Land Values - Micro and macro

Here is a link to a paper forwarded to me by University of California economist Roberta Cook about the farm real estate markets in Florida and California. The paper, written by John Reynolds and Warren Johnston, is titled "Micro Markets for Farmland: The case of California and Florida." The authors say a statewide average price for farm land isn't too helpful. From the paper:

The average per acre statewide value of farm real estate, whether for Florida’s 44,000 farms, or for California’s 87,500 farms, is a singular statistic of dubious “value.” It is akin to imagining whether Merriwether Lewis and William Clark, prior to their departure on the Expedition 200 years ago, would have found it of value to know the average depth of the Missouri River from its headwaters in the Rocky Mountains to its junction with the Mississippi. Probably not.

TK: As referenced in an earlier post, here is the USDA site for average farmland value, for what little it may be worth.

Shandong report: USDA FAS

The USDA FAS has published a report on Chinese horticultural production, focusing on the Shandong province. Roberta Cook, economist at UC Davis, passed along the report, which was composed with the help of one of her former students. Here are a couple of highlights from the report:

On the challenges for China....

A further distinctive quality of China’s domestic horticulture market structure is the lack of traceability with regards to food safety. Though the Administration for Quality Supervision, Inspection and Quarantine has recently implemented mandatory orchard, packing house, and processing facility registration for all fruit destined for export markets, the domestic market is still lacking quality control measures. In the majority of cases, the thousands of small-scale farmers selling to hundreds of local brokers and wholesalers are still largely unaccountable for the quality of their produce.



On vegetable growers...

There is no distinction among farmers in the level of wealth between vegetable and non-vegetable growing households. China’s markets allow equal access to emerging horticulture¹ activities. In 2006, the average cucumber producer’s household assets (on a per capita basis—not including the family’s house) were $992, for non-cucumber producing households $986 and for tomato producers $1,131, for non-tomato producing households $1,164. The lack of significant differences in assets suggests that there are no entry barriers for farmers to switch to the production of vegetables.

Vegetable farmers in Shandong normally grow several crops. Major crops are maize, wheat, cotton, peanuts, and vegetables. Within the vegetable category, farmers do not limit themselves to one type. Simultaneously planted vegetables in both greenhouses and open fields, include: Chinese cabbage, peppers, eggplant, string beans, cucumbers, and tomatoes.

Vegetable production is more labor intensive than other types of farming therefore, the availability of family labor is fundamental for farmers who choose to move into vegetable production. Households with a smaller percentage of laborers with off-farm jobs are more likely to produce vegetables because of the physically demanding nature of vegetable production. In Shandong (and elsewhere in China), there are no stable agricultural labor markets so when a farmer commits to vegetable production, he commits to spend less of his own and his family members’ time off the farm. Most farmers, however, have limited off-farm employment options. This implies that for those households who are not able to participate in off-farm employment, the expansion of China’s vegetable market provides a new employment opportunity.

On fruit growers....

Similar to vegetables, wealth has little effect on the decision to produce fruit but off-farm employment does impact fruit production. Lower-levels of household off-farm employment are seen on Shandong’s fruit farms. Households producing fruit actually had lower per capita assets than non-producing households, indicating that poorer farmers are not being left out of horticulture production. In 2001, the average apple producing households’ assets were $616.30, non-apple producing $734.70 and the average grape producing households’ assets were $787.70, non-grape producing $896.10. Like vegetable production, the labor intensive nature of fruit production is the reason fruit producing households have lower levels of off-farm employment.

China’s government provides some support for apple but not grape production. During the 1980s, this government support led to large production increases through expanding apple orchard area and encouraging farmers to shift production of other crops (grains, fibers, and oilseeds) to apples. The government encouragement occured in three ways: providing grants and loans to farmers, reducing in-kind grain taxes, and introducing new varieties (Zhang, 2005). This promotion program led to a staggering increase in apple production and nearly quadrupled production between 1990 and 1996 from 4.3 to 17 million tons (China’s Ministry of Agriculture, Online Database). However, the support program was viewed as a failure by government and industry because the dramatic increase in supply depressed both domestic and world apple prices. The growth in apple production has since leveled off with total production in 2006 at 26.1 million tons, a 50-percent increase over the ten year period, 1996-2006. Grape production, not supported by government programs, has risen steadily during the period from 1990 to 2006 from 0.86 to 6.3 million tons, a more than sevenfold increase. This increase occurred without government support.

