Both studies detail establishment and first year production and harvest costs for not-yet-fully-mature crops. For raspberries, first year of production includes a $12,460 per acre construction, management and investment cost for protective tunnels. Costs for a mature raspberry crop are analyzed in the second production year and total $48,210 per acre . For blackberries, costs for a mature crop are shown for the second through fifth production years, and total $43,406 per acre per year. Harvest costs again represent the vast majority of total costs, at 81% and 71% of total costs for raspberries and blackberries, respectively. For raspberries, cultural costs represented a much smaller share of total costs at $4,656 per acre, roughly half of which was for trellis and tunnel management. Blackberry cultural costs totaled $5,709 per acre, of which over half was for pruning and training canes. Each study also includes an analysis of potential net returns to growers above operating, cash and total costs for a range of yields and prices. When evaluating net returns above total costs, gains are shown for higher yield and price points; losses are also documented at many lower yields and prices . Farms with productive soils, experienced managers, optimal production conditions and robust market plans generally realize higher net returns. In contrast, farms with less-than-optimal production conditions, reduced yields, poor fruit quality or inexperienced managers may contribute to lower net returns. Results from the strawberry analyses show that on a per acre basis,vertical vegetable tower organic strawberries tend to be more profitable than conventional berries, even with lower yields.
Organic price premiums explain the result; in this example price per tray for organic strawberries ranged from $12 to $18, while price per tray for conventional berries ranged from $7.30 to $11.30. Prices for second year conventional strawberries were slightly lower still to account for a portion of the crop that was diverted to the freezer market. Net returns for both caneberries were mostly positive. Other noteworthy entries in all recent berry studies include per acre costs for pest control advisers , management of invasive pests and food safety and regulatory programs for water and air quality. Though each alone represents a relatively small portion of total costs, they provide readers with insights into the changing nature of berry production activities and costs over time.Cultural practices in the berry industry have evolved to address changes in soil, water and pest management needs. New varieties have been developed to enhance yield and quality attributes. Based on historical trends, and to meet both industry needs and consumer demands, we expect to see new varieties continually developed over time. Businesses have responded to consumer and market demands for fresh, safe and organic products by implementing food safety programs and/or transitioning more lands to organic production. Water and air quality programs have been developed to comply with state regulatory requirements. In the past, growers customarily hired those with expertise in financial and market management; they now also enlist the support of experts in food safety, organic agriculture and environmental quality to assist with farm management. But challenges remain, and management of key agricultural risks — including those for production, finances, marketing, legal and human resources — have become increasingly important.
Invasive pests pose significant management and regulatory constraints and increase production, financial and market risks. Two recent examples are light brown apple moth and spotted wing drosophila . LBAM infestations can lead to loss of part or all of the crop because of field closure from regulatory actions, increasing production and financial risk. SWD presents substantial market risk to growers in that its larvae can infest fruit and render the crop unsaleable. Growers minimize the risk of loss from these two organisms with the routine use of PCAs. PCAs monitor fields more frequently than growers alone would be able to do, identify pests and recommend actions, for example, the use of pheromone mating disruption for LBAM and field sanitation for SWD.Since their introduction, the soil fumigants CP and MB have unquestionably contributed to the expansion of the berry industry. However, the full phaseout of MB as a pest management tool — it will no longer be available for use in berry production after 2016 — presents both production and financial risks. While a substantial research commitment has been made to finding alternatives to MB, nothing has yet come close to offering the same level of protection from the large-scale loss to soil pathogens or the gains in productivity associated with the application of CP and MB as synergistic preplant fumigants. We anticipate that the berry industry will adapt to the MB phaseout by using alternative fumigants and preplant soil treatments, but these are likely to carry a higher level of risk for berry production in the short term and may lead to a decrease in planted acreage and production. However, this may also stimulate an even more robust research agenda directed towards soilborne diseases and plant health to minimize disruption to the industry. Reliance on fumigants as the primary strategy for pest management is almost certainly a thing of the past. Instead, adoption of integrated approaches, including alternatives to fumigants, to manage diseases, weeds and other pests will be key to sustaining berry production over the longer term .
