AIC Quarterly: Volume 12, No. 1, 1998


VOLUME 12. NO. 1. 1998

California agriculture is known for its diversity. We often think of this in the context of the more than 250 commodities produced on the state’s farms and ranches. But California agriculture is also diverse in the range of issues it faces. The issues are like crops in that some are “annuals”—the cycle from when the idea is planted to when the research results are “harvested” is within a single year. Of course, some of the annuals also appear in the rotation again in a few years. However, many issues are perennials. We harvest useful results periodically, but the issue remains.

This diversity of issues is a continuing challenge here at the Center. We must allocate our efforts among important new issues and long-standing issues that continue to demand attention.

A first principle of economics is that with limited resources one must choose among competing potential activities. Our strategy at AIC is to try to make the most effective use of our resources developing useful research-based information. This Quarterly describes a number of current activities and highlights some recent publications. In addition to these, we are pursuing a number of topics that have been mentioned in previous issues by our associate directors. It would, of course, be valuable to be able to undertake even more projects, but AIC has limits, too.

Among the topic areas we plan to pursue more fully in the near future is an analysis of science policy for California agriculture. In recent years, the University of California’s Office of the Vice President of the Division of Agriculture and Natural Resources has organized and led a major effort to consider Divisionwide organization, priorities, and program evaluation. I have been participating in this effort as chair of the Program Planning Advisory Committee for Agricultural Resources. The role of the University of California in agricultural research and outreach, the process of priority setting and the evaluation of the contributions are all issues of vital importance to California. AIC can play a role in this process by helping to bring to bear economic analysis and other information from the field of agricultural science policy. This effort will build on the well-received AIC report Valuing UC Agricultural Research and Extension and the recent AIC Issues Brief, Science and Technology in California Agriculture.Agricultural science policy is a topic of major global importance. It is an area where AIC has unique resources and it is particularly vital to California agriculture.

We are enthusiastic about pursuing these issues. Priority setting and evaluation is at the heart of economics and management. This is something AIC faces in its own program, and it is an area where the Center can bring expertise and experience to help contribute to productivity, growth and other improvements in California agriculture.


A reception and dinner honoring AIC Founding Director Harold O. Carter highlighted a recent AIC Advisory Board meeting. The event also marked the official beginning of the fund-raising campaign for the Harold O. Carter Endowment.

Carter’s contributions to the University and to California agriculture were noted and praised by, among others, Barbara Schneeman, dean of the College of Agricultural and Environmental Sciences; W.R. Gomes, UC vice-president for the Division of Agriculture and Natural Resources; and Ann Veneman, California’s secretary of Food and Agriculture. A letter from Governor Pete Wilson commended Carter’s career as a UC faculty member and as founding director of the Agricultural Issues Center. AIC Board chair Bill Allewelt presented him with an engraved silver tray from the Center board and staff.

It was announced that lead gifts to the Carter Endowment totalled more than $200,000. This excellent start will be followed by personal solicitation visits to prospective donors from Rick Swantz, development officer for the College of Agricultural and Environmental Sciences; Daniel A. Sumner, current Center director, and Bill Allewelt. Advisory Board members and campaign steering committee members were encourged to help identify individuals and corporations who might contribute to the Endowment.

The campaign is being led by AIC Board members and the following co-chairs: Howard Marguleas, chairman emeritus, Sun World International, Inc.; Graydon Nichols, president, Nichols Farms, Inc.; and Ann Veneman, secretary, California Department of Food and Agriculture. The steering committee includes: Robert Egerton, senior vice president, CoBank; Michael Fitch, agriculture consultant and Wells Fargo Bank, retired; John Kautz, owner, John Kautz Farms and Ironstone Winery; Bill McFarlane, McFarlane and McFarlane Farms; Terry Scranton, executive vice president, Bank of America; and Ron Schuler, president, California Canning Peach Association.

Materials outlining the varied ways to make charitable contributions are available from the co-chairs, from AIC and from Rick Swantz.


An advisory committee and multidisciplinary research teams are being organized for the Center’s new major project on exotic pest and disease policy in California—an issue that has even greater importance with the state’s increasing role in a globalized food system. The project will be broad in scope and expertise, involving university researchers, and Extension specialists, state and federal agency staff, and agricultural and other public-sector representatives.

The goal is to create a stronger scientific basis for decision-making related to non-indigenous pests in California, including assessment of both costs and benefits of public policies and programs. Criteria for the systematic selection of case studies are now under discussion.

AIC associate directors Jerry Siebert and Keith Knapp join AIC director Sumner in assuming lead roles on this project. Also providing important guidance are veterinarian James MacLachlan, chair of the Department of Pathology, Microbiology and Immunology in the UC Davis School of Veterinary Medicine; Joseph Morse, a professor in the Department of Entomology at UC Riverside and director of the UC Center for Exotic Pest Research; and Deborah Golino, director of the UC Davis Foundation Plant Materials Service and a Cooperative Extension specialist in plant pathology. Policy leaders and scientists at CDFA and USDA Animal and Plant Health Inspection Service (APHIS) will also be collaborating. Overall project coordination will be provided by Center analyst Marcia Kreith.

Economic models will be combined with appropriate scientific data and analysis to evaluate current and potential effects of exotic pests and of exclusion or control programs on (1) costs of California plant and animal commodity production, (2) demand (especially international) for California food and fiber products, (3) import of goods and national or international travel, and (4) the environment and urban communities. Integral to the evaluation is consideration of the “public good” nature of exotic pest and disease exclusion and control.

During the next year, several research teams, of four to eight members each, will undertake investigative and analytical work. Participants have expertise in an array of disciplines from biology to law, from epidemiology to economics, and many others.

Discussion of preliminary results is expected in spring of 1999, with a major conference scheduled for the fall of that year. Results will be disseminated through publications and workshops.


The Center’s agricultural export data project is well under way. Most recently we surveyed state departments of agriculture in the United States to assess current and potential methodologies used to report their agricultural export statistics.

The response to the survey has been positive, generating great interest and support for the project outside of California. We continue to get information daily.

In late March we held a panel discussion at the California Department of Food and Agriculture in Sacramento to discuss the uses and expectations of state agricultural export data. Fourteen participants represented government, banking, academia, and industry. Export data, they said, is primarily used for public relations, policy-making, funding decisions, and research. The panelists stressed the need for accurate information that does not lead to public misconceptions, research errors or incorrect decisions.

They also made it clear that they have an interest in high quality data for California agriculture, and expressed enthusiasm for working with the AIC effort to improve the information available.

The information from the survey and the panel discussion will enable us, by this summer, to propose a methodology for more accurate estimates as well as produce improved export statistics for California.


Three upcoming AIC Issues Briefs demonstrate the diversity of this Center publication series. The wide-ranging topics are (1) grower reactions to the federal Farm Act, (2) potential impacts of groundwater market transfers, and (3) a statistical study of organic agriculture in California. Each in its own way involves important public policy issues.

Last year was the first growing season in which farm operators and land managers could fully respond to the federal Farm Act. Two researchers, Warren Johnston of UC, Davis, and Lyle Schertz of US Department of Agriculture (both retired), set out to learn how farm decision-makers were responding or planning to respond to the new rules. They organized a series of eight focus-group panels of farmers and farm managers in five regions of the US, including the Sacramento Valley. This Issues Brief focuses on the Sacramento Valley panelists, and places their responses in context with those elsewhere in the nation.

All groups believed that the new law creates need to shift acreage among different crops, and to pay more attention to marketing. The Sacramento Valley panelists, mostly rice growers, were less likely than those elsewhere to respond by adopting new technology—and were more concerned with price volatility. The study also asked what forces were considered most likely to influence future management decisions. The California growers focused on environmental concerns and regulations, and on higher input prices.

This Issues Brief is titled Management Changes and Impacts of the 1966 Farm Act: A National Study and a California Viewpoint.

The groundwater study looks at Kern County, where water marketing proposals are relatively advanced. It considers this question: Suppose either 10 or 20 percent of the region’s yearly water supply is transferred to Southern California (with offsetting imports during wet years). What would be the effects on the water table? On crop revenues? Would there be potential benefits of groundwater management, as distinct from an unregulated “common-property” scenario? Answers, hypothetical but based on real-world measurements, are provided by an economic model. As might be expected, the projected difference in impact between transferring 10 and 20 percent of the water supply is substantial.

This Issues Brief, titled Water Transfers and Groundwater Management: An Economic Analysis, is in the final editing stages. The authors are Marca Weinberg, UC Davis; Keith C. Knapp, UC Riverside; Richard Howitt, UC Davis; and Judith Posnikoff, Collins Associates, Newport Beach.

