The urgent need to improve groundwater management

Posted on September 19, 2023 by jaegerw

William Jaeger

Groundwater is one of the most challenging resources to manage, in large part because it is hidden below ground and thus poorly understood. Many regions of the world have a high dependence on groundwater for agricultural, municipal, and domestic uses, as well as for aquatic habitats and other groundwater-dependent ecosystems. Yet aquifer depletion continues at an alarming rate, imposing costs on rural communities, farms, the environment, and society generally. This is particularly true in the western United States where consumptive use of water is expected to exceed available surface and groundwater by 2030. As surface water becomes fully allocated, groundwater withdrawals have increased, in part because western U.S. states have not done enough to regulate groundwater pumping. A recent detailed analysis of the problem by the New York Times found declining trends over the past 20 years in many areas – as indicated in red and orange in the map below.

Source: NY Times

The trend is particularly severe in Oregon where two-thirds of monitoring wells have declined since 1980. How and why has this happened? Like other states, Oregon has been slow to recognize that the accommodating approaches to managing an abundant resource of the past are insufficient in a world of scarcity, one where nearly all new uses of groundwater can be expected to cause interference with existing uses of both groundwater and surface water.

As in most parts of the western U.S., Oregon’s groundwater use is dominated by agriculture (about 90% of the total groundwater withdrawn), and the areas of concern across Oregon are widespread as indicated in the map below:

Source: 2021 Oregon Groundwater Resource Concerns Assessment

Efforts are underway, however, to fully recognize the realities of groundwater scarcity and, to some degree, groundwater’s unique management challenges. Over the past six months I’ve participated in this process as a member of the Oregon Water Resources Department’s Groundwater Allocation Rules Advisory Committee (RAC). The goals include clarifying and updating the rules for evaluating applications for new groundwater rights. Central to the approval process is determining whether “water is available” (in order to allow additional groundwater right). It is not an easy question. Groundwater resource rights are connected hydrologically to surface water. Pumping from a new well will potentially impact other existing wells, as well as surface water where it can interfere with surface water rights, springs, stream flow, and wetlands.

So how do we decide if “water is available” to allow development of a new right to withdraw groundwater? We need data on water levels and trends nearby and over a period of years. But reliable data is scant, and levels can fluctuate year to year. Most wells don’t collect or report the kind of data needed to develop a good understanding of the capacity of a given aquifer to sustain additional demands. Many well owners are reluctant to share information about their pumping rates and water levels. This unfortunate situation is counterproductive to gaining a good understanding of the state of the resource. Imagine trying to manage Oregon’s coastal fisheries if fishermen didn’t report their catch?

Central to Oregon’s water law is the “prior appropriations” seniority system that allocates water to senior water rights (established long ago) before more junior water rights (established more recently). Determining the “interference” of a junior water right on a senior water right is relatively easy with surface water (we observe stream diversions and know which way water flows). But knowing which junior groundwater right has interfered with a given senior groundwater right (or with a surface water right) is effectively impossible for purposes of regulation.

Interference among surface water irrigators occurs entirely within a given growing season. In the case of groundwater pumping, however, there is both within-season interference as well as longer-term aquifer depletion. But regulators don’t have sufficient information about the underground hydrological connections between specific wells to have a strong basis for knowing which junior water right should be shut off to protect more senior water right holders, so regulation is almost never used. This puts senior water right holders in overallocated basins at risk, where some water rights having seniority dating back more than 100 years are degraded from the interference of newly approved groundwater rights.

We can’t be sure if a new permit will impact existing groundwater rights and capacity, but given that Oregon’s surface waters are fully- or over-appropriated, there is a strong argument for erring on the side of caution. The current OWRD proposal seeks to establish a quantitative test to ensure that groundwater levels are “reasonable stable” and that a given aquifer is not “overdrawn.” Do water levels show declines of more than 0.5 feet per year? Do water levels show total declines greater than 25 feet or 8% of saturated thickness of the aquifer? A “yes” to either of these questions would trigger a finding of “water is not available.” And if there is insufficient data to evaluate these tests, then a precautionary finding of “water is not available” is also applied.

