GreatValleyCenterMay 07 KenMcCorklePowerpoin tSmal

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Expanding the Vision of Sustainability in California Agriculture Ken McCorkle Great Valley Center “New Thinking for a Big Valley” May 10, 2007

Men are like fine wine… : 

Men are like fine wine…

Men are like fine wine… : 

Men are like fine wine… They all start out like grapes…

Men are like fine wine… : 

Men are like fine wine… They all start out like grapes… and it's a woman’s job to stomp on them and keep them in the dark until they mature into something you'd like to have dinner with.

Women are like fine wine… : 

Women are like fine wine…

Women are like fine wine… : 

Women are like fine wine… They all start out fresh, fruity and intoxicating to the mind…

Women are like fine wine… : 

Women are like fine wine… They all start out fresh, fruity and intoxicating to the mind … and then turn full-bodied with age until they go all sour and vinegary and give you a head-ache.

Conclusion: 

Conclusion Many reasons why California Agriculture should perform well over the next 25 years…

Conclusion: 

Conclusion Many reasons California Agriculture should perform well over next 25 years… One critical factor: - expand vision of “sustainability” - act on that vision.

I. California Agriculture: Reasons for Optimism: 

I. California Agriculture: Reasons for Optimism Healthy industry in aggregate

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Source: USDA $34 B

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Source: USDA $34B $10B

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Source: USDA $34B $10B 3.5%

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Source: USDA:NASS

California is Blessed:: 

California is Blessed: Diverse/temperate Mediterranean climate Relatively predictable rainfall patterns Rich alluvial soils High mountains to east (capturing snow) Man-enhanced water storage/delivery systems Proximity to Asian markets Historically solid infrastructure: research/education, transportation, energy, water projects

California dominates U.S. Specialty Crop Agriculture: 

California dominates U.S. Specialty Crop Agriculture Almonds: 100% Pistachios: 100% Walnuts: 100% Processing Tomatoes: 95% Figs, Dates, Olives, Kiwi, Raisins, Pomegranates: 100% Apricots: 95% Avocadoes: 91% Plums/Prunes: 97% Grapes: 87% Strawberries: 60% Peaches: 46% Vegetables: Very high percentage

Market Opportunities: Set to Explode: 

Market Opportunities: Set to Explode Source: The Economist *Estimates based on 52 countries representing 90% of world GDP, weighted by GDP purchasing power parity World GDP* Growth Rate

GDP Growth Rates: 

GDP Growth Rates From G-7 to G-25…

U.S. Trade Deficit1970-2006: 

U.S. Trade Deficit 1970-2006 World is awash with U.S. dollars!

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Weakened U.S. Dollar 33% of CA Ag production is exported ($11 Bil in ‘06)

China: Thriving Economy, but Resource Poor: 

China: Thriving Economy, but Resource Poor 20% of World’s Population 7% of World’s Arable Land

Water Deficit: Yellow River Basin: 

Water Deficit: Yellow River Basin Source: David Roland Holst, University of California Water supply: 12% of population 15% of farmland

China’s Petroleum Exports: 1980-2004: 

China’s Petroleum Exports: 1980-2004 Major Importer Significant Exporter

Chinese Agricultural Imbalances  (USD 1997 billions in 2010): 

Chinese Agricultural Imbalances (USD 1997 billions in 2010) Source: David Roland-Holst, University of California

Verdict:China Will be Asia’s Largest Ag. Importer : 

19 March 2007 Verdict: China Will be Asia’s Largest Ag. Importer Source: Author’s estimates. Net Agricultural Imports in 1997 USD Billions

“Competition Ready” Industry: 

“Competition Ready” Industry There are only two viable business strategies: Low cost producer in commodity business Premium-priced marketer of differentiated products/ services Any other strategy is in the Valley of Death.

In Agriculture the Valley of Death has an artificial floor:: 

In Agriculture the Valley of Death has an artificial floor: Various Government Programs Prop up many growers who are neither low cost, nor premium-priced producers Price supports (cotton, rice, grains, dairy, sugar) Export subsidies Import quotas/tariffs (sugar, beef, dairy products, ethanol) Supply Control Marketing Orders (raisins, almonds) Effect: modify markets, reduce ST risk, reduce the LT return, delay market adjustments, stifle innovation, inflate farm land values

Government Farm Payments2000-2006: 

Government Farm Payments 2000-2006

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DIFFERENTIATION - COMMODITIZATION CYCLE Brand Differentiation “Me Too” Competition Second Tier Brands Private Label Commoditization R & D Investment P & E Investment Marketing Investment High Low Selling Price - High Volume - Low Cost - Low Price -Limited Volume -High Cost -Price Premium

1987: 

1987 Convenience

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Improved Packaging Technologies

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$2.99 -$3.99/lb. Improved Horticultural Technologies

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“Anti-oxidants contained in pomegranate juice may help reduce formation of fatty deposits on artery walls.” --National Geographic, 3/22/05 Health

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New Varieties

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Farmer Al Courchesne Brentwood, California 120 acre organic farm Produces 25 varieties: peaches, nectarines, cherries, apricots, pluots, plums, pears, table grapes. Markets to upscale grocers and restaurants: NYC, SF, LA Organic

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Unique Products

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Odwalla: A pioneer in functional foods Functional Foods

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Nutraceuticals: The Convergence of Science Medicine: Genetic mapping of human DNA: identifying gene patterns increasing risk of diseases Nutrition: “nutrients” to counteract genetic deficiencies Biotechnology: genetic engineering of plants/animals to produce these “nutrients” A food supply tailored to genetic populations

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Sustainability: Carbon Neutral

II.Expanding the Vision of Sustainable Agriculture: 

II.Expanding the Vision of Sustainable Agriculture Elements of Current Vision: Low/limited non-organic fertilizers Low/limited use of pesticides/herbicides Maximum use of IPM Promotion of Biodiversity Minimal impact on surrounding wildlife Reduced energy in production/distribution (particularly fossil fuels); Reduced CO2 emissions Reduced Water usage Fringe definitions: Organic farming “Small is Beautiful”: Small scale, family farms Locally produced; locally distributed No GMOs

But…: 

But… Are these the most significant threats to the sustainability of California agriculture?

