From this information, we examined fluctuation patterns that could exist specific to a region or crop category and linked the information with the main source of the lowest profit. Information presented for this topic was obtained from Questions 9, 10, and 11 . Risk Management examined farmers’ perceptions of risk and, in particular, the extent to which risk management tools are available and used. Respondents were asked to rank ten risk sources in order of importance and eight risk management tools in the order of preference. For each risk management tool, the survey also asked about its availability and whether it had been used by the farmer. Also included was information on their receipt of government disaster payments or loans. This section used data from Questions 12, 13, and 14 . Crop Insurance was one of the risk management tools covered in the previous section, but it was then given more extensive coverage. This section summarized in formation on respondents’ history of crop insurance purchases, reasons why they did or did not purchase crop insurance, and suggestions for improving the role of crop insurance. Information presented includes the mean rank ing and distribution of ranks. The relevant survey section for this data was Questions 15 through 22 . Financial Characteristics deals with off-farm income, gross agricultural sales, assets, and debts to provide the distributions of these variables and examine the existence of any systematic distribution patterns. Questions 23, 24, and 25 in the survey were relevant to this section.
Crop diversification is well recognized as a risk management tool . However, little information is available concerning the extent of diversification or the mix of crops used in diversification by horticultural producers. As a risk-reducing tool,mobile vertical farm crop diversification plays a role in pricing crop insurance and is likely to be incorporated as a discount factor in future crop insurance premiums. To implement degree of diversification into the crop insurance premiums structure, decision makers need to know the extent to which crops have been diversified. This section sheds some light on the issue. Figure B1 shows the share of fruit/nut and vegetable farmers who grew a single crop. Seventy percent of fruit/ nut farmers were single-crop growers as opposed to 26percent of vegetable farmers. This implied that crop di versification was more common for vegetable growers than for fruit/nut growers, which was consistent with our expectation that diversifying into multiple crops is more manageable for annual crops than for perennial crops. The tendency toward single-crop production, however, varied by crop. For example, for fruits/nuts the share of single-crop farmers ranged between 35 and 83 percent, depending on the crop. As shown in Figure B2, grapes were most commonly a single crop , while stone fruits were least frequently so . Table B1 presents the diversification patterns and mean acreages. The patterns and extents of diversification for fruit/nut and vegetable farms were very different. Of the 30 percent of fruit/nut farms that were diversified, most were diversified with other fruit/nut crops. However, of the 74 percent of diversified vegetable farms, only 26 percent were diversified using other vegetable crops; 48 percent were diversified with crops in other categories. This indicated that fruit/nut farmers rarely diversify into other crop categories and that diversification across crop categories is more common for vegetable farms, particularly with field crops.
Furthermore, even among the growers who diversified within their own crop category, the scope of diversification was smaller for fruit/nut farming, as indicated by the average number of crops, 2.56 for fruits/nuts and 3.59 for vegetables . Table B1 also presents mean acreages. Note that the acreage figures in the table are for land that was planted in fruits/nuts or vegetables only. We did this to exclude often extensive field-crop areas and to examine the scale of farmers’ operations for their primary crops relative to various patterns of crop diversification. A cursory observation of the acreage figures indicated that primary crop acreage increased with crop diversification for both fruits/ nuts and vegetables . Also, farms that diversified within a crop category were relatively large. We revisit this issue with more detailed vegetable data later in this report. Table B2 shows the pattern of crop mix for fruit/nut farms, which are diversified predominantly with other fruit/nut crops. The table lists the two types of crops most commonly used for diversification in each subcategory. Judging by the percent of farmers, growers of berries, citrus, stone fruits, and tree nuts have made substantial use of same-category crop diversification. For tree nuts and stone fruits, the diversification patterns were symmetric with substantial cross-diversification between the two groups. The diversification trends for citrus and tropical crops were interesting. While 66 percent of sampled tropical crop growers diversified with citrus, only 28 per cent of citrus farmers diversified with tropical crops . We now turn to vegetables. Table B3 summarizes the pattern of diversification for farmers who grew only vegetables and shows the distributions of those farmers by the number of vegetables grown. While half of the vegetable-only farmers produced a single crop, 9 percent produced more than six different vegetable crops.
