“You do have to think about it commodity by commodity. Which ones are most sensitive to income? Which ones aren’t? Let me just give you a quick example from the wine industry. […] So you could have the central valley wine industry be better off at the same time, the coastal wine industry is hurt. And we saw that in a recession 10 years ago.”
Public Policy Institute of California / February 18, 2020
It is important to recognize that global markets and climates interact, and so what economists call “comparative advantage” remains crucial to economic success. Let’s say climate change makes table grapes more expensive to grow here or moves the season earlier. But if climate change affects Mexican growing conditions even more, climate change could cause grapes to become more profitable and therefore expand in California. The crucial issue looking forward is what will grow well in California compared to other places and compared to other crops.
UC Agriculture and Natural Resources’ Agricultural Issues Center has
released four new studies detailing the costs and returns of wine grape
production in the southern San Joaquin Valley. All four cost studies
illustrate the cost and benefit of nearly full mechanization on wine
The studies estimate the cost of establishing a vineyard and
producing wine grapes, focusing on four wine grape varieties – Cabernet
Sauvignon, Chardonnay, Rubired and Colombard.
“Those studies take into consideration mechanical pruning, leafing,
shoot thinning, and harvest on a typical wine grape vineyard with the
average production level for this region,” said George Zhuang, UC
Cooperative Extension viticulture advisor in Fresno County.
“With farming labor becoming more scarce and expensive, growers will
opt to transition into more mechanization,” Zhuang said. “These studies
provide detailed information about the trellis type, planting density,
cost and potential benefit of vineyard mechanization. Based on these
studies, fully implemented mechanization reduces the production cost
from $3,000 to $2,500 per acre and that represents 17% cost reduction.
This information will ultimately help growers to guide their production
practices to more profitable and competitive ways under the new era of
Wine grape growers should look at the costs, particularly expenses associated with mechanization, Zhuang said.
“The investment to purchase and own equipment can be high,” Zhuang
said. “Fortunately, it is easy to find a contractor in this region to
perform certain vineyard tasks, if the initial investment to purchase
equipment is prohibitive.”
“It is a win-win-win situation,” Zhuang said. “Growers can improve
their farming margins, wineries and juice processing plants can get
reliable and higher quality grapes and juice from farms, and average
consumers can enjoy better wine and more healthy grape products at an
The studies are based on 200-acre farms with the vineyard established
on 40 acres using two types of trellis systems – quadrilateral cordon
system and bilateral cordon system. In addition to regular grape
production expenses – such as irrigation, fertilization and pest control
– the researchers broke out the differences between machinery costs and
hand labor hours required for thinning, pruning and harvesting for each
variety.The prices for labor, materials, equipment and custom services
are based on October 2019 figures.
The California minimum wage law will gradually decrease the number of hours employees can work on a daily and weekly basis before overtime wages are required. For more information and to view the California minimum wage and overtime phase-in schedules visit cail.ucdavis.edu.
Input and reviews were provided by UC Cooperative Extension farm
advisors, specialists, grower cooperators and other agricultural
associates. The authors describe the assumptions used to identify
current costs for wine grape establishment and production, material
inputs, cash and non-cash overhead. A ranging analysis table shows
profits over a range of prices and yields.
All four winegrape studies can be downloaded from the UC Davis Department of Agricultural and Resource Economics website at https://coststudies.ucdavis.edu/. Sample cost of production studies for many other commodities are also available on the website.
For additional information or an explanation of the calculations used in the studies, contact Donald Stewart at the Agricultural Issues Center at (530) 752-4651 or firstname.lastname@example.org.
UC Agricultural Issues Center has released new studies estimating the
cost and returns of establishing an almond orchard and producing
almonds for three growing regions of California.
“These cost studies are valuable for agricultural producers all along
the continuum – growers considering entering into a new crop production
business, less experienced growers, and those with decades of
experience,” said Emily Symmes, UC Cooperative Extension integrated pest
management advisor for the Sacramento Valley. “The information in these
cost studies allows growers to evaluate their production practices and
associated costs relative to an exemplary hypothetical orchard specific
to their geographic region, and can help with development of business
models, crop insurance and lending.”
