New Look in California Farming : Prospects Better in Some Sectors Than in Others

Tulare’s annual farm equipment show drew 750 exhibitors this year,a decline from 770 last year and the record of 1,024 in 1982.

“It seems obvious that the Tulare farm show is a reflection of the farm economy,” show manager Gary D. Patton said.

But California’s agriculture is not uniformly distressed. Citrus and other fresh-fruit crops have rebounded.

On the other hand, cattlemen have watched low beef prices slip even further as the government implements a new program to slash surplus milk by paying dairymen to slaughter their herds, thus feeding a glut of red meat.

The state grows about 250 different crops, some of which, like lettuce, are harvested 12 months a year. At final reckoning, last year’s farm production is expected to total 52.8 million tons, a 3% increase over 1984, but gross farm receipts are expected to rise less than 1% from last year’s $14.2 billion, according to the state Department of Food and Agriculture.

The department forecasts “a slight improvement” for 1986, thanks to lower financing and fuel costs and a softening dollar, which are expected to enhance exports. Weak commodity prices and lower price supports for cotton, wheat, rice and corn will depress earnings, however.

What follows is the outlook for the state’s top 10 agricultural sectors, ranked in terms of estimated 1985 gross cash receipts:

Dairy

When the federal government first gave the nation’s dairy farmers a one-time chance to sell their herds for slaughter this year and go out of the milk business for at least five years, few in California--the No. 2 dairy state--were expected to take the government up on its offer. The thinking was that because the state’s dairy operators claim to be the nation’s most cost-efficient producers, they would have less incentive than high-cost producers to want to destroy their herds. It was assumed that the price set for their animals would be too high for the U.S. Department of Agriculture.

Yet, when the USDA opened bids and announced results March 28, California led the list with contracts that will eliminate about 11% of the state’s milk production in exchange for payments of more than $277 million to participating dairymen--one of whom will receive more than $8 million for going out of the dairy business for five years.

In contrast, the nation’s leading dairy state, Wisconsin, finished third with buyout benefits of nearly $126 million and a 3.3% reduction in milk production. Second was Minnesota, which will reduce production about 9% and receive $145 million.

USDA officials speculated that farmers in the older dairy states of the Midwest may have been less burdened by debt than their counterparts in California’s relatively young dairy industry.

That may be a factor, but the industry’s strong participation in the herd-reduction plan also reflects a dependence on federal farm subsidies that is uncharacteristic of most of California agriculture. The scores of specialty produce and fruit and nut crops that are the state’s agricultural hallmark are grown and marketed without subsidies.

In contrast, only about half of the state’s milk production goes into the profitable fluid market; the rest is sold to the government at prices that have effectively removed any desire that the industry might have had to market such dairy products as powdered milk and cheese.

One result of this incentive to sell to the government is that California--the nation’s largest market--imports about 75% of the cheese consumed in the state.

This situation should begin to change this year, however, with the opening of the world’s largest cheese facility, Golden California Cheese Co., in Corona.

The plant will enable California producers to take advantage of their higher productivity and lower transportation costs to compete with Oregon and Wisconsin for the California market, which they previously surrendered by default.

If all goes well, dairymen will have a new market to replace the government, whose subsidies are scheduled to diminish over the next five years.

Nursery Products

Continuing enthusiasm for landscaping and gardening, plus an increase in new housing starts, help make this a bright spot in the state’s agricultural picture. Sales in 1985 were off only slightly from 1984’s record pace, and the outlook remains promising for 1986.

California leads the nation in production of high-value landscaping plants, which include trees, shrubs, vines, bulbs, turf and Christmas trees (but not plants, which are classified as flowers and foliage).

The state’s industry, which is centered in the Southland, accounts for 27.6% of the nation’s total production, a 2.6% increase in market share. Nursery production has grown steadily in the 1980s to more than $700 million last year from $499 million in 1981.

It could be one of the sectors to overtake cotton on the roster of California’s top 10 agricultural sectors.

Livestock

With consumption of red meat continuing to decline nationally in favor of poultry and fish, there is little cause for optimism among cattlemen. Last year was considered disastrous by cattlemen and their lenders; this year may be worse.

The dairy-herd buyout program at the very least will not help depressed beef prices, particularly among lower grades of meat, as overage cows are slaughtered over the next 18 months. (The fast-food industry is a major buyer of such cattle.)

The industry’s basic problem is one of oversupply. While fewer cattle were slaughtered last year than in 1984, the decline was partly offset through production of heftier animals.

Prices have fallen to their lowest level since 1978, and some cattle feeders lost as much as $150 a head on animals marketed last year. Nationally, operating losses for the first half of last year exceeded $1 billion, with no sign of improvement in the second half.

As a result, both producers who raise the cattle and feeders who finish them for slaughter are cutting back, reducing the nation’s beef-cattle herd to its smallest number since 1960.

According to the USDA, a record low number of cattle were in feedlots being fattened for market as this year began. Such a trend, if it persists, will eventually bring supplies back into balance with demand, bringing with it stronger beef prices.