Social and demographic changes in Mexico — the source of a majority of the area’s agricultural labor — have resulted in markedly lower immigration rates into the United States, a shrinking labor pool and upward competition and wage pressures for the agricultural workers who remain . In recent years, growers have reported difficulty in securing and retaining sufficient numbers of workers to ensure timely and effective farm operations. The lower production figures seen in strawberries in 2014 may in part have been the result of an insufficient labor pool from which to draw . However, no known regional employment or wage data are available to specifically document this. Some growers minimize labor risk by paying higher wages and providing year-round employment when possible. However, these strategies can be difficult for some businesses to justify economically. Arguably, the area’s berry industry, and agriculture more generally, increasingly face political risk. Immigration legislation that may assist with the current labor challenge languishes at the federal level, with major policy changes unlikely before 2017 . Farming practices are under ever more scrutiny by consumers, local municipalities and state and federal agencies. Soil fumigants and pesticide use have been the focus of many intense debates and discussions, especially in Santa Cruz and Monterey counties. At the time of this writing, several new regulations related to pesticide application notifications, pesticide and fumigant application buffer zones and worker safety have been proposed by the California Department of Pesticide Regulation or the U.S. Environmental Protection Agency but have not yet been finalized. It is anticipated that implementation will begin in 2017, with full compliance required in 2018. And, as California struggles through a fifth year of drought, water use, quality and cost has become a more robust part of the local, state and federal discourse, with directives issued and new legislation proposed. Compliance with each new directive or regulation presents production and logistical challenges for growers and can be costly to manage. Although it is unlikely that regulatory pressures will lessen in the future, there is every expectation that growers will continue to adjust business practices to meet or exceed any new requirements or standards. The economic sustainability of individual farming operations and the area’s berry industry in total will ultimately be impacted by and continue to evolve with the ever changing business environment,vertical farm tower and by an array of risks and challenges.While there is evidence that drought causes individuals to reduce water consumption, household demand remains somewhat inelastic . In periods of drought, the majority of water reallocation falls to industrial consumers and in particular the agricultural industry which consumes 80% of non-environmental allocated water in California . While this may spark scarcity innovation through investing in new technology or selling and trading water permits, there are substantial costs from unexpected changes to a water supply. In this paper, I investigate whether drought can create local spillovers into sectors closely related to the agricultural industry, using the distinct variation in drought intensity to compare compositionally similar counties.
Empirical evidence suggests that price volatility in times of crisis creates considerable spillover in closely related industries . I attempt to test this hypothesis with the 2012 to 2016 California drought, a hydrologically significant event that primarily impacted the Central Valley. I use cross-sectional data to analyze outcomes utilizing a difference in difference methodology to compare the counties in the Central Valley that experienced a greater intensity of drought with those that narrowly evaded costly impacts. Drought creates reductions in water supply that cause farmers to employ large-scale shifts to groundwater usage, less water per crop and increased reliance on water-conserving technology . Over pumping groundwater has the potential to create unquantifiable long-run impacts on the environment and permanently reduce the natural ability to replenish available aquifer levels.1 In future drought occurrences, lower levels of groundwater will increase pumping costs, particularly in Central Valley counties that relied heavily on groundwater from 2012 to 2016 . Although groundwater pumping is common, farmers that require more water than what is available from either state allocated water contracts or pumping face several choices. They can sell state allotted water permits to industrial consumers to recover a portion of losses, switch to drought-tolerant crops, or fallow portions of farmland.Fallowing is often the last choice, as farmers forgo all profit generated from owning and operating the property and are likely to reduce the hours their employees work. Fallowing creates sizeable direct costs to the industry in productivity and job loss .California agriculture is the national leader in terms of food sales, making up 11% of total exports in 2012. The lucrative industry was valued at $37.5 billion in 2012 and has been growing rapidly. Despite the drought, agricultural exports had a valuation of $46 billion in 2016 . Estimates suggest output would have been much higher if the drought had not occurred. Total direct statewide economic losses to agriculture from the drought were $3.8 billion solely from 2012 to 2016 . We know the 2012 to 2014 drought in Southern and Central California was the most severe occurrence in the last 1200 years by paleoclimate reconstructions of past droughts . The impact of the drought in terms of crop losses and job layoffs manifested primarily in the Central Valley, an inland area consisting of 18 counties. An estimated 72% of the crop losses in the height of the drought were contained in the San Joaquin valley and Tulare River basin . Although agriculture statewide did not sustain extreme losses, job losses and pumping costs were distributed unequally. After using groundwater pumping to recover the majority of the water shortage, the remaining 10% shortage in statewide agricultural water use was accommodated by fallowing half a million acres of farmland. Approximately 90% of that fallowed land was in the San Joaquin Valley and the Tulare river basin. Other compositionally similar areas such as the central coast depend on different water sources that were not similarly impacted by the drought . The 2012 to 2016 California drought highlighted the inadequacy of rural well and water systems, particularly in certain rural communities that lacked running water at the height of the drought. Tulare county suffered one of the greatest losses in crop production as well as bearing one of the highest costs of groundwater pumping. Due to reduced groundwater levels in Tulare, there were approximately 2,000 domestic well failures solely in 2015 . These small and often low-income areas are not always required to have contingency plans or links to larger water supply systems. Related literature has shown that rural and low-income individuals have less tolerance for natural disasters. A similar drought occurred in Australia from 2001 to 2004 and was estimated to be equivalent to an annual reduction of $18,000 in income. However, this impact appeared only for individuals living in rural areas . This result emphasizes differences in responses between demographic groups to natural disasters. Current literature aims to understand this differential to effectively implement welfare programs such as the relatively new Drought Housing Relocation Assistance Program implemented in 2015 .