In 2018, almonds ranked third among California commodities with almond growers receiving nearly $5.5 billion in cash receipts.
The cost analyses are based on hypothetical farming operations of
well-managed almond orchards, using cultural practices common to the
region. Local growers, UC Cooperative Extension farm advisors and
supporting agricultural representatives provided input and reviewed the
methods and findings of the studies.
“The recent almond updates for the Sacramento and San Joaquin valleys
reflect costs associated with the continually evolving conditions
facing agriculture,” said Symmes, who co-authored the almond cost
studies. “Some of the notable updates include labor, irrigation and pest
management costs – all integral to producing and delivering a
The researchers based one study in the Sacramento Valley, one in the northern San Joaquin Valley and the other in the southern San Joaquin Valley.
The southern SJV study is based on an orchard that uses double-line
drip irrigation, whereas the other two locations use microsprinkler
irrigation. All are multi-year studies, estimating costs from removal of
the previous orchard, through almond orchard re-establishment and the
production years. The economic life of the orchards used in these
analyses is 23 to 25 years.
Navel orangeworm (NOW) is a major pest in almond production; Symmes
and her co-authors describe in detail the pesticide applications and
winter sanitation methods for each location for NOW control and include
The authors describe the assumptions used to identify current costs
for orchard establishment, almond production, material inputs, cash and
non-cash overhead. A ranging analysis table shows net returns over a
range of prices and yields.
The studies are available for free download at the UC Davis Department of Agricultural and Resource Economics website at https://coststudies.ucdavis.edu/. Sample cost of production studies for many other commodities are also available on the website.
For additional information or an explanation of the calculations used in the studies, contact Donald Stewart at the UC Agricultural Issues Center at (530) 752-4651 or email@example.com. To contact a local UC Cooperative Extension advisor, find the UCCE office in your county at https://ucanr.edu/About/Locations/. The Agricultural Issues Center is a statewide program of UC Agriculture and Natural Resources.
The California State Board of Food and Agriculture will hear a presentation from the UC Agricultural Issues Center on California’s Agricultural Future and have updates on CDFA’s CalCannabis and Farmer Equity programs at its upcoming meeting on Tuesday, November 5, 2019. The Board will also hear from the U.S. Farmers and Ranchers Alliance. The meeting will be held from 10:00 a.m. to 2:30 p.m. at the California Department of Food and Agriculture, 1220 N Street – Main Auditorium, Sacramento, CA 95814.
California agriculture has faced particular challenges from the trade turmoil over the past two and a half years. Open access and stable relationships are important because California agriculture relies heavily on exports. About 25% of what we grow in California exported. The ratio is much higher for some products such as tree nuts. Moreover, imports on which new tariffs have been placed, whether steel and aluminum or other goods, are used as imports on farms and food processing and higher costs, such as for canners, translate directly into lower prices for processing tomatoes and other fruits and vegetables and for other farm raw materials.
Some of this turmoil has been caused by US tariffs and
international responses to US tariffs. However, it is important to realize that
concerns have been caused as well by responses to threats and counter threats
that cause market responses and instability even if the threatened actions do
not materialize. For example, when the threat that NAFTA might be revoked was
first raised by the new administration, buyers in Mexico and Canada of
California dairy and other products began considering diversifying their import
sources of supply in case imports from the United States might be disrupted.
The Landscape of California Farm Exports
The UC Agricultural Issues Center (AIC)
produces data on exports of farm products from California. Those data document
export value of more than $20 billion in recent years. The most recent full
year of data is 2017. The three charts on the next page provide basic facts.
California farm exports span a large range of products led by almonds, dairy
products, pistachios, wine and walnuts. California farm exports are shipped to
dozens of significant destinations led by the EU and Canada, with China/Hong
Kong now well ahead of Japan. Important industries differ on their export
reliance. The tree nuts and rice all have export value more than 50% of farm
value of production. For dairy, processing tomatoes, grapes (wine, raisins and
table grapes) and oranges, exports are in the 20% to 30% range. Produce items,
such as strawberries, and including the other fresh fruits and vegetables, have
smaller export shares and export mostly to Canada.
