Sunshine for State’s Farmers
Just west of Bakersfield, in the tiny community of Buttonwillow, workers are pouring the foundation of what will be the first tomato-processing facility in Kern County when it opens later this year.
The $35-million plant, built and financed by a group of 23 local growers organized as Rio Bravo Tomato Co., is a reminder that in California agriculture is still a growth industry.
While the Midwest copes with a devastating corn and soybean glut and family farmers are struggling to hold on to their farms, most of California’s large operators, who plant higher-value specialty crops, have begun planting new acreage, making trips overseas to scout markets and building larger processing facilities to capture more of the profit.
“It’s not an Internet stock-type expansion,” quipped Jeff Fabbri, president of Rio Bravo, whose new plant will churn out 350,000 tons of tomato paste a year. “The tomato business is a business that’s growing, but growing slowly.”
Although agriculture’s plodding but steady growth, about 3% a year, has been eclipsed in the last decade by high-technology industries, it’s still one of the state’s top economic engines. It ranks third among California’s export industries, according to Ted Gibson, chief economist for the state’s Department of Finance.
Export industries are those that bring in revenue from other states or countries, Gibson explained, thereby adding to California’s relative wealth. Agriculture trailed computer services and electronics manufacturing on this list, but topped the motion picture business, aerospace and apparel.
Agricultural production grew from $20 billion in annual sales in the early 1990s to about $26 billion in 1998, the last period for which data are available. California farm business represents 2.1% of the gross state product and provides about 8.7% of all jobs. But that is dwarfed by the state’s major service industries, such as retail and wholesale trade and health care.
As it has since 1948, California’s farm output leads the nation, topping its closest rival, Texas, in 1998 by nearly $11 billion.
“It’s pretty remarkable,” said Gibson. “Here you’ve got the nation’s most urbanized state [with] the largest agricultural sector in the country by far.”
The state’s farming outlook is expected to get even brighter as exports to recovering Asian countries such as South Korea and Thailand increase in the next few years. And if China gains entry into the World Trade Organization, that would open another huge overseas market for California produce.
Agriculture’s steady growth comes despite the state’s continued loss of farmland to suburban sprawl. The rising farm income is driven by a switch to more expensive items that other regions do not grow.
California growers supply 95% of the processed tomatoes used in the U.S. and 40% of the world supply.
The state also grows nearly all of the pistachios consumed in this country and two-thirds of the global supply.
By producing the preponderance of a broad range of crops, experts say California farmers are better insulated from market gluts and price competition.
“California is different,” said Jerry Siebert, an agricultural economist at UC Berkeley. “The bulk of its crops are specialty items, and milk, and those have higher value.”
That shift to specialty items is perhaps demonstrated best in the growth of California’s nursery plant industry. While acreage planted in hay, cotton and other crops has declined in the last decade, planting of flowers, seeds, roses and bedding plants has surged, moving those products, with their $2.4 billion in sales, up from sixth place to third among the state’s top commodities, right behind milk and cream and grapes.
“The population keeps growing, and they keep building streets, houses and new buildings. All of those need to be landscaped,” said Jack Wick, regulatory consultant with the California Assn. of Nurserymen.
Because of California’s dominance in certain crops, it’s also better poised to exploit new global markets, such as South Korea and China.
Bob Pinkerton, who grows lemons on 100 acres in Santa Paula, said he expects business for himself and other member farmers of cooperative Sunkist Growers Inc. to jump more than 20% if the Chinese market opens up for citrus this year as expected. China recently agreed to a series of tariff reductions and other arrangements that would allow it to join the World Trade Organization.
“The biggest opportunity we’ve had is right in front of us,” Pinkerton said. “That would mean more jobs and more business for the port of Hueneme where [Ventura lemons] would be shipped from.”
Exports, which account for 20% of the state’s agricultural sales, are rebounding after taking a hit amid the Asian financial crisis, state officials say. Tomato sales to Japan rose more than 20% last year as that country began allowing in more popular varieties such as Roma tomatoes. And relaxed trade restrictions in South Korea are allowing the import of more California beef, said Frederick W. Klose, an export specialist for the state.