Unlike vegetable production, farm size is not a factor in fruit production. There is no significant difference in the size of fruit versus non-fruit producing farms in Shandong. Fruit production in Shandong Province has increased since 2001. In the case of apples, this growth has come from an increase in average farm size from 0.18 hectare in 2001 to 0.19 hectare in 2006, as well as better farm management and an increase in farm inputs. The growth in grape production stems from a 14-percent increase in the total number of grape farmers from 2001 to 2006, there was no increase in average farm size for grape producers.

Charting new directions: June 21 event at UC Davis

Industry friend Jim Gorny, now at UC Davis, passes along news of this event. Also find it in the calendar at the bottom of blog.



DAVIS, CA (May 20, 2008) – An all star line-up of produce industry executives and academicians are slated to provide their strategic insights regarding some of the most pressing issues facing the produce industry at a very special one day symposium entitled “Charting New Directions In Postharvest Biology & Technology” to be held June 21, 2008 on the UC Davis campus.

Three pivotal sessions have been planned.

Session 1 – The Consumer Produce Experience: Explores the hurdles and effective strategies that may be used to increase consumer satisfaction and consumption of fresh produce.
Session 2 – Assuring Produce Buyer Confidence: Explores what information produce executives will need to make informed business decisions regarding produce safety, quality and marketability to assure business sustainability and competitiveness into the future.
Session 3 – Charting New Directions to Meet Postharvest Challenges and Opportunities: Explores
high priority produce research and education activities that are needed to meet produce industry needs.

Symposium Speakers Include:
James Truscott, VP of Sales and Marketing for Wild Rocket Foods, supply chain partner of Fresh & Easy (Tesco USA)
Nick Tompkins, Chairman of the Board, APIO Inc.
Nick Kukulan, President & CEO, Paramount Export Co.
Dennis Gipson, Executive VP of the Cold Chain, Ingersoll Rand Climate Control Technologies
Robert Whitaker, Ph.D., Chief Science Officer, Produce Marketing Association
Deirdre Holcroft, Ph.D., Research & Development Manager, AgroFresh Inc.
Keri Morrelli, Technical Services Manager, APIO Inc.
Patrick Brecht, Ph.D., President, P.E.B. Commodities Inc.
UC Davis Postharvest Technology Center Faculty including: Roberta Cook, Carlos Crisosto, Jim Gorny, Beth Mitcham, Mike Reid and Jim Thompson.
“We are thrilled to have these produce industry luminaries providing their insights at our symposium,” said UC Davis Postharvest Technology Research and Information Center Academic Director Jim Thompson. “We very much respect what all of these executives have accomplished in the produce industry and we value the opportunity to learn how the postharvest program at UC Davis can best address emerging issues in the produce industry. We envision that this symposium with produce industry leaders and produce researchers from UC Davis and other leading academic institutions will provide a roadmap toward innovative solutions” he said.

Detailed information including how to register for the Charting New Directions In Postharvest Biology & Technology Symposium may be found on the Postharvest Technology Research & Information Center website at http://postharvest.ucdavis.edu/announce/30thanniversary.shtml or by contacting Ms. Penny Stockdale, registration coordinator, at (530) 754-4326 or pastockdale@ucdavis.edu.

# # #

The mission of the University of California Postharvest Technology Research & Information Center is to reduce postharvest losses and improve the quality, safety and marketability of fresh horticultural products. Visit the center online at http://postharvest.ucdavis.edu. Postharvest Technology Research and Information Center, Department of Plant Sciences/MS2, University of California, Davis, One Shields Avenue, Davis, CA 95616, Tel: (530) 752-6941, Fax: (530) 754-4326, E-mail: postharvest@ucdavis.edu

# # #

Cook avocado ppt

While a little dated, this powerpoint provides great context to the industry and the insights of UC Davis economist Roberta Cook.

Consumer Trends - Issues in Quality and Safety

UC Davis economist Roberta Cook forwarded another powerpoint presentation to me that offers more insight on consumer trends, and the presentation is published by Google below. Lots of great trend data on per capita consumption and consumer trends. One quote: "People are having a love affair with food, but most are not in love with their local supermarket."