What is the overall size, value and growth potential of organic agriculture in California? Two UC researchers have gone to the only public source of information to provide at least some answers to that question. Laura Tourte and Karen Klonsky of the Department of Agricultural and Resource Economics at UC Davis studied thousands of registration forms supplied by growers, processors and handlers during the first three years of the California Organic Foods Act program (1992-95).

They have prepared the results as an 80-page statistical description of the state’s organic agriculture industry. Their report, being readied for publication by the Center, is summarized in an AIC Issues Brief.

Organic agriculture accounts for less than 1 percent of crop production in California, but the industry is growing faster than agriculture in general. In 1994-95, the third year studied, there were 1,372 registered organic farms in California, reporting $95.1 million in sales from more than 70 commodities grown on 45,070 acres. The AIC Issues Brief, titled Organic Agriculture in California: A Statistical Review, describes regional patterns of production, growth trends, and farm size and income statistics. Among the significant findings: In 1994-95, over half of the revenues from organic agriculture in California went to only 2 percent of the growers.


The AIC Executive Seminar will once again be held in December in Sacramento at the Hyatt Regency. This year’s theme is Risks and Opportunities for California Agriculture. Topics to be covered include: food safety regulations, environmental regulations including pesticide, trade rules and regulations, federal farm programs, farm labor and policy risks. The organizing committe is AIC director Sumner, associate director Jerry Siebert, Bees Butler and Roberta Cook, extension specialists, Department of Agricultural & Resource Economics, UC Davis. If you have suggestions for specific themes, speakers or panelists, please contact one of the committee members.


AIC’s internet survey is proceeding well. As discussed in the last AIC Quarterly, the questionnaire is intended to gather the information needed to guide improvements in the AIC web site. It will also provide a baseline on computer and internet use for an important segment of California agriculture. We believe that this information will be of broad interest and we will provide a summary as soon as the data is available. We thank those of you who have already returned your questionnaire and we would be delighted to receive additional responses. If you have not yet returned the questionnaire, please send it in. We want the results of the survey to be fully representative of our readership, even those of you who do not use the internet regularly. If anyone needs a copy of the questionnaire, please contact the AIC office.

AIC Quarterly: Volume 11, No. 4, 1997


VOLUME 11. NO. 4. 1997



This fall I spent one month in China and one week in South Korea, an interesting and productive trip to a part of the world that is particularly important to California agriculture. I had visited a number of Asian countries and South Korea several times, but it was my first visit to China.

Agriculture in China has enormous variety. Chinese agriculture is dominated by tiny family farms—a typical one might be about one acre, producing mainly grain—but it also has some huge state farms. I visited a state farm corporation outside Beijing that cultivates about 2,000 acres of wheat, milks about 10,000 cows, and raises and fattens 100,000 ducks (for Peking Duck). That farm also has a sizable hog operation, some miscellaneous crops and operates joint ventures with a Spanish multinational to produce value-added dairy products, such as flavored yogurt drinks. Outside of agriculture, the corporation owns a taxi company and a large apartment complex.

As with other state-owned enterprises in China, this company is under pressure to reduce costs, trim its bloated work force and generally get the business on sound financial footing. Clearly, growing incomes, improving infrastructure and broadening development are changing the physical and economic face of agriculture and the entire country.

Our visit to South Korea was in early November, a few weeks before the collapse of financial markets in Asia. Even at that time, the South Korean won had lost about 20 percent of its value over the previous year and there had been some increase in bankruptcies and bank failures—but the general mood within agriculture and agribusiness was one of optimism.

South Koreans are rightly proud of the economic and political transformation they have achieved in just 30 years. Traveling from Beijing to Seoul dramatizes that transformation, and also makes obvious how far the South Korean economy and its agriculture has come. Based on the achievement of recent decades, it seemed that South Korea’s financial problems were real, but short-term, and could be overcome with sound economic policy and some luck. Unfortunately, neither luck nor sound policy was available in late November and early December. The won dropped another 60 percent before recovering somewhat. This made it impossible to meet dollar-denominated debt payments. Even with improvement at the end of 1997, the situation remains serious and unsettled.

South Korea has been a major growing market for many agricultural products from California, so its prospects have clear and immediate economic implications here. It has also been opening its markets further in response to the Uruguay Round Trade Agreement and World Trade Organization dispute settlement pressures. However, the current economic turmoil means slower income growth and an expensive dollar relative to the won. Neither of these is good for California farm exports.

Everyone I spoke with agrees that the fundamental prospects for long-term growth in South Korea are strong, as they are in China. California agriculture must maintain an active interest in the region and encourage policy reforms that get economic growth back on track. In the 21st Century, both China and Korea will be even more important to California agriculture than they are today.


The AIC is co-sponsoring a study on growers’ responses to the state-mandated phasedown of rice straw burning in the Sacramento Valley. Data for the research is currently being collected through a mail and interview survey of randomly selected growers in a nine-county region.

The questionnaire, titled “Economics of Rice Straw Disposal: Grower Experiences 1995-1997,” queries growers about their costs of rice straw disposal, the physical characteristics of their rice fields, and their experience trading burning rights with other growers in the Valley. As is standard with this sort of statistical research, confidentiality of individual responses will be maintained.

The objective of the research is to determine the magnitude of costs that the burn phasedown imposes upon the rice industry, and to analyze the ways in which growers are responding. UC Davis graduate student Marc Carey, Professor Richard Howitt of the Department of Agricultural and Resource Economics, UC Davis, and AIC Director Daniel Sumner are collaborating on the research.

The results of this study will be featured in a forthcoming AIC Issues Brief, as well as in more technical research reports.



Exotic pests—harmful non-indigenous species—are the focus of the next major study by the AIC.

Daniel Sumner, Jerry Siebert, Marcia Kreith and Hyunok Lee have been working with the California Department of Food and Agriculture and others to plan a thorough multi-disciplinary study of exotic pest issues in California. After additional planning with scientists and policy analysts from the University of California, state and federal governments, industry and public organizations, we will begin to tackle a broad set of public issues that arise from the exotic pest threat.

The project will help decision makers better understand the effects of exotic pests on plant and animal production and mechanisms for detection, exclusion, eradication or control. We will study the public interest in exotic pest policy and review the full costs of public action or inaction. We will carefully consider the impact of potential exotic pest problems on domestic and international markets for California agricultural products. Consequences of alternative monitoring, eradication and control programs will be modeled and measured.

Exotic pests include a variety of plants, animals and microbes—such as weeds, disease-causing pathogens, insects, nematodes, vertebrates, etc. Several exotic pest related plant and animal diseases, insects, weeds, and nematodes are important in California. These include well known pests such as medfly, foot-and-mouth disease, citrus canker and hydrilla.

Early in 1998 we expect to begin working with research collaborators and project advisors from throughout the University research and extension community, the agricultural industry, and the public interest.




It’s gratifying to report that we’re off to a great start with fund raising for the Harold O. Carter Endowment of the UC Agricultural Issues Center. We will have lead gifts totaling more than $200,000 on the books before the official campaign commences early in 1998.

The campaign is a volunteer effort. All members of the AIC Advisory Board are enlisted and have been joined by a few other well known and respected participants in the agricultural community. It will also be of short duration; we intend to wind up our calls by the end of 1998. Of course, the endowment will remain open for future gifts from later donors who support the Center’s work.

Participants will not be subjected to a hard sell. We are committed to support being decided on the merits of what donors believe the Center has been worth over these past dozen start-up years, and what value it promises for the future.

The UC Agricultural Issues Center is a truly unique undertaking, chartered as it is to provide objective, scholarly examination of critical agricultural issues that also affect much broader public interests. In this sense we see it as a vital academic resource to promote agricultural literacy—a companion to such public information programs as Ag in the Classroom and Ag Network.

Those of us involved with this campaign believe the Center’s performance has earned your generous support for this special campaign. We’ll be anxious to hear if you agree when we contact you in 1998.




Natural resources and the environment are under stress in California and the West. Increases in population and economic growth, and continuing concern over the environment combine to place resources at the forefront of of AIC issues.

California agriculture is both affected by and a source of change in natural resource systems. The AIC program in Resources and the Environment focuses on these interactions between agriculture and the ecosystem.

As the primary water user in California, irrigated agriculture can expect increasing competition for water supplies from urban and environmental uses. Agriculture also contributes to water quality degradation through sedimentation, salinity, nitrates and other toxics such as selenium and pesticides. Innovative water management strategies are ways to mitigate both of these problems. Some of my ongoing research is investigating the economics of these issues.

Groundwater can expect increasing attention in the future. The Center has published several studies on water transfers. Related to this work we will now investigate in more detail the impacts of proposed water transfers and water markets on groundwater usage and management. Recent research results are being summarized in a forthcoming AIC Issues Brief, and a more detailed study for the southern San Joaquin Valley has been initiated. In general the long-run sustainability of groundwater resources (both quantity and quality) is the subject of considerable concern in California. This topic will be investigated as a possibility for a future major Center study.

