What is being termed “the worst drought since the Dust Bowl” cut deeply into production of wheat and corn and had a tremendous impact on dairies in California and elsewhere that struggled against rising feed costs.
The 2012 drought, spawning the third hottest summer on record for the contiguous United States, was among the top agricultural stories of the year.
At an agribusiness conference in Fresno, experts on more than a dozen commodities traced the interconnections of crops while giving projections for their outlooks in the year ahead.
Here’s a synopsis of each of those industry reviews presented at the 31st Annual Agribusiness Management Conference sponsored by Fresno State University’s Center for Agricultural Business, Bank of America and the California Agricultural Technology Institute at Fresno State.
• The nation saw record high corn and soybean prices and the second highest wheat values, ever, thanks to the drought, said Joel Karlin, commodity manager and market analyst with Western Milling in Goshen, Calif.
In recent months, Karlin said, the drought “has migrated from the Eastern Corn Belt to the Western Corn Belt and Plains, in the process torching much of the nation’s corn and soybean crop and now threatening U.S. winter wheat production.”
Karlin said U.S. corn and soybean yields have worsened each of the past three seasons. He said wheat fared better than corn or soybeans, and U.S. feed use of wheat will be the highest in five years as record high corn prices have encouraged use of alternatives.
• Milk production was down in California in August, partially due to hot weather but also because of high feed prices forcing rationing at dairies, said Michael Marsh, CEO of Western United Dairymen.
Average cost of production outstripped the price at which milk was sold in the second quarter of 2012 and in many other months since improvement in 2011 after the significant losses experienced in 2009.
A bright spot for the U.S. dairy industry in 2011: Exports increased significantly compared to 2010, up 12 percent for butter, 29 percent for cheese and 13 percent for powder, a trend that Marsh said spilled into 2012.
Marsh said some analysts are “forecasting stable to slightly higher prices” in 2013.
• In 2011, for the first time ever, the value of the California almond crop surpassed the state's iconic grape industry to move into second place, behind dairy.
And the U.S. Department of Agriculture has forecast the 2012 crop at a record 2.1 billion pounds.
Sue Olson, associate director for statistics and compliance with The Almond Board of California, said global demand remains high for 2011-12, marking a third year in which California shipped more than 1 billion pounds of nuts to export destination. At the same time, domestic shipments were up 11.6 percent over the prior year.
The industry continues to capitalize on health claims that characterize the almond as a “nutrient power house.”
Beef, navel oranges
• Past drought also took its toll on the state’s beef industry.
Billy Gatlin, executive vice president of the California Cattlemen’s Association, said four years of severe drought through much of the state has resulted in significant reduction in the size of the state’s cow herd, but above average precipitation fell during the 2011 winter grazing season.
So far, 2012 has proven to be a dry year, he said, with 88 percent of the state experiencing some level of drought. For 2013, Gatlin said, if demand can run steady with 2012, prices will likely reach new record highs as supplies are forecasted to decline for the year.
Tighter global beef supplies and rising demand have supporter higher global meat prices over the past eight years. U.S. beef export prices moved sharply higher – up 43 percent from January 2010 to May 2012.
• The navel orange industry had a positive year from a revenue and profit per acre perspective in 2011-2012.
But the Mandarin industry did suffer as a result of very cold weather last December followed by a cold snap in January, said Joel Nelsen, president and CEO of California Citrus Mutual in Exeter.
As for the 2012-2013 crop, citrus producers remain bullish despite a slightly higher crop, Nelsen said, adding that fruit size is good, fruit shape positive and heat units this past summer likely to produce “plenty of sweetness.”
Nelsen said a new flavor maturity standard has been put in place, which he believes will provide “a better tasting piece of fruit at the outset of the season and will result in more consistent flavor thought the first quarter of the season.”
In 2011-2012, the harvest got off to a slow start with small fruit and late maturity. Dry, cold weather in December brought out full color and strengthened rinds.
• Cotton prices became less attractive, especially when compared to competing crops, in all productive regions, said Gary M. Adams, vice president for economics and policy analysis with the National Cotton Council.