As is evident from these charts,
many California agricultural products are vulnerable to export turmoil. This is
especially true for products with large export shares and those that tend to go
to markets have face new impediments or are likely face new trade impediments.
Such concerns are broader than just exports to China. For example, just last
week, after concerns about termination of NAFTA had largely faded, the President
renewed treats of tariffs on imports from Mexico, which would invite
retaliation. Mexico is a major buyer of California milk powder and other
products. Again, buyers in Mexico are stimulated to source their dairy imports
from New Zealand or other places, even if they have highly-valued suppliers in
Impacts of New Tariffs and Trade Impediments
Last summer and fall our group at AIC, prepared some
calculations of potential losses to some California commodities based on estimates
of lower prices that would be caused by export disruption in markets that had
implemented tariff and other trade restrictions in response to US tariffs. These
trade disruptions has been broader than China and include important
destinations such as Turkey, India and Mexico. We have monitored events that
have played out over the course of the marketing year in subsequent months.
Several basic facts and notions are needed to interpret the
impact on farm commodities. First, much of what we export from California is
commodities from trees and vines that continue to produce even if markets are
in turmoil. A farmer cannot layoff an almond tree and turn off a milk cow when
market prices decline. Second, it is complicated to rearrange export
destinations and that means exporters face lower prices when some markets are
removed from effective demand. These two points are well illustrated by the
walnut trade situation. Exports to markets for which new import barriers are in
place have fallen substantially. As a result, export prices were about 60%
higher in 2017/18 than they have been this year (see the chart on the next
Different commodities have been affected differently.
California hay exports to China have fallen from about 30% of the total export to
about 20% for the year from April 1 to March 31, with average monthly export
quantities well below the pace of 2016 through early 2018. California wine exports this year are also well
below recent years by both volume and value.
Finally, let me use the case of pistachios to illustrate
some complexity in the interpretation of agricultural trade data. In the fall
of 2018, California had a large pistachio crop with more bearing acreage and
good yields. With new tariffs and trade impediments for a crop that relies on
exports, and especially exports to China (mostly via Hong Kong and Vietnam), we
anticipated low pistachio prices. What was not in those calculations was the
subsequent information that Iran, the only other significant exporter, had by
far its smallest pistachio crop in many years. Iranian exports have dropped to
about zero for this marketing year. The result has been that pistachio prices
have been relatively stable.
However, stable prices does not mean that the California
pistachio industry has not suffered a loss from trade disruption. In fact, the
2018-19 marketing year would have been far better, but for the government-caused
trade disruption. The industry would have been able to recover from the low
yields of recent crops and build reserves by capitalizing on the low Iranian exports.
Agricultural production and price variability means farm industries must make
the most of every good opportunity. The trade turmoil has lowered the revenue
of the pistachio industry relative to what it would have otherwise been able to
The bottom line is that across
California agriculture farm industries face higher cost inputs and diminished
export demand for their products and prices lower than would have prevailed.
The marketing year still have many months to go, so we do not have final
estimates yet, but much damage has already been done.
Walnut Export Unit Values for Three Marketing Years
Current Situation and Final Remarks
Many had hoped that the trade turmoil just summarized would
be history by now. But, problems have continued and by some measures have gotten
worse. The recent announcement of new U.S. tariffs on Mexican imports into the
United States reignited concerns about that crucial market.
The USDA has announced assistance for farm industries that
have documented losses and many California industries are in line to receive
some benefits. For the industries with losses something is better than nothing,
but all the industries from whom I have heard say clearly they prefer trade to
aid. Government assistance is no substitute for lost trade opportunities and the
loss of their reputations as reliable suppliers.