Air quality is another area of significant concern to agriculture. Public attention and regulation has highlighted rice straw burning, particulate matter and animal waste odor as sources of particular concern. AIC has completed studies related to livestock waste (which is also a water quality issue) and has work underway on the rice straw issue.

A major AIC research project (page 3) will deal with the analysis of issues related to exotic pest control. A part of this issue is the effect of control and eradication measures on environmental quality and on perceptions of California residents. AIC will deal with these environmental concerns in the overall project on exotic pest issues.

As you can tell, we have a full agenda for the Resources and Environment Program at AIC. There are many vital concerns facing California. We cannot deal with all of them, but we can contribute information and/or analysis to some of the most important issues.



A lunch address and question and answer session with California Secretary of Agriculture Ann Veneman highlighted the annual UC Executive Seminar on Agricultural Issues held at the Sacramento Hyatt on December 11, 1997.

One hundred and thirty-six agribusiness representatives, academic researchers and agency personnel shared their expertise on the topic: Where in the World Are the Markets? After a brief welcome by AIC Director Daniel Sumner, Jerry Siebert, AIC Associate Director and conference co-chair, characterized California agriculture and described trends and issues facing the industry. He pointed out that world incomes and population are expected to grow, and markets are opening further. These global forces create challenges and opportunities for California’s dynamic agricultural industries. Following Siebert’s overview, panels of industry leaders discussed those issues in three broadly defined markets.

Secretary Veneman described how the globalization of food systems profoundly influences California agriculture. Calling attention to the interconnections between international relations and agriculture, she also noted the importance of food safety and the public perception of food safety. Veneman cautioned against erecting import barriers to protect California agriculture, because we ultimately gain much more from open markets worldwide.

ASIA. The Orient is an important and growing market for California despite the current financial crisis (see Director Sumner’s message). Japan, South Korea and Hong Kong are among the top six destinations for California agricultural exports, while China and India are expected to become especially important in coming years. (Forecasts for 2020 are that China will be the world’s largest economy.)

Among the issues requiring resolution are high Asian import tariffs and quotas and China’s seemingly arbitrary use of medfly concerns to embargo California citrus. This highlights the importance of detection and eradication of exotic pests to insure reliability of California export markets.

Considerable discussion focused on the implications of the Asian financial turmoil for California agriculture. Slower income growth and a strong dollar relative to Asian currencies translate into weaker demand for California exports. However, as of December 11, for cotton and citrus, the impact was negligible.

Panel members: Colin Carter, chair; Roger Baccigaluppi, RB International; Bill Quarles, Sunkist; and Tom Smith, CALCOT.

LATIN AMERICA. Mexico and the countries of Central and South America are diverse in cultural orientation, competitive position and economic relationship. Conspicuously, the U.S. lags behind Europe and others in trade agreements with the region. A number of these countries have been aggressively developing foreign markets and have been creating trade alliances—most notably MERCOSUR.

Sanitary and phytosanitary barriers are a sensitive issue for the two-way fresh fruit and vegetable trade with Chile and other countries of Latin America. Systems inspection agreements, such as the Oriental Fruit Moth Agreement between Mexico and the U.S. covering export of California fruit to Mexico, could serve as important models for future SPS agreements. A systems inspection approach, however, requires continuous attention to details.

Panel members: Roberta Cook, chair; James Christie, Bryant Christie Inc.; Ron Schuler, California Canning Peach Association; and Cher Watte, California Department of Food and Agriculture.

US, CANADA AND EUROPE. The U.S. domestic market is the largest market for California farm production, Canada is our number two export market and the European Union remains among the top six export destinations. The domestic market is complex and changing. Consumers remain interested in value-added, time saving products and are increasingly focused on food safety. The source of the food matters less than its perceived safety. Panelists recommended seeking market niches for specific products rather than attempting to market globally.

Keys to market growth will be found through (1) market research, (2) strategic alliances with competitors in other countries and (3) consumer education. This panel also expressed frustration with market access and with export subsidies by foreign competitors.

Panel Members: Kirby Moulton, chair; Jane Anderson, Anderson & Associates; Dennis Balint, Walnut Marketing Board; Scott Horsfall, Kiwi Commission; and Jim Tillison, Alliance of Western Milk Producers.

In wrapping up the conference, AIC Director Daniel Sumner repeated the theme heard from those present—the future will be shaped by market access—and that access will be affected by sanitary and phytosanitary standards. He urged attention to trade negotiations as the one viable way to pursue market opening.



The internet is here to stay. We at AIC, like others involved in California agriculture, are considering how to make more effective use of our communication opportunities through the net. To tailor our use of technology to the needs of those we serve, AIC needs to know more about the technology, experience and expectations of our clients. In the coming weeks you will receive a short questionnaire from AIC asking what information technology you use, what you use it for, and what services you would want an organization like AIC to provide through the internet. We will use the results of the survey in planning improvements in our internet service. This information also will be of interest to others and will summarize the survey results in an upcoming AIC Issues Brief.Thank you in advance for your participation in the survey.



AIC Director Daniel A. Sumner was elected Chairman of the Board of Directors of the International Agricultural Trade Research Consortium (IATRC) at its annual meeting in December.

The IATRC is a diverse group of academic, government and industry economists who conduct research, policy analysis and public outreach related to trade in agriculture. Formed in 1981, IATRC now has a diverse and distinguished membership from more than a dozen countries.

Sumner was re-elected to serve a two-year term on the Board and will lead the group through its meetings on Food Security (June 1998) and Regional Trade Agreements (December 1998). He will also provide guidance for the June 1999 meeting on the role of China in the agricultural trading system.


International Trade and California Agriculture

AIC Issues Brief

No. 3, October 1997

International Trade and California Agriculture

Colin A. Carter and Daniel A. Sumner*

International trade, long important to California agriculture, is becoming increasingly central to the state’s agricultural economy. There are crucial opportunities and challenges for the state’s farm-related industries in world markets. The current debate over a “fast track” for new trade agreements highlights some of the important policy issues. Meanwhile, major forces are shaping international markets and the future of California agricultural trade. (See box for global trends.)

One quarter of the more than 250 agricultural commodities produced in this state are exported. Six of California’s top 10 commodities in terms of value of production also rank in the state’s top 10 exports. As a result, California not only leads the US in farm production, but also is the nation’s largest exporter of agricultural products. California exports more food and fiber than most countries, including such major exporters as Australia and Canada (1995 data).


California’s exports, including bulk commodities as well as consumer-ready foods, reflect the highly diversified nature of its agriculture. Table 1 lists the value of important export commodities and the 1992-95 growth rate in exports. Of the commodities listed, the largest rates of export growth were experienced by dairy (22.1%), grapes (10.4%) and almonds (9.6%).

All the commodities listed have a long history of exporting, but the nature of those exports differs. Most California cotton is exported—mainly in the form of raw cotton that is milled and further processed overseas, especially in Asia. The almond industry also ships the majority of its output to foreign markets, especially to Europe.

For other products, the domestic market remains larger than exports. California oranges are sold fresh to Asia and Canada, but the largest market is in the US. Grapes are sold fresh, as raisins, and as grape juice and wine. Exports in all these forms have been increasing, but the domestic market remains larger.

California’s Main Agricultural Exports

1995 export value
($ million)
1992-95 annual
growth rate
Beef 993 0.4%
Cotton 780 2.0%
Almonds 799 9.6%
Grapes 674 10.4%
Oranges 335 -0.9%
Dairy 236 22.1%
Total (1-6) $3,817 4.4%
California Total $11,506 4.5%
Source: California Agricultural Resource Directory, CDFA, 1995.
a) CDFA value for almonds was $488,439 and was considered to be inaccurate. More than 99 percent of U.S. almonds are grown in California. The almond value used was obtained from the USDA’s FATUS.
b) Grapes includes table grapes, wine, and raisins.
c) The California total uses the USDA’s FATUS for the almond data and excludes fish and timber.
d) The choice of the time period for the annual growth rate was dictated by the 1992 change in the way state export statistics were reported.

As measured by farm sales, the dairy industry is the largest single agricultural industry in California. Farm value of milk was $3.1 billion in 1995 and the processed value, including fresh milk, is several times larger. Therefore, even though less than 8 percent of dairy output is exported, the total value of exports was well over $200 million in 1995. Dairy exports have been aided by the US Dairy Export Incentive Program (DEIP), which is being curtailed as a result of the Uruguay Round Trade Agreement.

Beef is often listed among the top exports from California agriculture and the beef industry, including pasture-based and feedlot operations, remains a major part of agriculture in the state. However, the way export data are collected makes it difficult to determine whether the meat products originated from California farms or were simply processed and shipped from here. Thus, both beef and pork export figures attributed to California seem implausibly high. For beef, the 1995 data indicate exports of almost $1 billion. (See Data Issues section at end of Brief.)