Threats to Sustainable Ag in California: 

Threats to Sustainable Ag in California Loss of unique, irreplaceable farm ground to development Inadequate/unreliable year-to-year water supply Inadequate/unreliable labor supply Overloaded transportation infrastructure

Land Use : 

Land Use

Land Use: 

Land Use Source: American Farmland Trust 4.8MM 10MM

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An alternative: 4 people, 1/5 acre

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An alternative: 4 people, 1/5 Ac 2000 people, 4 Ac

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An alternative:

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Isn’t it time to go up instead of out?

Water Availability: 

Water Availability

2005 CA Water Supply/Demand: 

2005 CA Water Supply/Demand Supply: Average Year Total Precipitation 200MM AF Captured Runoff 70MM AF Sustainable Groundwater 10 Total Supply 80MM AF Source: Ca Department of Water Resources

2005 CA Water Supply/Demand: 

2005 CA Water Supply/Demand Supply: Average Year Total Precipitation 200MM AF Captured Runoff 70MM AF Sustainable Groundwater 10 Total Supply 80MM AF Utilization: Average Year Urban (Pop. 36MM) 9 Ag 34 Environmental 39 Total Demand 82MM Average Overdraft <2MM AF> Not Sustainable Source: Ca DWR

2030 CA Water Supply/Demand: 

2030 CA Water Supply/Demand Supply: Average Year Total Precipitation 200MM AF Captured Runoff 70MM AF Sustainable Groundwater 10 Total Supply 80MM AF Utilization: Average Year Urban (pop. 48MM) 12 Ag 34 Environmental 39 Total Demand 85MM Average Overdraft <5MM AF> Not Sustainable Source: Ca DWR

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Source: Turlock Irrigation District 6 yr drought 250% 20%

To Achieve Sustainable Agriculture, we must:: 

To Achieve Sustainable Agriculture, we must: Increase storage capacity 4-5MM AF to achieve average sustainability More to meet 6 year drought scenario Increase conveyance capability Encourage conservation among all water users, but: Conservation alone will be insufficient to achieve sustainability.

Agricultural Labor: 

Agricultural Labor

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Source: State of California, Economic Development Department

Agricultural Labor: 

Agricultural Labor Historically, farm labor – transient: AZ-CA-WA Prior to 1964: Bracero Program Since 1964: Research in mechanization Many activities successfully mechanized Pruning, harvesting: largely performed by hand to achieve quality demanded Many crops not readily mechanized Continued need for seasonal labor force: a magnet for foreign nationals, many arriving illegally.

Percentage of Unauthorized Farmworkers - Rising: 

Percentage of Unauthorized Farmworkers - Rising Source: University of California, Davis California Agriculture

Agricultural Labor: 

Agricultural Labor Historically, farm labor – transient: AZ-CA-WA Prior to 1964: Bracero Program Since 1964: Research in mechanization Many activities successfully mechanized Pruning, harvesting: largely performed by hand to achieve quality demanded Many crops not readily mechanized Continued need for seasonal labor force: a magnet for foreign nationals, many arriving illegally. Guest worker program is essential to CA ag’s sustainability.

Transportation Infrastructure: 

Transportation Infrastructure

Transportation Infrastructure: 

Transportation Infrastructure Americans lose due to traffic congestion: 3.7 billion hours/yr. 2.3 billion gallons of fuel/yr. Between 1980-2003, % Increases Total road miles: 3% Interstate miles: 13% Vehicle miles traveled: 89% Truck Freight ton miles: 89% GDP: 101% Sources: 2005 Urban Mobility Report, Informa Economics

Transportation Infrastructure: 

Transportation Infrastructure Over next two decades: Domestic freight traffic: +67% Highway traffic: +73% Rail traffic: +85% Source: Informa Economics

How is Cargo going to move?: 

How is Cargo going to move? Little room left to expand highways, particularly urban Rail mileage – decreasing; former right of way has been developed Navigation infrastructure: aging, increasing maintenance time Local issues tend to derail projects intended to increase capacity Source: Informa Economics

According to a Major Shipping Line Executive:: 

According to a Major Shipping Line Executive: “The United States’ freight transportation infrastructure will reach its absolute capacity in about three years if the federal government and private sector fail to invest billions to expand ports and intermodal connectors.”

Conclusions: 

Conclusions California Agriculture is poised to perform well over the next 25 years. Grower community: financially solid State: Natural and man-enhanced attributes Demand for CA specialty crops will continue to strengthen propelled by: Global economic growth Weak U.S. dollar China’s increased need for agricultural imports Industry is “competition ready”/innovative: free from direct government support payments

Conclusions: 

Conclusions California’s ag sector will continue to prosper in the innovative, value added sectors Convenience items Nutritionally enhanced Specialty niches: organic, healthy foods, sustainable agricultural practices

Conclusions: 

Conclusions Vision of sustainability must be expanded: Land use policy Water availability/reliability Labor availability/reliability Infrastructure capacity If we act on this vision, with the same boldness as the leaders in the 1940s-1950s…

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Noah’s Rule Predicting Rain Doesn’t Count; Building Arks Does. Thank You!!