Posts Tagged: economy

Undulating farm prices don't rock the retail cost of produce

The farm price roller coaster isn't often reflected in the cost of produce at the retail level, according to a column by Fresno County freelance writer Don Curlee. His article, based on research reported in the UC Giannini Foundation of Agricultural Economics Update newsletter, appeared in Capital Press yesterday.

While retailers are mostly unresponsive to farm price changes, they are more apt to respond to increases than decreases, Curlee noted, adding wryly, "Not surprisingly."

The research report, written by Ph.D. candidate Richard Volpe, said food prices at the farm level shot upward in 2007 and early 2008, followed by a sharp decline in late 2008 and 2009. Economists are ruminating on the wide variety of possible causes - e.g., energy costs, emergence of biofuels, the weak dollar - but they haven't reached consensus.

Through it all, retail prices remain significantly more rigid, perhaps for consumer and grocery store chain convenience. Curlee seems to suggest that consumers are ready for - and may even be entertained by - grocery bills that reflect the ebbs and flows commodity prices.

"When consumers play farmers' market or roadside stand bingo they experience significant price upturns and downturns regularly," he wrote. "Supermarkets might be missing a bet by taking some of that exhilaration out of food shopping."

Food prices are rising to meet consumer demand

A New York Times opinion piece invited four prominent economists to explain why they believe food prices are rising. The paper had reported that food prices spiked in April, even as oil and gas prices were down.

One of the experts, UC Davis Cooperative Extension agricultural economist Roberta Cook, made the point that food prices are rising because consumers have signaled they are willing to pay more to get what they want.

For example, consider the tomato. "A tomato is no longer a tomato is no longer a tomato," Cook wrote. "American consumers complained for years that tomatoes no longer tasted like tomatoes. The market responded to give them more of what they want."

Getting what they want increased prices.

Cook wrote that specialty tomatoes cost more to produce and harvest; they have a shorter shelf life, so there's more spoilage. Traditional round, mature-green tomatoes are giving way to specialty tomatoes, such as Campari, on-the-vine, strawberry, romas-on-the-vine, and many others. Field grown fresh tomatoes now include grape tomatoes, mini-pear tomatoes of various colors, and extended shelf-life vine-ripe round tomatoes.

In general, she wrote, quality across all tomato types has improved. The better products are commanding higher prices.

tomatoes

What is clear, costly and complicated? Water

While there have been whispers of skepticism about the Great California Drought of 2009, all would likely agree that California's water woes are complicated. The Wall Street Journal today ran a story outlining the decision process for farmers considering whether they should use the water allocated to them to grow crops, or whether they should sell the water to the state and let their land lie fallow.

Writer Pete Sanders penciled out the equation for Don Bransford, who grows rice on a 700-acre farm north of Sacramento:

• The state is offering $275 per acre foot of water
• Take 100 acres of his farm out of production.
• Sell the water for $90,000

To me, that sounds like a lot of money for leaving one-seventh of a farm unworked. But the implications go far beyond Bransford's farm - think of the laborers who won't be working and the inputs that won't be applied. That's the type of information that UC Davis agricultural economist Richard Howitt has taken into consideration in his calculations about the cost of the drought.

Sanders noted in the Wall Street Journal article that Howitt has determined the drought and resulting water restrictions could cost as much as $1.4 billion in lost income and about 53,000 lost jobs, mostly in the agriculture sector.

Almond industry's long boom is running out of steam

The Sacramento Bee* reported bad news for California almond growers, but the director of the UC Agricultural Issues Center, Dan Sumner, still had encouraging words for the industry.

According to the Bee story, written by Jim Downing, almond prices dropped more than 30 percent from August to December, the market for orchard real estate has gone cold, and the industry expects to be left with a 300 million pound surplus when the 2009 harvest begins in August.

Making matters still worse is a looming drought. West Side farmer John Diener told the reporter he plans to fallow 3,000 acres of land in order to concentrate what water he will have available on his 750 acres of almonds, which represent millions of dollars of investment.

But Sumner expressed confidence in California almonds. The state, he said, is the dominant global almond producer, holding more than 80 percent of the market. There are no serious competitors on the horizon.

"I still think they have a very strong long-term future," Sumner was quoted in the article.

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Speaking of Dan Sumner, the UC Davis ag economist was also cited in a Reuters story today about President Barack Obama's pledge to cut subsidies to big U.S. farm businesses.

Some trade experts believe reducing payments to U.S. farmers would be looked on favorably by the rest of the world and that the move would renew the Doha round of WTO talks. But Sumner indicated that direct payments are not as trade-distorting as other subsidies that go up when prices plunge or crops fail.

"A cut in direct payments would do little or nothing for the talks," Sumner was quoted in the article. "It is hard to see the current (U.S.) leadership moving forward on trade opening or paying much attention to the WTO."

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*The almond story was attributed to the Sacramento Bee, moved on the McClatchy wire and was picked up by various outlets, however, I could not find it on the SacBee Web site.

 

A California almond orchard in bloom.

The recession contributes to farmworker glut

One thing farmers apparently will not have to worry about during the upcoming growing season is a farm labor shortage. Slowdowns in the construction and food industries are turning many immigrant workers back to agriculture, according to a Los Angeles Times article published yesterday.

Reporter Jerry Hirsch wrote about a dramatic turnaround in what farmers considered a serious farmworker shortage three years ago. However, UC Davis agricultural economist Phil Martin offered the reporter a different view. He questioned whether the "shortage" was actually the result of a reluctance by farmers to raise wages enough to persuade people to do farm work

"You can't talk about need or shortage without talking about wages," Martin was quoted.

Farmers and agribusiness interests say they can't afford to pay much more than the minimum wage because of international competition, the story said.

"So what happens is that people move on to higher-paying jobs. Farm labor is a job, not a career. When people have other options, they get out of farm work. Construction is a frequent first step up the job ladder," Hirsch quoted Martin.

When higher-paying jobs become scarce, many laborers are forced back to the land.

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