Events were gradually righting a badly tossed sector when the 1987–1992 drought appeared on the horizon to ultimately affect all California agriculture. This was yet another severe shock to the system. In particular, the west side of the San Joaquin Valley was pummeled by a nexus of water issues, e.g., reduced water supplies, inadequate off-farm drainage, and rising water tables, extending through the decade of the 1990s. Selenium toxicity in the Kesterson Wildlife Refuge was a harbinger of future environmental challenges. The 1990s Two additional early-decade shocks would impact agriculture in the 1990s. A four-year recession softened domestic demands and affected capital markets. The CVPIA in 1992 abruptly changed the political economy of federal water availabilities, curtailing water deliveries south of the Delta. Farms on the west side of the San Joaquin Valley were impacted financially as water became at once more expensive and scarcer because of both drought and regulatory change or, as some saw it, because of a combination of natural and regulatory droughts. Financially leveraged farms again faced foreclosure pressure. Lending institutions this time were quicker to secure and dispose of foreclosed assets. Quick disposal depressed the land market and the value of collateral assets to the chagrin of marginally solvent producers and firms. Weakening of Japanese and Asian economies again affected U.S. commodity exports. However, California’s specialty-crop exports were impacted to a lesser extent, and nut crops and grapes in particular enjoyed more favorable markets and prices. Large investments again appeared for perennial crops from investors and from growers seeking to broaden production portfolios to include higher-grossing crops.
Ample farmland was still available for these higher and better uses relative to production of field crops,drainage for plants in pots which was still plagued by the low prices of the early 1990s. By mid-decade, export markets were again strong, including those for basic field-crop commodities. In the main, prices strengthened for the products of California’s agricultural sector through 1996–97, with variations from commodity to commodity . Low interest rates continued to feed investments in permanent plantings. Producers of basic commodities enjoyed high export demand when new federal farm legislation was put in place in 1996. In the first year of the farm program, producers enjoyed healthy market prices and decoupled farm-program payments, but shortly thereafter economic fortunes again reversed. Within a couple of years, world economies again softened and farm prices were low across a wide spectrum of both basic and specialty commodities—and the domestic economy also faltered. An ex post doubling of federal program payments sought to shore up basic commodity producers. Acreage remained in production despite low prices. The ups and downs of the 1990s were also marked by significant structural change. Brand-name fruit and vegetable processors closed processing facilities. Other processing outlets disappeared. The bankruptcy of Tri Valley Growers in 1999 had a disastrous effect on producers already at the margin.Increased buyer concentration in fresh produce squeezed out many grower/shippers, placing more reliance on large firms capable of supplying customer needs on a year-round basis. With widespread and rapid changes in the competitive environment, product prices fell while production costs continued to rise, further squeezing production agriculture.
Contractual arrangements became increasingly critical to preserve shrinking margins. Some growers countered by integrating processing and marketing activities. Even though farm financial advisors had been more temperate regarding increasing debt loads, many growers and agribusiness firms experienced difficulty in continuing their farming operations.At the century’s end, California’s agricultural producers once again were seeking to stay upright while searching to reright their economic fortunes. The industry had witnessed significant change over the preceding three decades. The sector was more diverse in production and less dependent on field-crop and livestock production than in 1970. Contractual marketing arrangements for agricultural production were now the norm in this new, higher-valued production system, changing marketing channels and risk exposures of producers and contracting firms. Field crops, livestock, and livestock products contributed less than 20 percent to agricultural markets in 2000 whereas specialty crops now dominated—28 percent fruit and nut crops, 26 percent vegetables, and 11 percent nursery and greenhouse products. Dairy products alone contributed nearly 15 percent of the value of agricultural products sold in 2000. The sector was also more export-oriented. Despite a drop of 5 percent below peak levels in 1997, the value of California agricultural exports amounted to $6.6 billion in 2000. Agricultural commodities with ratios of farm quantity exported to farm quantity produced of 20 percent or more in 2000 included cotton lint ; almonds ; walnuts ; prunes ; dry beans ; grapefruit ; plums and rice ; apples, apricots, and onions ; oranges ; broccoli and fresh tomatoes ; dates and pistachios ; asparagus and cherries ; and cauliflower .
