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A Growth Industry : State's Agribusiness Rides Out Recession, Insects and Bad Weather

THE CALIFORNIA SLUMP: How key industries are faring; One in an occasional series

July 26, 1993|DONALD WOUTAT | TIMES STAFF WRITER

WATSONVILLE, Calif. — Considering the six-year drought, a brutal 1990 freeze, an invasion of whiteflies and various political insults, California's $18-billion farm economy has held remarkably stable during the state's long-running recession.

Agriculture set annual records for cash paid to farmers for their crops until 1991, when the total dipped 5% to $17.9 billion as the effects of the drought and the freeze accumulated.

Yet receipts resumed their climb last year in the face of the state's water cutbacks as gross receipts edged up 1.1% to an estimated $18.1 billion, and the growth continues in post-drought 1993.

Farm jobs show the same pattern. After falling 6% in 1991 to 342,000, agricultural employment in the state jumped by 11% last year, and is up so far this year an average 6.5%, according to the state Employment Development Department.

"Agriculture has been a stable contributor to California's economy," says Henry Voss, a peach, plum and prune grower, who is director of the California Department of Food and Agriculture. "It doesn't swing up and down like it does in the grain states."

There are big problems for some farmers and some regions, notably in the water-short western San Joaquin Valley. And farmers always argue that even in good years, they see little or none of the profits generated by the state's vast agribusiness system after their products leave the farm.

In the aggregate though, the drought and other problems have been offset by the state's agricultural diversity, record yields in key crops, and the growing appetite for California's high-value fruits, vegetables and other crops, especially overseas.

Except in products such as wine, the state's recession has itself had little effect on the California farm industry, economists say. Even the unemployed must eat, they note, and most of the state's farm products are shipped elsewhere, anyway.

Meanwhile, state farmers went through the same shakeout in land values as the rest of U.S. agriculture in the mid-1980s, and the survivors emerged with low debt, according to economist Fred Cannon at Bank of America, the state's top farm lender.

"Despite the adversities, agriculture has been stronger and less volatile than the rest of the economy," Cannon said.

Indeed, for export-dependent crops such as cotton, weak economies in other nations are often worse than a recession at home. As California and U.S. agriculture continue to grow more food than the country needs, export growth is increasingly critical to a robust U.S. farm sector.

But as the economy has slowed in Japan, for example--the top foreign market for California cotton, where it is made into $200 golf shirts--the state's Tokyo-bound shipments have tumbled by nearly 30% to 500,000 bales a year.

Nevertheless, "we routinely sell everything they grow," says Bruce K. Groefsema, senior vice president at Calcot Ltd., a Bakersfield-based cooperative that markets 42% of California and Arizona cotton, which is purchased by 250 mills in 30 countries.

Economic cycles aside, the state's farmers are worried about government-imposed limits on pesticide use and new competition in foreign markets from Mexico, Chile, Greece, Australia and Israel, among others.

But these and other headaches pale in comparison to the implications of farming's growing political isolation. With the state's rapid urban growth, farmers now make up less than 1% of all Californians, even smaller than their national profile of just 2% of the population.

This led to last year's enactment of the landmark Miller-Bradley law, a rewriting of federal water policy in favor of urban areas that dimmed California agriculture's prospects for continued automatic access to its lifeblood: cheap water for irrigation.

Farmers predict that this will drive up the cost and undercut the efficiency of farming, leading to higher food prices and exacting a greater toll on the overall economy than urbanites realize.

Growers on the west side of the San Joaquin Valley are said to be especially vulnerable to water cutbacks due to the salt content of their ground water and the region's reliance for irrigation on the federal Central Valley Project.

Already, tens of thousands of acres, especially in cotton, have been pulled from production, striking economic blows to farm workers and communities on either side of Interstate 5 west of Fresno.

"The real question is how long some of that land can remain in production," says Jerome B. Siebert, agricultural economist at UC Berkeley.

The web of California agriculture, with its network of processing factories, is wide.

The University of California calculates that the state's "food and fiber system" generates $63 billion a year, or 9% of the gross state product, and accounts for one in 10 jobs, most of them off the farm. Its $18.1 billion in gross farm receipts makes California half again bigger than Texas, the nation's No. 2 farm state.

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