More on the economy

I had a chance to visit with Roberta Cook today and she provided me some interesting insight on the recession of 1989-1992, particularly relating to what happened to per capita utilization of fruits and vegetables during that period. I'll bring some of that together soon.

She had some great observations about the effects of a potential recession on foodservice demand and some thoughts about private label produce retail. Dr. Cook points out that Tesco is using several private label brands, signaling different price points and consumer expectations. The use of private label produce is likely to pick up momentum for a number of reasons, not the least of which that it offers profit opportunity for retailers.

Meanwhile, Dr. Cook just forwarded me this new USDA report titled "Are Lower Income Households Willing and Able To Budget for Fruits and Vegetables?" The question seems especially timely with the increasing chatter about a possible recession.

Here is an excerpt:

In 2003, households earning below 130 percent of the poverty line spent less than higher income households on six out of seven food types examined. However, a small increase in income will not likely induce them to spend more on fruits and vegetables. Beef expenditures and spending on frozen prepared foods do increase. Focus group analyses suggest that beef and frozen prepared foods may be priorities over fruits and vegetables for reasons of taste and convenience. However, it appears that a household’s income does not need to rise much higher than 130 percent of the poverty line—a cutoff for the Food Stamp Program—before the average household allocates additional resources to fruits and vegetables, given a small increase in income. A positive income effect is found among households earning between 130 and 185 percent of the poverty line. Among such households, a 10-percent increase in income prompts a 1.15-percent and 1.93-percent increase in fruit and vegetable expenditures, respectively.

Roberta Cook

More than one industry leader considers UC Davis economist Roberta Cook's insights into the produce business prophet-like, and it is easy to see why. Here is Dr. Cook's presentation, updated in November and passed along by PMA, on "Trends in the marketing of Fresh Produce and fresh cut products."

California and NAFTA - Myth and Reality

Roberta Cook of UC Davis had this powerpoint presentation from 2005 about "NAFTA at 11" that offers some great insights about factors influencing trade relationships.If you haven't voted in the Fresh Talk NAFTA poll yet, this may swing your vote to the option of "positive impact." She makes these summary points:

Exchange rates and the WTO have influenced California ag much more than NAFTA.
Mexico’s decision to join the GATT in 1986 had a greater impact on reducing trade barriers in the Mexican market.
Prior to joining GATT Mexico had high average tariff rates and major nontariff barriers in the form of licensing restrictions.
Mexico made a decision to “unilaterally disarm” in ’86, partly as an internal strategy for controlling food costs and inflation.
Mexican fruit and veg average tariffs were already reduced from around 50% to a max of 20% prior to NAFTA.
Licensing restrictions were removed on most ag products, including fruit/vegs. This began to open Mexico to US exports prior to NAFTA. (ag licenses: 320 in ’85, 57 in ’90)
The US trade-weighted average tariff rate for Mexican fresh vegetable imports was 7% prior to NAFTA. There were only a few fruits and vegetables facing high ad valorem tariff rates (like 25% on asparagus, 35% on melons.) Grapes were already duty free (big growth in Sonoran grape exports since NAFTA not due to improved market access).
Arguably, the US had the most to gain from improved market access since Mexico had higher average tariffs.

TK: Cook provides her take on myths and realities:

Myths and Realities
Myth:
It is an advantage to be underdeveloped.
Reality:
US ag benefits from:
enormous support in RD&D from govt. institutions such as USDA and from the land grant university system.
enormous public sector investments in transportation and infrastructure of many types, including water storage and distribution.
extensive private sector research targeting specific crop needs.
a transparent and relatively responsive govt.
unimpeded access to the largest consumer market in the world and usually a transportation cost advantage.
Myths and Realities
Myth:
Because fruit and vegetable production is labor-intensive, countries with low wage rates naturally have the advantage.
Reality:
Fruit and vegetable production is capital, technology, management, research, marketing, and infrastructure intensive.
Mexico’s advantage is generally seasonal (climatic advantage) rather than a cost advantage.
Exceptions: crops requiring bunching at harvest – green onions, radishes, asparagus, give Mexico a cost advantage; and avocados.
Myth:
A given wage rate differential is equivalent to the same differential in labor costs.
Ag labor is abundant everywhere in Mexico.
Mexican growers provide few social services to workers.
Reality:
Labor is generally less well trained and efficient, offsetting some of the wage rate advantage.
Certain areas also experience labor shortages.
Labor management can be challenging in Mexico due to social and policy issues.
Common to provide housing and schools.