He said that in developing economies, “demand for cotton textiles and apparel will be very sensitive to relative prices of cotton and polyester.”
The 2011-11 Pima crop was “an unprecedented one,” said Ernie Schroeder Jr., president and CEO of Jess Smith and Sons, “with prices of over $3 a pound reached in February 2011.
The higher prices attracted more acres to Pima following a decade low of 141,400 acres for the 2009-2010 crop season. For 20120-2011, it was 204,200 acres and for 2011-20012 it was 307,400.
As prices dropped, there has been a drop in planted acres to 239,000 for 2012-2013. Competing crops, such as beans, corn and wheat are at historically high prices and expected to attract Pima acres next year.
Meanwhile, production declines in Egypt and China will push demand to the United States.
• The pistachio crop for 2012 will be a record for the U.S. pistachio industry at about 550 million pounds.
The crop size will hit 1 billion pounds between 2018 and 2020, said Richard Matoian, executive director of American Pistachio Growers in Fresno.
The industry sees good opportunities for exports to India with the lowering of tariffs there.
The U.S. and Iran continue to dominate the world’s production of pistachios. In 2008, the U.S. surpassed Iran as the No. 1 pistachio producer and has remained in that position. The U.S. implemented a ban on all Iranian products entering the U.S. effective September 2010.
• Bearing acreage for raisins continues to drop by 2 percent to 3 percent per year despite stronger returns for raisin grapes and now stands at 205,000 acres.
The 2012 raisin grape supply is estimated at 1.9 million tons, said Glen Goto, CEO of the Raisin Bargaining Association in Fresno. That’s 14 percent below the previous 10-year average.
The 2012 Thompson Seedless green price was $325 per ton, the highest ever paid for the grapes to be crushed.
The 2011 field price of $1,700 per ton was paid with no reserves held.
Skies were clear and temperatures warm during the months of September and October 2012, compared to two previous years of late maturing grapes and weather related issues.
• The crop value of California table grapes has continued to increase in recent years and has exceeded $1 billion each year since 2004, said Jeff Klitz, research analyst with the California Table Grape Commission in Fresno.
About 40 percent of the California table grape crop is exported to more than 60 countries, he said.
• A handful of large players continue to dominate wine-making in California. By volume, Gallo, The Wine Group and Constellation make up well over 50 percent of the market share, said Stan Xavier, president and CEO of Correia-Xavier.
Xavier pointed out an appearance by Joseph Gallo, CEO of the giant company, at the San Joaquin Valley Wine growers Association in November 2011 sent a message his company was expanding their production capacity and asking growers to contact Gallo regarding long term purchase contracts.
“It is clear we have seen the bottom of another cycle in the wine business,” Xavier said, “and we are now starting another leg up the expansion of that cycle.
Xavier said a “cheap is chic” temperament has encouraged importation of cheap bulk wine, mostly from the southern hemisphere and that does threaten to displace some of the lower priced California grapes that had regained market share since the start of the recession.
• The 2011 season marked the first California stone fruit season without the California Tree Fruit Agreement following the termination of its peach and nectarine marketing orders by the growers. The California Plum Marketing Board voted to go into dormancy in the fall of 2011.
As the 2012 season approached, said League Associate Director Sara Frauenheim, a severe hailstorm rolled through the Central Valley in April. The worst damage was in the Traver area, and from 10 to 15 percent of the stone fruit crop was destroyed.
With the close of the California Tree Fruit Agreement, the California Grape and Tree Fruit League has assumed an expanded role to include research facilitation, supplementary trade activities and crisis communication.
• Production for the 2012 crop of processing tomatoes is expected at 12.6 million tons, said Mike Montna, president and CEO of the California Tomato Growers Association. It will be the second largest crop California has produced.
Yields have continued to increase the past five years, he said, due to use of drip irrigation, varietal research and development and “continual improvement of agricultural practices.”
The CTGA negotiated a price of $69.40 per ton for the 2012 season.