California tends to specialize in commodities that are usually sold to high income countries. The top six destinations, shown in Figure 1, are Japan, Canada, European Union (EU), South Korea, Hong Kong, and Mexico. (Unofficial trade sources indicate that somewhere between 10 to 60 percent of agricultural exports to Hong Kong may be re-exported to mainland China. If accurate data were available, China might well replace Hong Kong as one of the top six California markets.)

In order to highlight some of the trade issues that California faces, market developments in important receiving nations are briefly discussed below.


Japan has a highly protected market in some important commodities, but is also the world’s largest importer of agricultural products. Japan is California’s largest export market for agricultural products, with beef, cotton, and oranges ranking among the top commodities. The US accounts for roughly one-third of Japan’s agricultural imports and about 20 percent of that amount originates in California.

Rice is the focus of Japanese agricultural policy and the stated goals are to enhance food security and raise farm incomes. In the recent Uruguay Round Trade Agreement, however, Japan pledged to gradually increase the import share of its domestic rice consumption from 4 to 8 percent over six years. In 1996, Japan imported about 500,000 tons, or about 5% of domestic use. Of this total, about half came from California. In addition, tariffs are being significantly lowered for beef, oranges, grapefruit, certain dairy products, peaches, wine and vegetable oils.


The implementation of the Canada-United States Free Trade Agreement (CUSTA) in 1989 followed by NAFTA in 1994, has led to expanded agricultural trade between the two nations. Between 1989 and 1995, US exports to Canada grew about 60%, from $3.6 billion to $5.74 billion, while imports from Canada increased about 90%, from $2.9 billion to $5.56 billion. Fruits and vegetables account for more than one-third of Canada’s agricultural imports from the US and thus California plays an important role in this north-south trade.

Trade disputes seem to be a byproduct of increased farm trade on the North American continent. A continual and contentious disagreement has focused on increased Canadian exports of wheat and barley to the United States, some of which makes its way into California. In 1997, with wheat imports rising again, there are renewed US complaints, many focused on the Canadian Wheat Board.

In 1995, the United States complained formally about Canada’s high tariffs on dairy, poultry, and egg products. The US argued that these tariffs, which replace import quotas as a part of the Uruguay Round trade agreement, conflict with Canada’s NAFTA commitments. In 1996, a NAFTA dispute settlement panel unanimously supported Canada. (But, this result did not satisfy most US dairy industry advocates.)


The wealthy nations of Western Europe have been a traditional market for US agricultural exports. Although high trade barriers and other rules limit its imports of grains, meat and many other products, the EU remains a key destination for US and California exports. In the case of California, the EU is a major buyer of almonds and other nuts, as well as wine and raisins.

California agriculture is also affected by EU export subsidies. These policies depress the world market prices for many items including beef and dairy products.


South Korea imports significant amounts of beef, cotton, and hides from California. South Korea is also a growing market for horticultural products.

Although the overall economy continues to grow rapidly, Korean agriculture is under serious economic pressure. Under the Uruguay Round Agreement, South Korea has committed to trade liberalization. Like Japan, it agreed to import a small but growing share of its domestic rice consumption. (In exchange for limits on its rice liberalization requirements, South Korea agreed to substantially lower citrus and other fruit and nut tariffs, and substantially open beef markets.) Most observers agree that South Korean imports of rice will likely exceed their minimum commitment and imports of California rice seem likely in the near future.


Hong Kong’s population is only 6.3 million, compared with China’s 1.2 billion. However, Hong Kong’s GDP is equivalent to 21 percent of China’s and its income per head, nearly $24,000, is higher than in most Western countries. Hong Kong is highly dependent on the rest of the world for food.

The California farmer plays an important role in supplying this market and Hong Kong is a rapidly growing market for California’s agricultural commodities. There are no import tariffs on food. Non-tariff barriers, such as phytosanitary or plant quarantine regulations, are almost nonexistent.

On July 1, 1997, China regained sovereignty over Hong Kong. China pledged, however, that Hong Kong will retain its status of a free port, and that Hong Kong’s free trade structure will remain in effect.

China was an original member of General Agreements on Tariffs and Trade (GATT), but withdrew in 1949, and has been trying to rejoin since 1986. Entry into the World Trade Organization (WTO), which now enforces GATT, would mean better and increased food imports. However, the US has maintained that to enter the WTO, China must pledge to comply with basic international standards of trade.

Currently, China bans the importation of most fruits for consumption in China. (Table grapes recently became one exception to this rule.) However, fruit imports are permitted if the products are subsequently re-exported after further processing. This system is open to abuse and some produce likely remains in China.

China has the long-term potential to export high-quality food to Hong Kong, Japan or Korea. The hurdles are lack of incentives and inadequate infrastructure. Hong Kong entrepreneurs may now produce higher quality food products in China for sale in Hong Kong and other markets. This could affect California’s competitiveness in the Hong Kong market and perhaps elsewhere.


Mexican agricultural trade is highly dependent on its two NAFTA partners. Under NAFTA, US and Mexican agricultural tariffs and non-tariff barriers will be phased out over time periods up to 15 years.

However, it remains difficult to assess the impact of NAFTA on Mexico or on agricultural trade. Beginning with the devaluation of the peso in late 1994 and early 1995, the Mexican economy experienced a two-year economic crisis that halted the expansion of trade and the economic growth that was expected to result from the January 1994 implementation of NAFTA. The peso went from 3.4 per dollar in 1994 to 7.9 per dollar in 1996. Inflation in Mexico went from single digits in the early 1990s to over 50 percent in 1995. This crisis had a huge impact on Mexico’s trade in agricultural products. Imports dropped dramatically due to the declining real incomes in Mexico. At the same time, Mexican exports of agricultural products benefited from the peso devaluation. Mexico’s key exports are tomatoes, orange juice, coffee, fruits, cattle, beer, and grapes.

In 1996, the US partially opened its market to Mexican avocados for the first time in 82 years. Prior to this ruling, phytosanitary rules banned unprocessed Mexican avocado imports and provided protection to California growers. The US decision to import avocados into selected markets indicates a US commitment to rules-based trade which will probably help in alleviating US-Mexican trade tensions over peaches, nectarines and cherries.

Unlike Florida, many of the labor-intensive crops grown in California do not compete directly with Mexican produce. In the case of fresh tomatoes, for example, the major market periods of Mexican and Californian tomatoes do not overlap. Still, with lower labor costs and improving conditions for infrastructure, management and technology, Mexico is likely to be a formidable competitor in the future. Of course, as the Mexican economy improves, Mexico will also become an even more important export destination.


For the foreseeable future, growth in trade of agricultural products is expected to be most vigorous in the Pacific Rim. As a major food exporter, California is well situated to participate in this growing market. California agriculture is highly diversified and produces a range of high-valued food products destined for sale in relatively high income countries. Thus California is likely to experience continued growth in profitable agricultural exports.



  • First, income growth, especially in the Pacific Rim, is driving increased demand for food and fiber. In poor countries, income growth results in more food purchased and improved diet quality. In middle income countries, income growth encourages a shift to fresher produce, more meat and poultry and higher quality products in general. In the strong economies of East Asia, agricultural imports have grown dramatically during the 1990s.
  • Second, international agreements and unilateral actions are gradually opening more foreign markets to California exports. Improved market access is occurring for many products, but this phenomenon is not universal and is certainly not complete. The North American Free Trade Agreement (NAFTA), and the Uruguay Round Trade Agreement, are already having significant impacts on California agriculture.
  • Third, US import barriers are also falling, which allows foreign products better access to US markets. This means domestic competition facing California products is stronger.
  • Fourth, technical trade barriers based on animal and plant health, food safety and related concerns must now be based on scientific evidence that satisfies international review. Barriers are not required to be standardized or harmonized, but they are subject to international challenge in the World Trade Organization, or before bilateral dispute resolution committees.
  • Fifth, investments by multinational firms, joint ventures, and trade in highly processed products or ingredients are changing the very meaning and substance of international agricultural trade. As California firms invest overseas and foreign firms invest in and source raw materials from California, we must broaden our concept of international commerce beyond the traditional exchange of commodities across national boundaries.


Information on international trade of agricultural commodities and products is reported for the US as a whole by the USDA in a series of publications known as Foreign Agricultural Trade of the United States (FATUS). However, consistent data on the export value of agricultural products by state of production are simply not available and may be approximated only with varying degrees of confidence. The Agricultural Issues Center and the California Department of Food and Agriculture are initiating a study to assess the uses of and improve the accuracy of state agricultural trade statistics.

This Issues Brief presents export figures for 1995 based upon information from the California Department of Food and Agriculture, FATUS, and industry sources. Similar information for 1996 is not available. The major points we make in this Brief are unaffected by the approximate nature of the trade data.