However, California growers also are facing increasing competition abroad from other global players such as Argentina, which enjoys lower labor and land costs and has more acres of lemons than California and Arizona combined. Other issues, such as the growing scarcity of water and the threat of a ban on popular pesticides, also have farmers concerned this year.
Still, state economists expect agriculture to continue to grow, surpassing 1997’s record $26.8 billion in sales and 1998’s $25.9 billion. (A devastating citrus freeze cut into the value of the 1998 crop.)
Not everyone is cashing in on the sector’s growth.
Many small farmers have been pushed out or forced to farm part-time as supermarket consolidation and competition from larger, low-cost operators have pushed down prices. In fact, only a handful of the state’s 350 crops are actually profitable, farmers say.
While prices for such crops as citrus, pistachios, tomatoes, premium wine grapes and dairy products remained strong in 1999, growers of hay, cotton and many row vegetables have struggled to break even as an oversupply pushed down prices.
In fact, some broccoli and cauliflower growers along the central coast and celery farmers in Southern California were forced to plow under part of their crops last year because the cost of harvesting them would have exceeded the price retailers were paying.
A.G. Kawamura, an Irvine fruit and vegetable farmer, said he couldn’t afford to pick about 10% of his celery crop. “When you’re losing a dollar a box, you might as well just let it sit there,” he said.
But as tough as the market has been for some commodities, it’s almost certainly bound to change, economists say, pointing to the cyclical nature of farming and the effects of seasonal weather changes.
Broccoli, cauliflower and lettuce growers in the Imperial Valley say they’re already starting to see an uptick in prices for those over-planted crops, according to California Farm Bureau reports.
And the same dairy farmers who were benefiting from high milk prices and low feed costs several months ago are now getting about 60 cents less a gallon as the milk supply has swelled.
“Most of them [dairymen] should be able to stay profitable because of low feed prices, but in dairy there are clearly high-cost operators that will not be profitable,” said Vernon Crowder, an agricultural economist with Bank of America.
Thriving regardless are the dairy processors, operators who buy fluid milk from farmers and bottle it or make it into cheese to sell to supermarkets.
With their new processing plant in Buttonwillow, Fabbri said he and his fellow growers hope to boost profit margins and their ability to find customers for their tomatoes in bumper-crop years.
Likewise, almond growers and milk producers, both of whom had record years last year, are seeking new outlets for their crops.
Blue Diamond Growers, the country’s largest almond cooperative, is now producing almond milk, a lactose-free product that hit the grocery shelves last fall.
California dairy processors are expanding vertically, building huge new cheese plants, or adding to existing plants to claim a greater share of that business from huge food manufacturers and rapidly consolidating retail chains. The state’s booming dairy sector is even beginning to catch the attention of foreign investors.
Mitsui & Co., Japan’s largest trading company, recently formed a joint venture with dairy cooperative Land O’Lakes Inc. to build a $142-million cheese plant in Tulare. The plant, which will open in 2001, will be 30% owned by Mitsui and is expected to generate annual sales of more than $300 million.
New investment on the processing side, meantime, should boost production of many commodities in the coming year.
Rio Bravo growers, for instance, expect their tomato operation to generate more than 9,000 acres of new planting in Kern County, both in their own fields and in others--a huge leap up from the 3,000 acres of canning tomatoes now grown in the area. Until now, those tomatoes have had to be trucked to processing facilities 100 miles north.
“We’ve got great weather, great transportation infrastructure and deregulated energy,” Fabbri said. “In the farm business, California is just one of the best places to be.”
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Land of Milk and Money
For more than half a century, California has led the nation in total farm sales, outstripping Texas and all Midwestern states. In 1998, its most valuable product--milk and cream-- accounted for nearly 18% of agricultural income.
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Source: California Department of Agriculture
