There were no end-of-tunnel beacons illuminated for a struggling western agricultural economy by a panel of experts at the first annual gathering of the California Plant Health Association (CPHA).
However, California's Secretary of Agriculture Bill Lyons; California cotton industry leader Earl Williams; Dow AgroSciences vice president and Californian Elin Miller and Well Fargo banker Ken McCorkle did not sound like a chorus of Titanic cruise directors either as the offered their insight into the future of California agriculture.
It was not news for CPHA member to hear Lyons talk about historically low commodity prices and the impact those are having on farmers.
Many farmers and ranchers within California's $26 billion ag industry are “intensely concerned” about survival,” said Lyons. That concern is heightened by worries over the levels of federal and state fiscal support in a time when national security it taking precedent over almost all other issues.
“Yes, these are hard times but California farmers and ranchers have the will and talent to keep ag thriving,” said the state's chief agricultural spokesman.
It has been helped toward that goal with recent federal support of the state's specialty crops as well as the massive $100 million ag tax relief package signed into law earlier this year.
That helped, but farmers must rely on government support to survive today. With more than half the nation's net farm income coming from government subsidies and little prospect for that changing in the near future, it was no surprise that the subject dominated the panel.
Need federal funds
Lyons has spearheaded an effort by a coalition of Sun Belt states (New Mexico, Arizona, Texas, Florida and California) to wrangle federal funds from the same pot basic commodities now rely on for survival.
With taxpayer dollars getting increasingly scares, that is not a popular subject, even in California.
“We continue to engage secretary Lyons and others on how big the (federal subsidy) pie is,” said Williams, president and CEO of California Cotton Ginners and Growers Associations. “We are not willing to share much of the pie and would like him to bake another pie — and would certainly support that”
Bankers like federal farm subsidies, said McCorkle. Federal funds for farmers make it “real easy” for bankers to loan short-term capital. “All you really have to worry about is yield,” he said.
However, from a personal perspective McCorkle said subsidies stifle innovation and are “counterproductive.”
In looking at the current economic depression, McCorkle said there are two big differences between now and the last downturn in the 1980s.
The debt to total capitalization in agriculture now is 20 percent compared to 26 in the 80s and interest rates now are at 6 percent to 7 percent compared to 17 percent to 20 percent the last time around.
Agriculture is in better economic shape now than it was 20 years ago, McCorkle said.
Nevertheless, California must compete with prices at historical lows. California is no longer a low cost producer of commodities and, therefore, cannot compete in a global marketplace form that position, the banker said.
McCorkle said California must focus on becoming the “premium-priced marketer of differentiated products” to survive in the future.
And, California must practice that approach as the nation's largest agricultural exporter. California exports $6.8 billion in ag products. Over the past six years, California has exported from 16 percent to 19 percent of its annual ag output.
That makes China's entry into the World Trade Organization of vital interest.
Miller said even though China out-produces most every other nation in most commodities, a change of policy allowing Chinese to live where they want is shifting the population to urban areas. That will create demand for imported fruits and vegetables. This is a “huge opportunity” for California products, but she warned it would not be easy to tap this market.
Williams is a little more wary of China, even though it has long been an importer of California production, which sends 85 percent of its production off shore each year.
China is also the world's largest cotton producer, and the cotton industry views China's entry into the WTO with “mixed emotions” because of China's past experience in flooding world markets with apples, garlic and tomatoes and heavily eroding profits.
“It is not so much China getting into the WTO as it is the policing and enforcement of trade policy,” said Williams.