When we shifted from all vegetables to the subcategories, diversification patterns varied considerably. This was illustrated with Groups V2 and V5, which showed the highest and lowest levels of diversification. Table B3 also provides mean vegetable acreages for vegetable-only farmers. There was a tendency for farmers with more acres of vegetables to grow a larger variety of vegetable crops, suggesting that large-scale commercial farms engaged in more diversified vegetable production. In other words, the “scope” of diversification was positively related to the scale of the operation. This report does not include a discussion of crop diversification for ornamental crops because of a lack of information. The finest level of diversification we could investigate with the data for ornamental crops was diversification patterns across the three subgroups in the category: floriculture, nursery products, and Christmas trees. Our data indicated that ornamental growers rarely diversified across these groups. Organic farming information is summarized in Table B4. The table combines acres of “organic” and “transitional-organic” plantings and presents the combined area as “organic acreage” . Table B4 shows that 14 percent of vegetable growers practiced organic farming, compared to 6 percent of fruit/nut growers, although organic fruit/nut farms were more numerous. Most organic farmers also grew conventional crops and, on average, they devoted more land to conventional production than to organic production.This section summarizes the survey results on types of output use , marketing channels, and types of operations . Figure C1 shows the distribution of farmers by type of use for their fruits/nuts and vegetables . The two types, “mainly fresh” and “mainly processing,” were defined to include cases in which more than 80 percent of output volume was designated to the listed use. For fruits/nuts,vertical farming racks 71 percent of farmers were characterized as mainly processing and 23 percent as mainly fresh. These figures were almost re versed for vegetables—67 percent of vegetable farmers specialized in fresh-use crops and 26 percent in processing-use crops. For both fruits/nuts and vegetables, only 7 percent of farms supplied both fresh and processing uses . This implied that production of fruits/nuts and of vegetables in California tends to be specialized for either processing or fresh use.4 Also, these figures were consistent with the common observation that, for both vegetables and fruits/nuts, specific uses dictate the varieties grown. For example, Cling peaches are typically destined for canning and the Roma variety of tomatoes is usually made into paste. Relevant marketing channels are determined by whether the crop goes to the fresh market or for processing since the two uses require different post harvest handling techniques. Once harvested, processing crops are shipped directly to a processing plant. Fresh-use crops are usually sorted, packed, and refrigerated before being shipped to wholesale or retail buyers. This implies that specific marketing channels emerge to accommodate the post harvest handling required for each use. Figure C2 lists the marketing channels available for processing crops and the share of farms that used those channels. For fruits/nuts, marketing cooperatives and contracts with a processor were the most widely used marketing channels, accounting for 90 percent of the farms. How ever, for processed vegetables, marketing cooperatives played a relatively small role. Instead, contracts with a processor arranged at a predetermined price predominated.
While contracts with processors were an important marketing avenue for both the fruit/nut and the vegetable categories, the patterns of pricing arrangements with processors were distinctly different. For fruits/nuts, contracts with and without predetermined prices were almost equally important , whereas for processed vegetables, contracts with processors were mostly arranged under predetermined prices .Given the importance of processing use for fruits/nuts, we further investigated their marketing channels by disaggregating the category and looking at subgroups of the crop, as shown in Table C1.Cooperatives were especially important for citrus crops and tree nuts , and predetermined price contracts were particularly prevalent for grapes . The bulk of the grape growers produced wine grapes and, according to a recent survey, 90 percent of wine grape growers in California have either written or oral contracts with wineries . Overall, the data in Table C1 underscored the prevalent role of contracts in the processed fruit/nut industry. For vegetables, crop-specific marketing channels did not deviate much from the overall marketing pattern reported in Figure C2 and disaggregated information is not presented here. Post harvest handling is a crucially important component in marketing fresh-use crops. Thus, large commercial growers sometimes integrate field production with post harvest packing and shipping activities under the same owner. These growers are often referred to as grower/shippers . Table C2 indicates that 9 percent of the fresh-use growers who responded to the survey were grower/shippers. The vegetable industry had the largest proportion of grower/ shippers ; next was the ornamental industry , followed by fruit/nut operations . There is no parallel notion of post harvest handling for ornamentals and, thus, the remainder of the grower/ shipper discussion mostly relates only to fruits/nuts and vegetables. Grower/shippers operate on large scales and usually supply large-scale buyers such as grocery chains and mass-merchandisers , often at a pre-negotiated price. Negotiating the price before market conditions are known has important implications for price risk. Even though the net effect of prefixing the price depends on the structure of market power, a contract with a fixed price tends to reduce price risk. Our survey indicated that 51 of 75 fruit/nut grower/shippers sold, on average, 85 percent of their products at a predetermined price. However, for vegetables, the data indicated that only one grower/shipper sold product at a predetermined price.While grower/shippers typically supply their crops directly to large retailers or wholesalers, the grower-only group tends to market its crops through contracts with shippers or other means. As shown in Table C3, the two major outlets for fruits/nuts are marketing cooperatives and independent shipper/brokers. On the other hand, for vegetables, cooperatives have a minor role, and major roles are played by three marketing channels: direct marketing to consumers , independent shipper/brokers, and direct marketing to commercial buyers. Comparing marketing channels between processed and fresh-use crops, two observations stand out. With no single dominant marketing channel, fresh-use crops are generally marketed through various channels. Nevertheless, for fruits/nuts, the importance of cooperatives is significant—cooperatives are widely used in marketing both fresh and processed fruits/nuts.Production risk is closely linked to yield risk . As a way to measure yield risk, fluctuations in yields were investigated. The survey asked for information on actual annual yields from 1997 to 2001, and complete five-year yield data were obtained from about 45 percent of the respondents . Using the five-year yield data, average yield deviations in percentage were calculated and are reported in Table D1. To arrive at average yield deviations, for each observation we first calculated the simple average using the five-year yields. The percentage deviation from the average yield was then computed for each year . The all-year average deviation was the average of the five-year yield deviations. Table D1 presents the sample mean of all-year deviations by crop category and by crop-specific group.