Oregon’s seniority water law system places emphasis on protecting existing rights above the approval of new, additional water rights. But the risks of unsustainability are high due to two factors:  the lack of an effective or operational enforcement mechanism to adjust to within-season or long-term declines in groundwater supply, and the implied permanence of a new groundwater right — there is no way to fine-tune the amount of pumping allowed (no two-way adjustment mechanisms as in the case of a catch-share fishery where the total allowable catch can be revised up or down, year-to-year).

The revisions currently being considered by the groundwater RAC represent an important step, but more changes will be needed to better manage Oregon’s groundwater resources. There is an urgent need for more and better data, such as requiring groundwater right holders to measure and report water use and well levels. And we need to find policy mechanisms to adjust groundwater demand in response to changes in our understanding of groundwater supplies.

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What does the EPA Vulnerable Species Pilot Project mean for Oregon agriculture?

Posted on August 28, 2023 by Tim Delbridge

Tim Delbridge and Dan Bigelow

As the Capital Press and other outlets have been reporting over the last month, there is a draft plan from the EPA to protect a number of endangered and threatened species through new restrictions on pesticide applications. One of the protected species, the Taylor’s Checkerspot Butterfly, is found here in the Willamette Valley as well as in western Washington. The EPA’s proposed mitigations call for a near-total prohibition on applications of herbicide and insecticide use for non-residential uses in the affected “avoidance area”.  That is, if this EPA plan is implemented as currently drafted, farmers and forest managers will not be able to use pesticides on slightly more than one million acres of the Willamette Valley and more than 3.5 million acres of Washington. In addition to the proposed pesticide bans in the avoidance area, looser regulations on pesticide use are proposed for a smaller “minimization area” around its periphery. A well-produced interactive map along with information on the Taylor’s Checkerspot Butterfly can be found here.

EPA map of proposed pesticide avoidance and minimization areas in Oregon

This short blog post will outline a few general conclusions that we can come to about the potential economic impacts of the EPA’s plan. We will then use the USDA Cropland Data Layer (CDL) to estimate the acreage of each crop that would be affected in Oregon and Washington. Note that these statistics apply to the avoidance area subject to the strictest proposed pesticide use regulations, which understates the true number of acres that will be impacted. We then provide some early idea of the degree of impact that we might see in different commodity markets.

In general, the EPA plan will remove insect and weed management tools from farmers. The degree of impact will vary by crop and location. Where the restrictions are binding, they will increase production costs, reduce yields, and, consequently, reduce operating profits. The restrictions will make some production systems unprofitable and lead to changes in land use and crop choice. We can be confident that:

  1. At least in the short term, agricultural land values in the affected areas should fall relative to nearby unregulated areas. It is difficult to anticipate the severity of the potential land value declines. To the extent that farmers will generate less annual net revenue under the EPA restrictions, lower purchase prices and cash rental rates will result. Over a longer time horizon, as producers adjust (see next two bullets), land values and rents may rebound accordingly.
  2. Many individual farms would suffer financial losses and increased expenses associated with switching production to new crops and/or cropping systems that are less dependent on pesticides. These short-term adjustment costs are in addition to the sustained reduction in profits that could be expected under the new cropping choices. The adjustment costs could be larger for perennial crops, such as blueberries or hazelnuts, that are costly to establish. Note that these adjustment costs include both the tangible financial cost of changing how a farm operates, as well as the investment in learning how to grow something new, which is harder to quantify.
  3. Organic acreage would increase in the affected areas. High rates of organic adoption (either by existing farms or new buyers/tenants taking advantage of falling land values) in this area could lead to significant increases in overall organic acreage in the PNW. While this might sound positive to advocates of organic agriculture, we could expect some volatility in regional organic markets and downward price pressure on organic crops that are well suited for the affected area. Furthermore, this may be the first example of farms in US being so strongly guided towards pursuing organic adoption, and it is not clear how their success will compare to existing organic farms that chose to transition voluntarily.
  4. Prices of some of the most affected crops will increase in response to the potential fall in production. Some of these price changes may be tempered as production eventually shifts out of the affected areas. Farms outside of the EPA mitigation zones are likely to benefit financially from the higher crop prices, at least in the short term. Because the regulated areas represent a small fraction of the production land base for most commodities, the price effect will only be noticeable for crops for which the impacted area represents a significant portion of regional or national acreage (e.g. blueberries, grass seed).