*Carter is a professor in the Department of Agricultural and Resource Economics at the University of California, Davis, and an Associate Director of the Agricultural Issues Center. Sumner is the Frank H. Buck, Jr., Professor in the Department of Agricultural and Resource Economics at UC Davis, and the Director of the Center. The authors thank Ray Coppock of AIC for editing.

AIC Quarterly: Volume 11, No. 3, 1997


VOLUME 11. NO. 3. 1997


Several articles in this UC/AIC Quarterly highlight the importance of international trade and global relationships to agriculture in California. This issue is once again in the news as the US Congress debates the President’s negotiating authority for new trade agreements. AIC has contributed to the dialog over trade policy in the past and we will continue to provide analyses of these issues.

Among the most dramatic economic trends in recent years has been the growth of the Asian market for agricultural imports. Not only has the market grown in such places as Japan, South Korea, Taiwan and Hong Kong, but markets in other Asian countries are now poised to expand rapidly over the next decade or so.

While this AIC Quarterly is being finalized and distributed I am getting a first-hand look at one of the most important and dynamic economies in Asia. During the month of October, Hyunok Lee, UC Davis agricultural economist, and I will be in China, teaching graduate courses in agricultural policy analysis and gathering information and contacts for future research. We will then proceed to South Korea for one week to gather data related to ongoing research on Korean markets and policy.

The Agricultural Issues Center will continue to deal with many topics of interest to California agriculture. None are more important than improved understanding of international markets and related policies.


Harold O. Carter, recently retired founding director of the Center, has been given the 1997 Award of Distinction, the highest recognition granted by the UC Davis College of Agricultural and Environmental Sciences to those whose contributions have advanced the mission and enhanced the image of the College. He is one of 11 recipients from industry, agriculture and research institutions, including UC.

The awards were presented October 17, during the College’s annual Fall celebration and award ceremony. Carter, now professor emeritus in the UCD Department of Agricultural and Resource Economics, was honored for, among other achievements, a landmark study of world hunger and food supply, contributions to economic programs in Egypt, and development of the Agricultural Issues Center as “a forum where crucial trends and policy issues affecting agriculture and natural resources in California and the West are analyzed.”



As indicated in the last AIC Quarterly, the Center has created program areas, each led by an Associate Director. The background and expertise of the fifth new AIC Associate Director is described below.

Jerry Siebert
Agribusiness Issues

Jerry Siebert is an economist in the Department of Agricultural and Resource Economics, University of California, Berkeley. Prior to this assignment, he was Director of U.C. Cooperative Extension. In addition to his academic experience, he has held positions in both business and government. In the latter assignments, he was special assistant to four U.S. Secretaries of Agriculture. He also has a farming background on a family farm in Madera, California.

His work centers on research and education involving the impacts on California agriculture of changes in public policies affecting production and marketing of California agricultural commodities. In particular, he analyzes the use of market mechanisms to evaluate the potential economic effects of changes in public policy. His current focus is the role of technology in California agriculture and changes needed in industry and research institutions to facilitate the development and application of agricultural biotechnology. He is also an active participant in a Russian project to facilitate the transfer of technology in a market economy.

In addition to his work at the University of California, he is an “ex-officio” member of the California State Consolidated Farm Services Committee, a public member on the California Walnut Commission and chairman of the Walnut Marketing Board, president of the San Francisco Farmers Club, and a member of the Board of Directors of the International Agribusiness Management Association.




In each of the next issues, the AIC Quarterly will introduce the new AIC program areas. Interactions between California agriculture and the larger society, particularly the urban populations and communities of the state, are the focus of this AIC program. Up to now, we have concentrated largely on the impacts of rapid urban growth on farmland—emphasizing farmland preservation and other land use policies as they are established and carried out by California’s state and local governments. Looking ahead, we would like to stretch the boundaries of this program area to include other types of interactions critical to the future health of California agriculture. We are looking for challenging issues that call for new research or new syntheses of existing data and knowledge, that have state and local public policy dimensions, and that can generate useful educational outcomes in publications, conferences and other forms. Readers of the AIC Quarterly with ideas along these lines are invited to contact me. (Phone: 916-752-0979. E-mail:

What have we done so far, and what are the projects in the pipeline or planned for the near future?

The origins of this program go back to two projects carried out by AIC in the late 1980s, a study of the Williamson Act commissioned by state government and the Central Valley Confluence of Change project. The Williamson Act study had a positive although unanticipated effect on policy when, late in the 1993 deliberations on the state budget, the subvention to local governments for property tax losses was doubled and the formula for allocating the payments was revised to pay less for parcels close to cities—both recommendations of the 1989 study. The two-year Confluence of Change project culminated in two large conferences in Sacramento and Fresno in 1990, produced several reports and videos, and brought together more than 60 UC researchers in a comprehensive review of the implications of population growth on the Central Valley’s agricultural and other resources, residents, and local governments. Much of my outreach work as a Cooperative Extension specialist has followed in the footsteps of that 1989-90 project.

More recently, AIC held two conferences on farm-urban “edge” issues. They were (1) Farmers and Neighbors (October, 1995) that primarily examined pesticide application controversies, and (2) California’s Future: Maintaining Viable Agriculture at the Urban Edge (December, 1996) that covered a large set of edge concerns. The published proceedings of both conferences are available from the Center, as is the widely-used Farmers and Neighbors video.

An ongoing feature of our program area is the research report series on California Farmland and Open Space Policy. Three reports in the series have been published so far: studies of (1) preservation programs in four North Bay counties, (2) farmland provisions in county general plans in the Central Valley, and (3) municipal density patterns and policies in the Central Valley as related to farmland protection. Currently under preparation are two candidate reports for the series—a study of the effects of Measure A (restricting new urban growth to cities) in Solano County and a comparison of farmland protection policies and their political roots in seven Central Valley counties.

Scheduled for publication early next year is a book-length collection of articles, California Farmland and Urban Pressures: Statewide and Regional Perspectives,that has been peer-reviewed. The approximately ten pieces in this collection include statewide studies of population and farmland trends, dimensions of the edge problem, state policy, California agricultural history, and the experience of local land trusts. Also included are case studies of farmland preservation problems and programs in Marin, Napa and Ventura counties and the San Joaquin and Sacramento valleys.

As to possible future activities, we are considering a project on generational change in California farm families that would integrate research from several different disciplines—agricultural economics, sociology, anthropology, and law. The issue has implications for agricultural industry and farmland preservation as well as individual families, since shifts from one generation to the next in the ownership and management of farms often provide the impetus for selling farmland for development purposes. I welcome comments about this possible project.




International trade has long been important to California agriculture and that importance is growing. Recent domestic and international policy and market developments have created both new opportunities and new challenges for California agriculture. AIC Issues Brief Number Three documents the importance of trade to California agriculture and raises a number of trade issues facing the industry. The AIC program related to international trade cannot deal with all of the topics raised in the Brief, but we have plans to research some of the issues identified.

A substantial focus of the AIC’s upcoming international efforts will deal with the Pacific Rim. For instance, we will be looking at the growing agricultural markets of Korea and Japan and investigating how trade policy changes in those countries will affect demand for California’s imports. We are also studying the growing potential of competition from mainland China crowding out California exports to Asia. We will study factors affecting trade in high-valued processed food versus trade in bulk commodities.

The international trade program at the Center is also devoting effort toward better understanding of state trading enterprises (STEs). These government organizations established to monopolize foreign trade play an important role in global agricultural trade. STEs are expected to come under increased scrutiny under the new World Trade Organization. AIC’s work on STEs will investigate their role in Australia, Canada, and China. We will investigate both domestic and international market impacts.

Finally, applied research must begin with reliable data and trade statistics, which are notably problematic, especially at the state level. A brief article on page 5 mentions a new project initiated by the AIC and designed to improve the quality of published data on state agricultural exports. This work has a very practical objective of allowing states to more accurately gauge the value and destination of exports. It will also improve the AIC’s program on trade by developing a set of state-level trade data for California.



The AIC will co-sponsor an Executive Seminar on Agribusiness Issues at the Sacramento Hyatt on December 11, 1997. The theme of the seminar will be: “Where in the World are the Markets for California Agriculture?” Registration for the seminar will be $110. To receive registration materials, call AIC at 916-752-2320. Registration is limited to 150 participants.



With international trade increasingly important to California agriculture, AIC Issues Brief Number Three examines the role of international trade in the economic progress of California agriculture.

California is the largest agricultural exporter in the U.S. Exports are crucial to the state farm economy—one-fourth of all agricultural commodities produced here are shipped abroad, a volume of trade greater than that of such major agricultural nations as Australia and Canada. In the Pacific Rim, particularly, international market trends will be a crucial factor in the future of California agriculture.