To try to stimulate demand for beef, cattlemen are assessing themselves to finance promotion of beef consumption and to study production of leaner meat to alleviate consumer concern about cholesterol levels.

Though the rate of decline in consumption is slowing, it has yet to reach bottom: Consumption was 78.8 pounds per person in 1983, 78 pounds in 1984 and about the same last year, according to the American Meat Institute. Some experts expect poultry consumption to overtake beef and pork over the next decade.

Alfalfa Hay

Uncertainty marks what traditionally was one of the state’s steadiest crops.

Given the magnitude of California’s dairy and beef herds, the state cannot feed all of its cattle. Traditionally, it imports hay from other states--470,000 tons of it last year--though that represented a 17% drop from 1984.

The decline mirrors the shrinking feed requirements of a diminishing herd, which will be joined over the next 18 months by an 11% reduction in the dairy herd under the new buyout program.

Some of the steadiness of hay as a crop stems from the fact that it is harvested somewhere in the state every month of the year.

With the market shrinking, however, producers in the northeast corner of the state find themselves increasingly at a disadvantage because of their distance from feedlots.

While alfalfa can offer an alternative to cotton production, it requires more water than cotton cultivation, which is concentrated in the southern reaches of the San Joaquin Valley and parched Kern County--which depends on increasingly costly California Aqueduct water for irrigation.

Moreover, because little hay is produced in the first year, bankers are proving reluctant, if not unwilling, to finance production at this time.

Grapes

For the first time in nearly two decades, planted acreage declined slightly last year as vineyards were pulled out and others left unharvested because of low prices, particularly for the one-time San Joaquin Valley staple, the Thompson Seedless grape variety used for wine blending and drying into raisins. But new production from vineyards developed at a time of higher land values more than offset the acreage decline.

As a result, the state produced 5 million tons of grapes last year, up 8% from 1984. There were about 2.3 million tons of raisins, 2.2 million tons of wine grapes and about 500,000 tons of table grapes.

Among wine grapes, the largest variety is French Colombard, which made up about 45% of all white varieties and 18% of the total.

The weighted average price per ton dropped 6% in 1984 and continued to fall last year as wine sales flagged in the face of strong competition from cheap imports.

Only spectacular sales among the new wine coolers, which use Thompson Seedless grapes, kept domestic consumption from further decline.

Raisin growers are striving to rid themselves of huge, price-depressing surplus stocks, both by pulling out vineyards in exchange for surplus raisins under a federal marketing order--more than 76,000 tons are available--and by heavy retail marketing and development of new uses, such as sweeteners.

In addition, financial hardship has forced some growers to abandon their vineyards. Minimal improvement in prices is expected.

With record production of table grapes last year along with some quality problems, market prices declined. California produces all but 3% of fresh-market grapes, consumption of which has nearly tripled over the last decade.

Importation of Mexican and Chilean grapes--though not directly in competition with domestic grapes--has stabilized supplies year-round, lessening price increases at the beginning and end of the state’s growing season. Still, quality will hold the key in terms of price.

Cotton

The outlook for cotton growers remains bleak.

California’s cotton growers are noted for high productivity and superb quality.

Last year, they produced 23% of the nation’s cotton on only 13% of its cotton acreage. “We have no trouble selling our cotton,” said a longtime Kern County cotton producer. The problem is global overproduction, which has kept world prices in a prolonged slump.

California growers can only barely--if at all--cover production costs. Adding to the pressure on cotton prices is the low price of competing polyester.

The current marketing year began with a 17.5% increase in surplus cotton on the world market--bringing the surplus to about two-thirds of annual world consumption; the U.S. surplus of 8 million bales alone would fill 80% of annual domestic mill and export requirements.

Under the new farm program, however, price support levels will gradually be reduced to the world market price, and 25% of the nation’s acreage will be taken out of cotton production.

Because little price improvement is expected this year, and government subsidies are limited to $50,000 per farm, more California cotton producers who operate on a far larger scale are expected to break up their operations into smaller units in order to qualify for federal aid.

Many reportedly are dissolving partnerships and distributing acreage among relatives in order to maximize government-paid returns. “I’ve become more an ‘administrative’ farmer,” complained the Kern County grower. “I spend most of my time with lawyers and bankers.”

As a consequence of the acreage being taken out of cotton production as a condition of qualifying for federal aid, cotton may well sink to fourth or fifth place this year among the state’s leading crops.

Congress eased one major worry among California specialty crop farmers in March by amending the 1985 farm bill to keep cotton farmers who take land out of production from switching to other, more profitable crops and ruining those markets by oversupply.

Lettuce

Lettuce growers fared relatively well last year with some high prices reminiscent of the 1970s, but the outlook is always unpredictable for this highly weather-vulnerable, year-round staple.

“It’s kind of a roller-coaster crop,” says Henry J. Voss, president of the California Farm Bureau Federation.

California leads the nation in lettuce production, accounting for up to 75% of the nation’s crop--much of it grown in the Salinas Valley and Imperial County.

