs, 2001 $/acre % of Total Chemicals 83 14 Fertilizers 72 12 Irrigation 54 9 Fuel & Lube 50 8 Total Operat.Costs 605
California Walnut Operating Costs, 2001 $/acre % of Total Chemicals 271 19 Hull, dry 212 15 Irrigation 132 9 Fertilizers 59 4 Fuel & Lube 48 3 Total Operat.Costs 1407
California Processing Tomato Operating Costs, 2001 $/acre % of Total Irrigation 135 12 Fertilizers 119 10 Fuel & Lube 99 9 Chemicals 82 7 Total Operat.Costs 1159
Input Prices and Availability Crop protection and chemicals Regulation affects both availability and cost. FQPA remains a driver. Hired farm labor Drift up in wages, continued supply problems. This may be the year for another immigration (guest worker) law.
National Farm Subsidy Programs Farm payment programs do contribute to selected commodities. Crop insurance and risk management programs have expanded. Marketing orders and dairy supports are important without direct payments
Direct Federal Government Payments to California Farmers Year $ Million California as a Percent of Total U.S. Payments 1960 22 3.1 1970 132 3.5 1980 14 1.1 1990 252 2.7 1995 238 3.3 1996 301 4.1 1997 220 2.9 1998 353 2.9 1999 651 3.2 2000 ~700 ~3.0
Use of Federal Crop Insurance by California Farmers Catastrophic Policies Buy-up Policies Acres Insured 1995 31,923 7,935 4,476,324 1996 29,591 8,602 3,686,363 1997 25,896 8,775 3,173,440 1998 23,617 9,942 3,526,321 1999 24,893 13,002 4,050,454
Percent of California Harvested Fruit, Tree-Nut and Vegetable Acreage with Buy-up Insurance, 1999 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Raisins Prunes Apricots Almonds Tomatoes Oranges Plums Lemons Peaches Grapes Pears Nectarines Walnuts Avocados
Percent of California Harvested Field Crop Acreage with Buy-up Insurance, 1999 30% 25% 20% 15% 10% 5% 0% Sugar Beets Cotton Wheat Rice Barley Beans Corn Safflower Potatoes Forage
Global Issues Trade remains important for California agriculture. Global investment is also important. About 20% of farm value is exported. Import competition and global competition in third markets are challenges.
Indexes of Real Trade-Weighted Dollar Exchange Rates for All Agricultural Trade 1998 1999 2000 2000 2001 Annual Annual Jan July Jan US Markets 119.9 118.4 118.2 127.5 124.6 US Competitors 115.8 122.3 126.7 135.8 137.6 US Suppliers 111.4 113.6 115.2 121.2 120.8
8,000 7,000 6,000 California Agricultural Export Value, 1995-1999 $ Millions 5,000 4,000 3,000 2,000 1,000 0 1995 1996 1997 1998 1999
Agricultural Exports to the Top 10 Destinations by Value, 1999 Other 23% Canada 22% Spain 2% Netherlands 3% South Korea 4% Japan 22% Germany 4% Taiwan 4% Hong Kong 5% United Kingdom 5% Mexico 6%
California Agricultural Exports by Category, 1999 Other 21% Fruit 32% Animal Products 8% Field Crops 12% Vegetables 13% Tree-Nuts 14%
Where from here? Most issues are perennials, but so is California agriculture Such low prices cannot continue much longer. But, how much longer is that?