Meanwhile, the world’s food and farm product markets are being re-shaped by income growth in third-world nations, trends toward reduced trade barriers, and globalized economic enterprises. All these create opportunities and challenges for California’s agricultural industry.

The new Center publication is International Trade and California Agriculture, AIC Issues Brief Number Three, by Colin A. Carter and Daniel A. Sumner. It integrates statistics from several sources to identify California’s most important agricultural exports, their relation to domestic markets, and recent growth rates. The authors then analyze trends in the most important foreign markets for California farm products: Japan, Canada, the European Union, South Korea, Hong Kong and China, and Mexico.

Carter and Sumner are professors in the UCD Department of Agricultural and Resouce Economics. Carter is an associate director of the Center, and Sumner is director.

Those on the mailing list for this newsletter will receive a copy of International Trade and California Agriculture. Additional copies are available from the Center. Also available are the first two in the AIC Issues Brief series: Economic Impacts of Irrigation Water Cuts in the Sacramento Valley and A Measure of Subsidy to California Agriculture.



In recent years California state agricultural export statistics have been reported based upon several different methodologies. At the request of CDFA’s Secretary Ann Veneman, the Center is initiating a new project to investigate, review and develop a consistent methodology and approach. The research will:

  1. Survey appropriate uses of state export statistics by government and the private sector.
  2. Review current and potential ways of reporting export statistics by community and location.
  3. Develop the most accurate and appropriate measurement for values of the state agricultural exports.

With the participation of agriculture departments in other states, the project will be conducted jointly with research counterparts at several land grant universities. Thus, while the analysis here focuses on California, the project will be national in scope.

We anticipate a preliminary set of results and a proposed methodology by mid-1998. We also hope to produce a prototype set of California export statistics by the summer of 1998.




In our last issue it was announced that Hal and Carol Sconyers had named the Harold O. Carter Endowment as one beneficiary of a charitable trust they established to be shared equally by four UC Davis campus programs. Their gift to the Endowment is valued at $147,500 and is a tremendous kick-off for our fund-raising effort.

Co-chairs and steering committee members are being recruited for the fund-raising campaign and the candidates are demonstrating 100% willingness to serve. Plans to honor Hal Carter and officially launch our campaign are in their early stages.

More good news on the fund-raising front: the Dean’s Office was contacted earlier this summer by a representative of the State Attorney General’s office, asking whether the college has visible programs that provide maximum benefit to agriculture in California. The AG’s office has received money from a settlement to be awarded to programs benefiting agriculture. It was suggested to them that support of the Center’s programs through the Harold O. Carter Endowment would have substantial long range benefits for California agriculture and California residents. All indications are that $20,000 is on the way!

Economic Impacts of Irrigation Water Cuts in the Sacramento Valley

AIC Issues Brief

No. 1, June 1997

Economic Impacts of Irrigation Water Cuts
in the Sacramento Valley

Hyunok Lee
Daniel A. Sumner
Richard E. Howitt*

In the Sacramento Valley, irrigation water is vital to agriculture and agriculture is vital to local economies. Our recent research investigated these relationships by asking this question: If a substantial part of the Valley’s irrigation supply became unavailable, what would be the economic effects on farmers and on communities—and where would the loss hit hardest?

Specifically, the research analyzed the impacts of a hypothetical permanent 25% cut in surface irrigation water supply to the Sacramento Valley (Tehama, Glenn, Butte, Colusa, Yolo, Yuba, Sacramento and Sutter counties; see Figure 1). All of those counties have large agricultural industries; agriculture leads the local economy in all except Yolo and Sacramento. Nearly all of this farm-related economic activity depends on irrigation water.

The reduction of 25% was chosen for the study because that amount would be large enough to have potentially noticeable effects while being feasible and within the range of experience in California. The research investigated economic impacts of a 25% reduced surface water supply in four hypothetical situations—normal and drought years, with 10% additional groundwater pumping and with no additional groundwater use.

To highlight the main results, we focus here on only one of the scenarios: a normal non-drought year (based on data from the average of 1985-88) without supplemental groundwater. Under these circumstances, the study results indicate revenue losses for most crops throughout the Sacramento Valley totaling $32 million. The effects are not uniform.  Indeed, 80% of those losses would take place in counties that depend most heavily on agriculture, and particularly on rice.

A reduction in one input alters a production system in complex ways. Irrigation is vital, yet there are measures that growers take to mitigate losses. They adjust to water shortages by (1) using alternative technologies or otherwise reducing water use per acre, (2) switching to crops that use less water, or (3) reducing acreage that is irrigated. This research investigated such adjustments and traced the resulting economic impacts at the county level.

Figure 1: The Study Area

map of study area

The Study Area

Demographically and economically, the eight counties in the study vary greatly—a fact that strongly influences likely effects of a water shortage. Sacramento County, largely urbanized, has two-thirds of the entire region’s population. Butte and Yolo counties also have proportionately large urban populations. The other counties are smaller in population and tend to be more dependent on agriculture. Colusa and Glenn counties have the largest agricultural sectors in relation to their overall economies—54% and 46%. Other counties in order of importance of agriculture to the local economy are Sutter (17%), Tehama (13%), Yuba (13%), Yolo (8%), Butte (6%) and Sacramento (1%).

The proportion of agricultural jobs compared to total employment shows a similar pattern, ranging from about one-third in Colusa County to only 1% in Sacramento County.

In total value of crop and livestock production, the lineup of counties in the study area appears somewhat different. Yolo County heads the list, followed closely by Sutter and Sacramento counties. The rest, in order of farm value produced, are Butte, Glenn, Colusa, Yuba and Tehama counties.

Fruits and nuts account for the largest share of agricultural revenue in the Sacramento Valley, contributing substantially in all of the study counties except Colusa and Sutter. Vegetable crops, especially tomatoes, provide the next largest source of revenue. Rice has a special place in the study, both because it is particularly important to the economy in most counties (Butte, Colusa, Glenn, Sutter, and Yuba) and because the crop is particularly vulnerable to water shortage.

The eight counties also differ in sources of irrigation water supply. The primary source for the region as a whole is groundwater, followed closely by local surface water supplies. Other important sources in certain areas are the federal Central Valley Project and the State Water Project.

The Economic Model

The analysis considered both (1) direct production and economic effects of reduced water supply on agriculture (crop acreage, water use, irrigation system costs and on-farm revenue) and (2) indirect effects of the agricultural adjustments on local economies.

Certain characteristics of the model are worth highlighting:

  • The model allows water transfers within seven sub-regions in the Sacramento Valley, but allows no transfer across sub-region boundaries. These sub-regions are relatively homogeneous, but may include several water districts and parts of more than one county. In reality, water is usually not fully transferable within a local region and may be partly transferable across regional boundaries. Our two assumptions on transferability are offsetting, but, we think the economic results may be underestimated slightly due to these assumptions.
  • The analysis allows for the fact that farmers can adjust to a water shortage by increasing efficiency of their irrigation systems—but only at a significant cost. Irrigation systems in the Sacramento Valley have been steadily improved in recent years, and the model assumes that additional gains are possible and would be made if water were even more scarce.
  • Output and input prices are treated as constants. Possible price effects of changes in crop output resulting from the 25% cut in water supply are not included (they are expected to be quite small). Even for japonica rice, for which the study area produces much of the national output, projected effects on the world and local rice prices are expected to be small.

To determine agricultural effects of the 25% cut in the surface water available for irrigation, the model first projected crop supply and input use responses, including changes in crop acreage, per-acre water use, irrigation system costs and resulting water costs. From this, changes in farm revenue were calculated.

Table 1: Farm Revenue Changes from a 25% Surface Water Reduction

Farm Revenue Changes (1,000 dollars)
Commodity Tehama Glenn Butte Sutter Colusa Yuba Yolo Sacramento Total
Pasture -299 -337 -418 -483 -40 -139 -249 -349 -2,314
Alfalfa Hay 46 -86 -8 -14 -124 -4 -243 105 -328
Sugarbeets -5 -105 -13 -60 -171 -3 -158 -26 -541
Field Crops -155 -348 -102 -1,000 -934 -41 -899 -152 -3,631
Rice -26 -4,132 -2,575 -2,744 -6,584 -1,405 -929 -211 -18,606
Vegetables -1 a -1 -72 -78 a -56 -3 -211
Tomatoes a a a -102 -187 a -366 7 -648
Fruits, Nuts 59 -27 -140 -70 -27 -35 -25 11 -254
Small Grains -331 -362 -599 -699 -574 -156 -1,345 -67 -4,133
Subtropical 2 5 -4 a a -3 a -3 -3
Total -710 -5,392 -3,860 -5,244 -8,719 -1,786 -4,270 -688 -30,669


(a.) Not produced in this country.
Reduction in surface water is from a normal rainfall year, with no additional groundwater pumping.
Field Crops include field corn, dry beans, oilseeds and miscellaneous hays.
Small Grains include wheat, barley, etc.
Subtropical orchard crops in these regions include olives and kiwifruit.