Quality and prices were relatively good in 1985, though prices were still below the five-year average, resulting in sales that totaled $450 million last year, down from $494 million in 1984 and $542 million in 1983.

Acreage is expected to decline slightly from the 1985 level of 146,000 acres.

Lettuce growers feared that cotton growers participating in a federal program to reduce cotton acreage might switch to such crops as lettuce, melons and beans, but an amendment to the 1985 farm bill, enacted in March, should discourage such market disruptive switches.

Processing Tomatoes

Unlike the fresh tomato market, processing tomatoes are generally grown under contract with canners.

“You really don’t grow unless you have a contract,” says Voss of the farm bureau, who thinks growers of other specialty products could benefit from similar market-oriented production.

Cheaply priced imports have held California-produced sales flat at about $400 million in the 1980s. Producers won some relief last year after the federal government stepped in to slow the increased importation of subsidized Israeli tomato products being brought in under the bilateral free-trade agreement negotiated between the two countries (over the protest of U.S. farmers).

Acreage last year fell to 215,000 acres from 239,700 in 1984, though improved yield kept production stable at about 6 million tons, compared to 6.6 million. But sales dropped to $385 million, compared to $427 million in 1984.

California accounts for nearly 90% of the nation’s processing-tomato production.

Flowers and Foliage

Another Southland specialty, the flowers and foliage industry, has performed well through the dark years.

Demand remains good for such products as flowers, cultivated greens, potted plants, bedding plants and indoor decoratives.

This is good for California’s producers, who account for about 28% of the nation’s crop, ranking first.

While gross sales by growers leveled off at about $500 million last year, they are well ahead of the $412 million in 1982.

However, competitively priced imports from Central America, South America and the Netherlands are generating some concern (and charges of unfair trade practices) and focusing greater attention on marketing by California growers.

Imports now account for about 60% of chrysanthemum and carnation sales and 20% of the roses sold in this country. The Dutch are doing “a terrific job” of marketing high-quality flowers at competitive prices while cultivating florists by guaranteeing quality, varieties and timing to a degree, says state agricultural economist Ray Borton, “that ours weren’t always able to do.”

Domestic producers are responding by seeking government investigation of alleged unfair trade practices, developing new varieties and markets and improving growing techniques.

Oranges

California’s orange growers have benefited from terrible times in Florida and Texas with severe freezes in the last few seasons, followed by a virulent outbreak of citrus canker that has resulted in heavy losses of Florida orange trees.

As a result, an estimated 1,000 new acres of orchard are being developed, mostly in Kern County, but much of this is being offset by lost acreage in the Southland.

Total acreage in the 1984-85 crop year totaled 107,854 acres of navel oranges and 67,187 acres of Valencia juice oranges. In the current crop year, navel acreage rose to 198,200 acres while Valencia acreage slipped to 66,300 acres.

As a result, the overproduction that resulted in low returns in 1984 has now come into better balance with modestly growing demand both domestically, where the taste for fresh fruits and vegetables continues to expand, and abroad.

Sunkist Growers, which handles about half of the state’s crop, has been shipping increasing quantities to relatively new customers around the Pacific Rim, replacing European markets lost to Mediterranean producers under the Common Market’s system of preferential tariffs.

Japan is in the third year of a five-year agreement to increase its quotas for orange imports, and Malaysia, Singapore and Hong Kong continue to increase purchase of California oranges.

A CORNUCOPIA OF CROPS

The hallmark of California’s $14-billion agricultural economy is the cornucopia of crops--some 250--raised in fertile, well-irrigated soil blessed with a clement climate that enables year-round growing. This diversity distinguishes the nation’s leading agricultural state from other farm states, which typically produce a handful of commodities in accordance with the unrelenting, unpredictable rhythms of pronounced seasons.

It also means that no one agricultural sector dominates California farming. While the top 20 sectors account for nearly 80% of the state’s farm revenue, most account for less than 2%.

In addition, about a fourth of the state’s farm sales are generated by export sales, which have fallen since 1981, at the same time that domestic demand has remained flat. Leading exports are, in order, cotton, almonds, oranges, grapes, wheat, beef, rice and lemons.

THE SECOND 10

Value ($ in millions) Eggs $336 Strawberries $334 Almonds $290 Chickens $282 Wheat $237 Rice $234 Broccoli $207 Turkeys $205 Potatoes $186 Sugar beets $180*

CALIFORNIA’S TOP 10 AGRICULTURAL SECTORS

Value % of state % of U.S. Product ($in millions) harvest production 1 Dairy $2,100* 13.8% 11.4% 2 Livestock 1,091 9.7 4.1 3 Grapes 906 5.8 92.8 4 Cotton 895 7.3 23.0 5 Nursery Products 700* 4.8 27.6 6 Alfalfa Hay 675 4.5 5.4 7 Oranges 524 3.7 32.8 8 Flowers-Foliage 500* 3.6 28.6 9 Lettuce 476 3.4 70.4 10 Process Tomatoes 391 2.9 85.0 Total: $8,258 59.3%

* denotes bank estimates. Source: California Department of Food and Agriculture;