By overlaying the EPA maps of proposed avoidance areas on the satellite imagery from the USDA CDL, we have generated a list of crops grown in both Oregon and Washington and the average acres planted in each over the past five years. You can access the full list for both states in a google sheet here. While these estimates are not perfect (and are particularly challenging for crops/forest types that look the same from space) they give us a pretty good sense of which crops would be most affected by the EPA plan. In addition to the agricultural uses listed in the table, note that sizable amounts of forest, wetlands, and developed land also fall in the areas that would be regulated.

In Oregon, grass seed looks like it will be among the most impacted crops. The “Sod/Grass Seed” category from the CDL includes more that 115,000 acres within the EPA avoidance area. That is roughly 25% of the grass seed acreage in the entire state of Oregon, where a vast majority of grass seed is produced. If these grass seed farms were no longer able to use pesticides we would see significant disruption and financial losses for individual farms and a large increase in farm-gate prices for grass seed, at least in the short term. In Washington, more than 7,000 acres of blueberries and 2,000 acres of caneberries fall within the avoidance area, representing about 20-30% of statewide acreage for these crops.

The ultimate fate of the EPA’s proposed pesticide regulations remains to be seen. A unique aspect of the discussion around the proposed rules is that disparate groups of stakeholders, including producers, environmental groups (such as the Center for Biological Diversity), and the USDA, all seem to agree that the regulations go far beyond what is necessary to provide adequate protection for the Taylor’s Checkerspot Butterfly. If implemented as proposed, the impacts of this EPA policy will be far-reaching and will affect farmers and landowners in complex ways. The impacts will be felt beyond the geographic area targeted in the mitigation plan and farmers across the region would be wise to consider them when planning future investments and cropping systems.

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Per latest USDA estimates, most categories of farmland value in Oregon continue to rise

Posted on August 9, 2023 by Dan Bigelow

On August 4th, the US Department of Agriculture (USDA) released its latest state-level data on farmland values. The data come from the USDA’s June Area Survey, which asks a rotating panel of producers to estimate the market value of their land. Responses from surveyed farmers are then weighted and extrapolated to generate estimates for entire states. The survey-based estimates are broken down into four categories of per-acre land values: (1) farm real estate, measuring the value of all land and buildings on the farm, (2) non-irrigated cropland, (3) irrigated cropland, and (4) pastureland.

In Oregon, the per-acre value of farm real estate is $3,180 in the most recent data (see Table 1), representing a $140 (4.61%) increase in nominal terms over the past year. Note that this is in nominal terms, meaning that it is not adjusted for inflation. Economists typically examine trends in farmland values over time using real (or inflation-adjusted) values, which account for shifts in values relative to incomes and the prices of other goods. After adjusting for inflation using the Bureau of Economic Analysis’s Gross Domestic Product Implicit Price Deflator, the change in farm real estate value is more muted, but still positive, amounting to a $46 (1.46%) increase in 2023 dollars. When compared to its most recent 5-year average, farm real estate values are up $134 (4.41%). These changes indicate that the value of Oregon’s farm real estate has outpaced inflation in recent years, as it has for much of the last several decades (see Figure 1).