Farm Impacts

Estimated changes in farm revenue for selected crops in the eight study counties are shown in Table 1. Across all counties and for most crops, the study shows that reductions in agricultural revenue are expected. There is substantial variation in the amount of loss, depending on crop and location. Much of the variation across counties reflects differences in the relative importance of groundwater in the county water supply.

Rice stands out among crops. Rice takes the largest proportional cuts in per acre water use, incurs the highest irrigation system costs, and suffers the largest acreage losses. Rice tends to be particularly dependent on surface water supplies. Rice revenues are relatively important in Colusa, Glenn, Sutter, Butte and Yuba counties. In these counties, projected farm revenue loss for rice totaled $17.4 million.

Overall, as expected, our results show that crops with more return per acre and per unit of water have less reduction in acreage. Pasture has the largest acreage cuts in all counties, while vegetable and orchard crops exhibit only small changes.

Not shown in the table but documented by the research: (1) in some cases, there are shifts toward crops that provide less revenue per acre, but also use less water; (2) in extreme cases, some land is removed from production.

Impacts on County Economies

The economic impacts of irrigation water cuts on counties depend on the magnitude of farm income lost and also on the crops involved in the adjustment process. For each crop in each county, a specific economic multiplier was used, taking into account off-farm handling and processing, as well as the scale of other local economic activities. These multipliers range from 1.2 to 2.5, meaning that a $1 change in farm gate revenues results in a $1.2 to $2.5 change in the overall county economy. Of all crop categories, fruits and nuts have the highest multipliers. (The multiplier analysis applies the same approach in the AIC publication The Measure of California Agriculture by Carter and Goldman.)

As expected, county income effects are negative, but vary in magnitude (Table 2). The largest county income loss occurs in Colusa County and the smallest in Tehama County. Glenn and Sutter counties also experience large income losses.

Table 2: Income Effects of a 25% Surface Water Reduction

County Income Lost
(1000 dollars lost)
Income Lost
(% of county
Tehama 929 0.18
Glenn 7,762 2.48
Butte 6,697 0.39
Sutter 8,153 0.98
Colusa 12,589 5.35
Yuba 2,577 0.45
Yolo 6,326 0.31
Sacramento 1,195 0.01
Total 46,228 Average 0.25
Total without
45,033 Average 0.72

Rice again plays a crucial role, since the reduction in rice production alone accounts for 62% of the total income loss in the Sacramento Valley. Counties with large income losses are all associated with major rice production, except for Yolo County where losses are mostly in field crops, small grains and alfalfa.

Since counties differ in the scale of their economies, the total agricultural income loss for each county was also calculated as a percentage of that county’s total personal income. The results are also shown in Table 2.

Colusa County is the hardest hit, losing over 5% ($12.5 million) and Glenn County is next at about 2.5% of county income. These two counties have the lowest personal income levels of all Sacramento Valley counties, as well as the highest reliance on agriculture in their economies. In the other six study counties, projected losses to agriculture from the loss of irrigation water are less than 1% of county personal income.

A similar procedure was used to project the number of farm and farm-related jobs lost as a result of the cut in water supply. The results are shown in Figure 2. In the eight counties, total job losses equal 305, with about 185 from the rice industry alone.Overall, 60% of job losses in the Valley are attributable to losses in rice revenue. As with county income, Colusa County would be hardest hit in terms of jobs lost.

graph shows jobs lost by county

Results of the UC study indicate at least three general conclusions:

  • Adjustments that occur within the agricultural production system in response to reduced water supply are crucial.
  • A reduction in water supply, of course, results in relatively greater economic impacts on those counties more dependent on agriculture.
  • Those counties whose economic livelihood depends heavily on agriculture are also the poorest counties in the Sacramento Valley. Thus it appears that the counties with least economic resources would be hardest hit if the water supply is reduced.

* Dr. Hyunok Lee is a research economist in the Department of Agricultural and Resource Economics at UC Davis. Richard E. Howitt and Daniel A. Sumner are professors in the same department. Sumner is also director of the UC Agricultural Issues Center. The authors thank Ron Felthoven, David Hart and Gabriel Tiffany for research assistance; Ray Coppock for editing; and Corrin Rausenberger for layout and design. We also acknowledge helpful comments from Rich Golb, Katy Howe and Marcia Kreith, and the California Rice Research Board for financial support. For more on the model and for additional detailed results the reader is referred to a forthcoming AIC report, Economic Impacts of Reductions in Irrigation Water Availability in the Sacramento Valley by Lee, Sumner and Howitt.


AIC Quarterly: Volume 11, No. 2, 1997

Volume 11, No. 2, 1997 (html)



Volume 11. No. 2. 1997



The Agricultural Issues Center has been active these last few months completing projects and planning new work. New publications have been released, other studies are progressing to the editing stages, and some research is just now underway. Also, a few additions to the slate of AIC activities have begun.

We have initiated a new publication series, the AIC Issues Brief. As the name implies, these will be short summaries of research on topics of interest to California agriculture. Our objective is bring to a broad audience information from studies that might not otherwise be widely accessible. The first Issues Briefhas been released and the next few are on the way.

We are actively preparing for AIC participation in the Sacramento Conference of the International Association of Agricultural Economists. I am particularly excited about the plenary session on California agriculture that will include an address by California Secretary of Food and Agriculture Ann Veneman.

In the last AIC Quarterly, I introduced four new associate directors who have agreed to provide leadership to ongoing programs for AIC. In this newsletter, we provide a bit more background on each of these new associate directors and give some further information on plans for the Science and Technology Program led by Professor Julian Alston.

It gives me great pleasure to announce here that UC Berkeley Cooperative Extension Specialist Jerry Siebert has agreed to take on the added role of AIC Associate Director for Agribusiness Issues. Many of you know Jerry from his multi-faceted work with Cooperative Extension. In the next newsletter we will provide more information on Jerry’s background and his plans for the agribusiness area.

Finally, I want to express my appreciation for the job AIC Advisory Board Chair William Allewelt is doing in getting the Harold O. Carter Endowment off to such a great start. Bill Allewelt has long been a great citizen of the university community. I am sure he and his co-chairs will appreciate all the support you can provide as he broadens the Carter Endowment fund-raising efforts.


As indicated in the last AIC Quarterly, the Center has created program areas, each led by an Associate Director. The background and expertise of four new AIC Associate Directors are described below.

Julian M. Alston
Science and Technology

Julian M. Alston is a professor in the Department of Agricultural and Resource Economics of the UC Davis. He teaches graduate and undergraduate classes in microeconomic theory and the analysis of agricultural markets and policies.

Prior to beginning his current position in 1988, Alston was Chief Economist in the Department of Agriculture in Victoria, Australia, where he had been employed in various capacities since 1975. His experience in public policy analysis and advice, and in administration of a large scientific organization has shaped Alston’s research interests in the economic analysis of agricultural markets and public policies concerning agricultural incomes, prices, trade, and agricultural research and promotion. Along with many articles in professional journals, he is a co-author of two recent books:  Making Science Pay: The Economics of Agricultural R&D Policy and Science under Scarcity: Principles and Practice for Agricultural Research Evaluation and Priority Setting.

Alston was raised on the family farm in northern Victoria, Australia. He has a Bachelor’s degree in Agricultural Science from the University of Melbourne in 1974; a Master’s degree in Agricultural Economics from La Trobe University in 1978; and a PhD in Economics from North Carolina State University in 1984.

Colin A. Carter
International Trade

Colin A. Carter has been a Professor of Agricultural and Resource Economics at UC Davis for 12 years, after serving as a professor at the University of Manitoba. His research investigates problems related to agricultural policy and trade, with a focus on grain markets in the Pacific Rim. He has written extensively on state trading enterprises in grains. Carter has studied the internal grain economy in China and China’s participation in the international market. From 1986-89, Carter held a fellowship in international food systems from the Kellogg Foundation. Along with scores of professional journal articles, chapters and reports, Carter has co-authored several books, the topics of which include China’s grain markets, futures markets, and U.S. agricultural policy.

Carter was raised on a grain farm in Alberta, Canada, and received his B.S. and M.S. degrees from the University of Alberta. His PhD in Agricultural Economics is from UC Berkeley in 1980.

Alvin D. Sokolow
Rural/Urban Interactions

Alvin D. Sokolow is a Public Policy Specialist with UC Cooperative Extension, housed in the Department of Human and Community Development on the Davis campus. Formerly a Professor of Political Science at Davis for 27 years, his research and extension activities deal with issues and processes of community and state governance. He has published 72 journal articles, monographs and other reports. Current and recent work concentrates on farmland and land use policy in California, state-local public finance, and politics and policy in small communities. Sokolow has been a key participant in AIC projects since 1989, including the Williamson Act, Central Valley, and urban-agricultural edge projects. He is the editor of the Center’s series, California Farmland and Open Space Policy.