The basic principle is that prosperity for agriculture is
best stimulated by the opportunity to compete for markets with as few barriers
and as little disruption as possible. Agricultural in California is innovative
and resilient. It can and will adjust to the economic situation, but there are
plenty of other issues and adapting to this trade turmoil adds an unnecessary
The United States has legitimate complaints about China’s policies. But, governments can be most effective by using dispute settle processes in now well-established institutions (such as NAFTA and the WTO) that provide frameworks for stability. The United States has had much success in the WTO as in two recent agricultural cases brought against China. The WTO would be a natural forum for the U.S. and its many potential allies to pursue their claims against China.
Impact of the U.S. Trade Dispute with China on California’s Economy
Assembly Select Committee on International and Regional Agreements and the
Standing Committees on Agriculture and on Jobs and Economic Development are
convening a joint informational hearing from 1:30 to 4:00 p.m. on June 4, 2019,
to provide insights the impact of the U.S. trade dispute with the People’s
Republic of China on California and key economic sectors in the state.
I.Welcome, Introductions, and Opening
Assemblymember Levine, Chair (International and Regional Agreements)
Assemblymember Eggman, Chair (Agriculture)
Assemblymember Cervantes Chair (Jobs and Economic Development)
Among California’s agricultural commodities, cattle rank fifth in
revenue. The University of California Agriculture and Natural Resources’
Agricultural Issues Center has released a new study showing the cost
and returns of a beef cattle operation.
“Ranchers can use UC beef-cattle cost studies to guide their
production decisions, estimate their own potential revenue, prepare
budgets and evaluate production loans,” said Rebecca Ozeran, UC
Cooperative Extension livestock and natural resources advisor for Fresno
and Madera counties.
The study estimates costs and returns of a representative
owner-operated beef cattle operation located on rangeland in the Central
San Joaquin Valley and foothills of Madera and Fresno counties. The
study describes a 200-head cow-calf operation and includes pasture costs
on the basis of the rental per animal unit month.
The analysis is based upon a hypothetical cow-calf operation, where
the cattle producer both owns and leases rangeland. The “typical” ranch
in the Central San Joaquin Valley is an owner-operated cow-calf
operation, often relying on multiple private leases. The operations
described represent production practices and materials considered
typical of a well-managed ranch in the region.
Input and reviews were provided by ranch operators, UC Cooperative
Extension farm advisors and other agricultural associates. The study
describes in detail the assumptions used to identify current costs for
the cow-calf herd, material inputs, cash and non-cash overhead. The cost
calculations in this study are based on economic principles that
include all cash costs and overhead costs. The study also includes a
“ranging analysis” to show potential net returns over a range of market
prices. Other tables show the average costs and revenues, the
distribution of monthly costs and revenues over the year, and the annual
equipment, investment and business overhead costs.
“In addition to producing meat, cattle play an important role in
California’s landscape and environment by grazing on vegetation that
could fuel wildfire,” Ozeran said. “Ranching therefore has ecological
and social impact on rural and fire-prone communities. If we can help
ranchers remain economically viable, then we help support local
stewardship of productive natural landscapes and contribute to fire
resiliency and food security.”
This study and other sample cost of production studies for many commodities are available for free download at https://coststudies.ucdavis.edu. The program is supported by UC Agriculture and Natural Resources, including both Agricultural Issues Center and UC Cooperative Extension, and the UC Davis Department of Agricultural and Resource Economics.
The students visited Sumner in the AIC to present their entry for the
FFA Agricultural Issues Forum Leadership Development Event, and hear his
suggestions. Sumner explained that this annual FFA competition has
students pick an agricultural issue, then present all sides. The Galt
High School students chose the Sustainable Groundwater Management Act.
Sumner relayed that one student took on the role of moderator as the
other students took on personas of people on various sides of the issue,
such as farmer, environmentalist, rural community leader, etc.
“The students were very articulate, smart and thoughtful,” Dr. Sumner
said, adding that UC Davis is a great resource for students interested
in pursuing agricultural economics, and he enjoys and encourages such
requests for interaction as the Galt High School teacher makes for his
FFA students each year.