California and Arizona agricultural economies are coming off one of their best seasons in a decade, and prospects are bright for another banner year.
2012 may not be a home run like 2011, but Vernon Crowder, vice president and agricultural economist for Rabobank in Fresno, Calif., is looking for continued prosperity in the agricultural sectors.
Wine grape growers in the coastal areas suffered from early frost and late rains last season. Central Valley raisin and citrus producers were challenged by late season rains in 2011.
“Overall, however, it was a good year, so a good many of the bank’s customers are embarrassed to talk about how good it was,” Crowder commented at the World Ag Expo in Tulare, Calif.
“We expect this year to be as good as well — just maybe not as good as 2011,” said the veteran ag economist. He is optimistic because ag exports remain strong, interest rates are low and the domestic economy seems to be picking up.
China’s agricultural buying is one reason California is prospering with a growing demand in China for many of its specialty crops like walnuts. The Chinese economy is slowing a bit to a 7 percent to 8 percent growth rate from the overheated 10 percent of the past years. Nevertheless, Crowder expects China to continuing purchasing what Western farmers produce.
It has been a very dry winter and Crowder joins the chorus of concerned farmers worried about this year’s irrigation water supplies. However, he does not expect farmers to curtail production from last year, just spend more money to get the water.
“The groundwater basin was replenished last year, and I expect the West Side of the San Joaquin Valley to get a 35 to 40 percent (state and federal surface) water allocation. This is certainly better than we saw during the recent bad water years,” he said.
Many producers had water allocations left over from last season and are using that water this spring to pre-irrigate fields ahead of the planting season. Many orchards and vineyards also have been irrigated this winter.
When Crowder talks about 2012 being another good year, he hastens to add that “Mother Nature is in charge.”
On specific fronts, Crowder said the dairy industry seems to be suffering the most economically right now with very low milk prices. “Prices are below the breakeven point for a fair number of dairymen,” Crowder lamented.
“I think you will see some dairymen start to cull older cows and production should slow down,” he said.
The recent dairy roller coaster rides have helped to make dairymen more focused. “California is a feed deficient state and therefore very vulnerable to the volatility of feed prices. Dairymen are making every effort they can to invest in farmland to feed their dairy animals,” he said.
Almonds give way to grapes
One of the hottest California commodities over the past decade has been almonds. This marketing year almost 2 billion pounds will be delivered to handlers with excellent prospects to profitably market every pound.
However, Crowder expects almond planting to slow down primarily because wine grapes are looking better than they have in the past decade, and growers like those on the West Side of the San Joaquin Valley are concerned about having enough water for new almond plantings on open ground.
“We are seeing older almonds coming out and the land replanted to wine grapes,” he said. Many of these plantings are by large winery conglomerates, but Crowder said wineries also are offering new vineyard contracts to growers.
Walnuts and pistachios are still hot, but he expects pistachio plantings to slow down due to the “huge amount of non-bearing acreage” now in the ground. “Yes, some people are still planting, but that has slowed down,” he added.
For the processing tomato industry, Crowder said canneries are “beating up each other” on pricing products to food manufacturers. In the meantime growers are demanding contracts to cover costs. “It is a stalemate as to what happens there in the future,” he said. California produces more than 90 percent of the processing tomatoes in the U.S. and planting is starting now.
Alfalfa acreage is up only a modest 3 percent to 4 percent this year in an overheated hay market that would suggest an acreage increase closer to 15 percent.
Crowder said “alfalfa guys were burned a few years ago” and are reluctant to jump into the hay market any deeper. “With a short water supply, it is not necessarily a good idea either to put in a lot more alfalfa,” he added.
Field crops are competing for a shrinking supply of open ground with the growing acreage of trees and vines. “Last year cotton won out over alfalfa on a lot of open ground because of strong prices. This year there will be less cotton because prices are lower. There is not much open ground left,” Crowder said.
For more than a decade, world population strategists have been predicting an impending world food shortage. It is here now, said Crowder.
“California and Arizona are in a good spot in the world food chain because we produce high value foods that people with higher incomes in the world want,” he said.
The future is not all rosy. Immigration issues like E-verify and the emerging water quality issues could have a negative impact on Western agriculture’s future.
Nevertheless, Crowder admits to being an optimist. “I think we will sort out some of these issues like water quality and move forward into a future of prosperity,” he said.