A Chicago native, Sololow’s degrees from the University of Illinois are: undergraduate in Journalism, and M.A. and PhD in Political Science. He has taught at Western Michigan University, Michigan State University, and the University of Illinois, and has been a visiting scholar at Montana State University and Miami University.

Keith Knapp
Resources and the Environment

Keith Knapp was born in Wichita, Kansas, and raised in Minnesota, Illinois and Iowa. He received a B.S. in Economics from Iowa State University in 1972. After two years of military service, his educational career resumed at Johns Hopkins University where he received a PhD from the College of Engineering in 1980, specializing in resource and environmental economics. He has been with UC Riverside since September of 1980. He is currently Professor of Resource Economics and Resource Economist in the Department of Soil and Environmental Sciences at UC Riverside.

Professor Knapp teaches four courses in resource and environmental economics at the undergraduate and graduate level. He has conducted research on irrigation management, salinity and drainage problems in the San Joaquin Valley, renewable resource management with an emphasis on groundwater, agricultural markets (grain reserves and perennial crops), and the implications of exhaustible resources for economic growth. Current research interests are generally the economics of natural resource use and environmental quality as related to irrigated agriculture with an emphasis on water management.



The AIC will co-sponsor an Executive Seminar on Agribusiness Issues at the Sacramento Hyatt on December 11, 1997. The theme of the seminar will be: “Where in the World are the Markets for California Agriculture?” Registration for the seminar will be $125. Watch for a detailed announcement and registration materials in early October.




In each of the next issues, The AIC Quarterly will introduce the new AIC program areas. New technology, resulting from private and public investments in agricultural R&D, has been the mainspring of agricultural economic development, and has driven the growth of agricultural productivity that sustains California’s competitiveness in domestic and world markets. Understanding the relationship between science and technology and agriculture, and the rural sector, has always been important.

A variety of newer policy issues relate to changes in public perceptions of, and policy related to, science and technology, evolving policies for public and private funding of agricultural R&D, changing institutional arrangements governing intellectual property, and changes in the technology of science itself, such as the development of modern biotechnology and information sciences. Emerging concerns about such issues as the relationship between agriculture and the environment, animal welfare, and food safety are bringing new challenges to agricultural science and technology policy.

The Science and Technology program in the Center is devoted to work on these issues. The current program of work includes (a) state-level analysis of the causes of growth in U.S. agricultural productivity over the post-war era, (b) analysis of the state-level variation of funding patterns of agricultural R&D at State Agricultural Experiment Stations during 1890-1990, (c) the effects of the U.S. Plant Variety Protection Act on U.S. wheat variety improvement, (d) the relationship between U.S. agricultural productivity and U.S. investments in international agricultural R&D, (e) measurement of the benefits from policy-oriented social science research, (f) the economics of biodiversity policy, and (g) international comparisons of agricultural R&D institutions and investments.



The AIC joined with the Farm Foundation and the Economic Research Service of the USDA to sponsor a study on farmers’ and managers’ responses to the 1996 FAIR Act. Warren Johnston, Professor Emeritus in the Department of Agricultural and Resource Economics, UC Davis, along with Dr. Lyle Schertz, retired from the USDA, conducted intensive round table discussions with producers and farm managers in eight regions nationally, including one in northern California. The results of this national study will be published by the Economic Research Service, USDA, and the results from the northern California round table will be featured in a forthcoming AIC Issues Brief.



The AIC is initiating a new publication series to provide results of research and analysis in a convenient, non-technical format. The AIC Issues Briefs will cover a variety of topics of interest to California agriculture. The first AIC Issues Brief is now available (see page 5) and the next three are under way. They will appear this summer and be distributed to our newsletter mailing list:

  1. Economic Impacts of Irrigation Water Cuts in the Sacramento Valley
    by Hyunok Lee, Daniel A. Sumner and Richard E. Howitt
  2. A Measure of Subsidy to California Agriculture
    by Daniel A. Sumner and David S. Hart
  3. Agricultural Trade and California Agriculture
    by Colin A. Carter
  4. Technology Innovations in California Agriculture
    by Julian M. Alston and David Zilberman



WILLIAM ALLEWELT, AIC Advisory Board Chair

At its spring meeting Dan Sumner and I proposed that the AIC Advisory Board initiate a campaign to establish a Harold O. Carter Endowment fund to help support Agricultural Issues Center programs. We suggested this as a highly appropriate and lasting tribute for Hal’s invaluable leadership as the Center’s founding Director. With the AIC Board’s encouragement, we formalized the proposal, just recently receiving Chancellor Vanderhoef’s authorization to commence fund raising.

With this, we are now recruiting friends of the Center to join us in providing leadership and direction to the fund-raising campaign. As we set out to identify prospective donors and set a campaign goal, we would very much appreciate help from readers of this newsletter.

If you can join us in this worthy effort, or know someone who might, simply inform an Advisory Board member or the Center. Your help can be vital. A successful campaign will depend on a broad base of support from everyone who has been touched by the Center’s important work.

It is most satisfying to be able to close this reporting with word that the campaign has already secured a very generous gift from Hal and Carol Sconyers. Hal is a Davis graduate and now serves on the Board of Trustees of the UC Davis Foundation. Carol is actively engaged with UC Davis affairs, most especially UC Davis Presents, an annual series of performing arts events sponsored by the campus.

Recently the Sconyers named the campus as beneficiary of a charitable trust to be shared equally by four designated programs. The College of Agricultural and Environmental Sciences is one of the four, but no specific college program was identified initially. Well, now it is. Their gift to the Harold O. Carter endowment is valued at $147,500! That’s a great start. Let’s make it grow!



With “Economic Impacts of Irrigation Water Cuts in the Sacramento Valley,” the Center initiates the AIC Issues Brief publication series.  AIC Issues Brief, Number One, by Hyunok Lee, Daniel A. Sumner and Richard E. Howitt focuses on the relationship between water, agriculture and the local economies of eight Sacramento Valley counties. Using a simulation model, the authors show that a 25 percent cutback in surface water supply for irrigation in a normal non-drought year (and without supplemental groundwater pumping) would result in substantial loss of farm revenue, jobs, and personal income in the Sacramento Valley counties most dependent upon agriculture. Moreover, the poorest counties would be hardest hit.

Our first AIC Issues Brief precedes the more extensive AIC publication which will describe the economic model and the complete results of this scenario, and three others.



On August 10-16, 1997, Sacramento hosts the triennial conference of the International Association of Agricultural Economists. The Center is well represented at these meetings with presentations by the Director and Associate Directors. The AIC is also sponsoring a display to make information on the Center more widely available.

Among the conference highlights is a plenary session on California agriculture chaired by AIC Director Dan Sumner. This session leads off with a presentation by California Department of Food and Agriculture Secretary Ann Veneman. It also features presentations by UC faculty on the economic history and breadth of California agriculture, marketing and resource issues, and agricultural policy. These faculty presentations are based on chapters from the book, California Agriculture: Issues and Challenges, edited by Jerome B. Siebert, UC Giannini Foundation, August 1997.



California’s Future: Maintaining Viable Agriculture at the Urban Edge

Who holds the keys to maintaining agriculture at the urban edge? What are the roles for legislators, genetic engineers, planners and waste management specialists? These questions, and the more specific challenge of reducing conflicts at the agricultural-urban edge, were issues that the AIC posed to a select group of experts that included farmers, developers and land use planners. The Center’s summary report on its December 1996 conference, California’s Future: Maintaining Viable Agriculture at the Urban Edge, is now available.

The report explores in detail the complementary roles of agricultural production technologies/practices and public sector policies and land use planning tools. Innovative agricultural technologies discussed include precision spraying, use of bioengineered disease-resistant crops, integrated pest management, proper manure management, and others. The public policy chapters focus on farm-city and regional cooperation, urban growth boundaries, buffer and edge design, parcel sizes and appropriate uses in agricultural areas, and fiscal policies.

For long term stability at the edge, approaches that “cry for attention,” according to contributing author Alvin Sokolow, Òinvolve state support and guidance of local land use decision-making.Ó Most important is changing the state’s fiscal rules under which local governments in California operate. California’s Future: Maintaining Viable Agriculture at the Urban Edge is available from the UC Agricultural Issues Center for $15.


Pathogens Excreted by Livestock and Transmitted to Humans through Water

Reviewing knowledge about pathogens which could be transmitted from livestock to humans, Pathogens Excreted by Livestock and Transmitted to Humans through Water is our latest joint publication with the UC Davis Animal Agricultural Research Center. It is available from the AIC for $10.00


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