Competitive pressures increased for water resources throughout the state and for land in some areas, particularly in the northern San Joaquin and southern Sacramento Valleys. Environmental issues continued to command attention with more emphasis on in-stream water use, dairy-waste management, new chemical standards, water quality, and particulate matter concerns. With ample field-crop land and increased permanent plantings, values for open agricultural land for agricultural uses have remained relatively stable over the past decade. The major exceptions include varietal wine-grape vineyards in premium coastal areas, irrigated vegetable land on the south and central coast, and dependably watered, developable land in the San Joaquin Valley. The two dominant underlying forces affecting regional shifts in the location of agricultural production have been population growth and water-supply conditions. Rapid postwar and continuing urban and suburban population expansions forced relocation to interior valleys, first from the Los Angeles basin and later from the Central Coast and San Francisco Bay Area.A fuller appreciation of changes of the recent half century is the immediate precursor to an examination of the state of California agriculture as the industry enters the 21st Century. We first review the changing character of California agriculture from 1950 to 2000, focusing on major shifts in the structure of production , commodity composition, and geographic distribution. We then document the increasing importance of exports, followed by statistical information and financial indicators comparing California and aggregate national agriculture with respect to farm numbers, land in farms, farm real estate values, farm income, and selected financial ratios.Without doubt, the most significant structural changes of the half century were those that followed the addition of two major water projects that came online in this period. Together, the federal CVP and the California SWPT brought more than three million additional acres under irrigation. As shown in Figure 2, irrigated acreage grew from 4.3 million acres prior to WWII to 6.4 million at the start of the 1950s. Expansion, mostly from CVP supplies, increased irrigated acreage to 7.4 million in 1959 and subsequent increases, mostly from SWP deliveries, yielded 8.5 million acres in 1978. The most recent census indicated that there were 8.7 million acres of irrigated land in 1997.Expansion in irrigated production capacity plus rapid increases in productivity allowed California agriculture to experience very rapid growth in output at good prices until the early 1990s. Demand growth fueled by rising incomes and population growth kept California agriculture on a steep growth path. In constant 1996 dollars, the market value of agricultural products sold grew from $400 million in 1950 to nearly $27 billion in 1997 . The upward trend in the real value of agricultural production was tempered by short periods of decline—in the mid- 1970s and early 1980s and by economic recessions in the early 1990s and again at the end of that decade. However,30 litre pot within that overall picture of growth, there were significant changes in the composition of output, the importance of particular commodities, and the geographic location of production.The shares of the value of agricultural product sales coming from plant and animal products changed persistently over the past 50 years.
As shown in Figure 4, crops made up 61 percent of sales in 1950 while livestock accounted for 39 percent.The shares remained relatively constant throughout the 1950s and 1960s with expansions both in crop production and livestock production . However, livestock shares then fell steadily so that in 2000 three-quarters of the value of California production came from plant production and only onequarter from livestock. The crop share in California was much higher than the U.S. average of roughly 50/50 and significantly different from European agriculture, where animal products generated approximately two-thirds of sales. Additionally, these broad trends hide significant changes that occurred within both the plant and livestock production categories. Figure 5 shows the shares of crop production made up by major crop categories: field crops ; fruits, nuts, and berries; vegetables and melons; and nursery and greenhouse products. Over 50 years, the field-crop share of total crop production fell steadily, dropping from 33 percent of value in 1950 to less than 10 percent in 2000. The share of intensive agricultural crops rose from 63 percent in 1950 to 77 percent of total crop products by 2000. Growth was most pronounced in nursery products . These latter trends no doubt reflected the shift in the preference of consumers with rising incomes toward fresh products, and phenomenal growth in urban populations. Shares also shifted significantly within the livestock sector. In 1950 poultry and poultry products made up about 23 percent of the value of production, dairy products constituted 26 percent, and meat animals represented 42 percent . Over the 50-year period, poultry’s share declined gradually to 16 percent. Cattle and calves increased very rapidly in the 1950s and 1960s as the large-scale feedlot boom hit California, rising to 49 percent of livestock value in 1970. Thereafter, the share of the beef industry steadily declined, approaching 20 percent of value in 2000. The value of dairy production approached 60 percent of total livestock production in 2000, doubling in importance from shares of 30 percent or less in the period 1950 to 1970. We attempt to explain some of the causes of these shifts in industry composition in the sections that follow.At the aggregate level, California agriculture seems to be fairly stable and growing rapidly ; but beneath the surface it is a caldron of perpetual change. Here, we look briefly at what commodities are important, followed in the next section by a discussion of where they are produced. Table 1 attempts to capture the dynamics of an ever changing commodity composition. Part A presents the top ten commodities in 1950 and what happened to their rankings over the next 50 years, and Part B presents the top ten commodities in 2000 and how their rankings changed over the past 50 years. Several trends stand out in Part B. Dairy has clearly supplanted beef as the number-one commodity and now holds a commanding lead over the second-ranked commodity, grapes. Cattle and calves, ranked first from 1950 to 1970, were ranked fifth in 2000. Field crops’ role in the top ten declined in relative importance. In 1950 four of the top ten were field crops —cotton , hay , barley , and potatoes . In 2000 only two field crops remained in the top ten —cotton and hay . Nursery products and flowers and foliage have come from relative insignificance to number three and number seven, respectively. Overall, products sensitive to rising incomes have grown in importance—grapes , nursery products, flowers, lettuce, strawberries, and almonds make up six of the top ten.The share of the total value of production accounted for by the top ten commodities has fallen, reflecting a much wider spectrum of high-valued commodities produced on California farms and ranches. The top ten commodities accounted for 66 percent of the total value of agricultural production in 1950 but only 61 percent in 2000.The majority of agricultural production takes place in just four of the eight agricultural production regions of California : Region 4 , Region 5 , Region 6 , and Region 8 .8 Major shifts of production among regions reflect progressively increasing demands for California products for both domestic and export markets, withdrawal of land from agricultural production because of population growth in temperate coastal areas , growth in higher-valued perennial and vegetable production displacing field-crop acreage in interior areas, and shifts within the Central Valley induced by surface-water deliveries.