Myth:
Food safety and pesticide practices are substandard in Mexico.
Reality:
Important to distinguish between domestically-oriented growers and export growers.
Although it depends on the grower/exporter, practices have improved markedly for exporters and many now are third party certified and implementing GAPS.
It is possible to find operations in Mexico with superior food safety controls.

Ready to eat good to go

Readers...see the note in the comments from one of the authors of the study that clarifies my use of the term "triple washed" and other points.



Triple washed leafy greens are probably as good as they can get, says a scientific paper that concludes the risk of cross contamination when washing "ready to eat" salads negates any benefit from additional washings.Here is the report from the UC Davis Postharvest Technology Research and Information Center called "Recommendations for Handling Fresh-cut Leafy Green Salads by Consumers and Retail Foodservice Operators." From the report's summary:

A panel of scientists with expertise in microbial safety of fresh produce was convened to review recent research and re-evaluate guidelines for foodservice and restaurant operators, regulatory agencies with oversight over food facilities, and consumers for handling prewashed bagged salads. The guidelines developed by the panel, together with materials reviewed by the panel to develop the guidelines, are presented. The background materials reviewed include published research and recent recommendations made by other authoritative sources. The panel concluded that leafy green salad in sealed bags labeled "washed" or "ready-to-eat" that are produced in a facility inspected by a regulatory authority and operated under cGMPs, does not need additional washing at the time of use unless specifically directed on the label. The panel also advised that additional washing of ready-to-eat green salads is not likely to enhance safety. The risk of cross contamination from food handlers and food contact surfaces used during washing may outweigh any safety benefit that further washing may confer.



Also, from the November newsletter from UC Davis Postharvest Technology R&I Center:

UCD Researchers Working to Control Light Brown Apple Moth's Threat to Produce ExportsDr. Beth Mitcham recently received approval from the California Department of Food and Agriculture to establish a colony of Light Brown Apple Moth at the UC Davis Contained Research Facility, thus paving the way for potential research on development of effective postharvest control strategies for this pest on harvested raw agricultural commodities and avoid potential disruption to interstate and international trade of California produce. The Light Brown Apple Moth is an invasive pest that has now been detected in eleven California Counties (Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, San Francisco, San Mateo, Santa Clara, Santa Cruz and Solano) and there is concern that this pest could become established in other California growing regions and disrupt shipments of California grown fresh fruits and vegetables. Dr. Mitcham's research program focuses on finding alternatives to chemical treatments to control physiological disorders, decay and insects in numerous tree crops. For more information contact Dr. Beth Mitcham at: ejmitcham@ucdavis.edu

Fresh-cut Produce Short Course Offered in Spain An European short course focused on "Quality and Innovation of Fresh-cut Produce" is being offered in Cordoba, Spain on March 10-12, 2008. The short course focuses on important aspects relevant in the production, processing, packaging and quality assurance of fresh-cut products. Enrollment is requested by January 25, 2008 and detailed information about the short course may be found at: www.uco.es/fresh-cut. Dr. Jim Gorny and Dr. Trevor Suslow from U.C. Davis will be participating in the short course. The short course is organized and sponsored by the International Curriculum of Postharvest Technology of Horticultural Crops (ICPT), which is a collaborative program among the University of California Davis (USA), University of Cordoba (Spain), University of Florida (USA), University of Foggia (Italy), Texas A&M University (USA), and University of Thessaly (Greece). The ICPT was developed to increase the professional skills of graduate students studying postharvest biology and technology at participating institutions. More information about the ICPT program may be found at: http://postharvest.ucdavis.edu/icpt/index.shtml

National Mango Boards Taps UCD Researchers To Enhance Consumer’s Mango Experience UCD Postharvest Technology Research & Information Center members Dr. Adel Kader, Dr. Elizabeth Mitcham and Dr. Mary Lu Arpaia are collaborating with colleagues Jeff Brecht and Steve Sargent from the University of Florida and other colleagues from institutions in several Central and South American countries on an important mango quality research and analysis program sponsored by the recently formed National Mango Board. This project is designed to evaluate the entire mango supply chain from production through postharvest handling and quarantine treatment, transportation and distribution stages to the retail market. Understanding and documenting mango supply chain opportunities for handling improvement is a first step for the National Mango Board in its drive to inform the entire supply chain regarding proper handling techniques and improve the mango eating experience for consumers. More information about this project may be found at the National Mango Board website at: http://www.mango.org or by contacting Dr. Elizabeth Mitcham at ejmitcham@ucdavis.edu.

New Center for Fruit & Vegetable Quality Center Launched at UCD Postharvest Technology Research & Information Center members Dr. Christine Bruhn, Dr. Roberta Cook, Dr. Adel Kader, Dr. Jim Gorny, Dr. Jim Thompson, Dr. Elizabeth Mitcham and Dr. Diane Barrett participated in a special one day symposium entitled Increasing Fruit and Vegetable Consumption: Is It a Matter of Taste?; which marked the inauguration of the new UCD Center for Fruit and Vegetable Quality (CFVQ) on campus. The symposium attracted more than 70 participants from the food industry, academia, and government to commence discussions regarding means of promoting science-based information and technology that increases consumption of fruits and vegetables to enhance human health. The new CFVQ led by Dr. Diane Barrett is comprised of over thirty multi-disciplinary faculty including those with expertise in Postharvest Biology and Technology and the CFVQ is already working closely and collaboratively with the Postharvest Technology Research & Information Center. Another major goal of the new CFVQ is to enhance collaborative industry/UCD research interactions and as such has established a CFVQ Corporate Affiliates Partnership Membership Program. More information about the CFVQ may be found at: http://fruitvegquality.ucdavis.edu or by contacting: Dr. Diane Barrett (Director, Center for Fruit & Vegetable Quality at UCD), Tel: 530.752.4800 or dmbarrett@ucdavis.edu.

Postharvest Technology Research & Information Center Collaborates with New UCD Center for Produce Food Safety
Dr. Jim Gorny, Dr. Trevor Suslow and Dr. Linda Harris were recently appointed as advisory board members to the new Center for Produce Safety (CPS) at UC Davis. On November 1st the CPS advisory board convened in Davis under the leadership of Dr. Devon Zagory, Interim Executive Director of the CPS, to discuss the Center’s strategies for addressing key food safety issues facing the fresh produce industry. The center was established earlier this year to work with the agricultural and food industries, government regulatory agencies, trade associations, research institutions, and consumer groups to enhance the safety of fresh fruits and vegetables through research, education, and information exchange. For more information about the UCD Center for Produce Safety contact: Dr. Devon Zagory, Interim Executive Director, Tel: 530.757.5777 or devon.zagory@cps.ucdavis.edu.

Wal-Mart's procurement

The Packer's David Mitchell has some interesting coverage on Wal-Mart's procurement policies.
David writes:


Wal-Mart Stores Inc. has altered its procurement procedures during the past two years, but recent criticisms that the Bentonville, Ark.-based retailer has violated terms of its supplier agreements are unwarranted, the company’s vice president and divisional merchandise manager for produce and floral said.“Wal-Mart honors (its) contracts and offers the suppliers the right to talk to Lee Scott, our CEO, or Rob Walton, our chairman, through the open-door process if we do not,” said Ron McCormick , vice president and divisional merchandise manager for produce and floral.Wal-Mart suppliers were reluctant to comment on changes in the retailer’s buying practices, but sources alleged off the record that the company is increasingly using what it calls “opportunity buys” to source product from other suppliers when the market is lower than the contract price.“The expectation in doing business with Wal-Mart is not what it was two years ago,” said a supplier who spoke on the condition of anonymity.


TK: In a presentation in 2004, Roberta Cook of UC Davis points out that shippers doing long term contracts with Wal-Mart procurement can keep their portfolio of quality growers happy only by compensating them fairly for lost opportunities on the spot market. In my view, when Wal-Mart looks to "opportunity buys" when the spot market is in its favor, it could hurt the long term health of WM's contracted suppliers.