Figure 1: Farm real estate (land and buildings) value, Oregon, 1998-2023

Non-irrigated cropland value, at $2,600/acre, is down slightly over the past year in real terms, representing a decline of -$81 (-3.01%). Compared to its 5-year average, the change is a much smaller decline of -$3 (-0.11%). The value of irrigated cropland, on the other hand, is up to $6,600/acre in 2023, a $53 inflation-adjusted gain of 0.81%. Irrigated cropland value is up even more, by $203 (3.18%), relative to its 5-year average. Pastureland value, at $950/acre, experienced the largest gain of any specific land category, increasing by $22 (2.38%) compared to 2022 and $41 (4.49%) against its 5-year average. Despite the recent drop in the real value of non-irrigated cropland over the past year, the values of all categories of Oregon’s farmland have generally more than kept up with inflation in recent history (see Figure 2).

Figure 2: Inflation-adjusted farmland values for different land uses, Oregon, 1998-2023

With aggregated state-level data on farmland values, it is difficult to tease out any direct cause of the observed trends or year-to-year changes. One thing that is clear, however, is that the increases in interest rates seen over the past couple of years have not yet translated into large decreases in the value of farmland. When interest rates go up, we generally expect the value of land to go down, as debt payments for land purchases go up and landowners put a greater discount on the net income they expect to receive from the land in future years. It is plausible that this is why non-irrigated cropland values have started to come down and growth in overall farm real estate and irrigated values is lower than in the last couple of years, but note that pastureland value growth is actually slightly higher than it was over 2021-22. The contrasting trends between irrigated and non-irrigated land may also be related to the droughts that Oregon, and much of the west, continues to experience, which should place a premium on access to irrigation water.

Table 1: Summary of 2023 USDA farmland values for Oregon.

The fact that Oregon’s agricultural land has generally continued to appreciate in value has both pros and cons. Investors tend to be attracted to farmland because it generally keeps pace with inflation, which makes it an attractive and relatively safe asset class. For many reasons, having access to affordable farmland is key for producers, as real estate is the most common source of collateral in farm-related loans. Without owning farmland, it may be more difficult for producers to obtain the capital, on affordable terms, that allows them to make other investments in their operations. When land values increase, current landowners benefit, but it only makes it harder for renters and new and beginning producers to purchase the land they need to grow their operations.

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It has been a bad year for PNW cherry producers

Posted on July 25, 2023 by Tim Delbridge

Tim Delbridge and Ashley Thompson

The cherry industry is unique, even among specialty crops, in that the production period is brief, the crop (typically) has a very high value but has a short shelf-life, and a relatively small proportion of the crop is diverted to processing applications. This creates a significant amount of risk for growers, as their annual revenue is highly dependent on production and market conditions in a few short weeks of the early summer. For farmers in Oregon and Washington, the critical period is typically from mid June to early July. Growers further South, in the San Joaquin Valley of California, see production peak in late spring. The ideal outcome for cherry producers in the PNW is that California cherries are largely out of the market by the time that fruit is picked in The Dalles, the Yakima Valley, and Wenatchee.

Photo credit: John Byers; The Dalles, OR

This year, things did not go as planned. In fact, cherry prices have been near or below the cost of harvest this summer, leading many growers in OR and WA to leave fruit in the field rather than face the cost of hand picking the cherries and sending them to the packing houses. Financial losses will be severe for many cherry producers, and to a lesser extent the farm workers, packinghouse employees, and the communities that rely on the summer influx of economic activity during the cherry harvest. There remains considerable uncertainty regarding the future and whether this year’s market will become more typical.

The figure below shows weekly cherry volumes from the USDA-AMS movement reports. These data show that not only was California’s crop twice as large as it was last year, it was about 3 weeks later than it was in 2022, overlapping much more than usual with the WA/OR season. In 2022, total movement from CA was 47,270 tons whereas in 2023 it was 87,090 tons. There were an extra 40,000 tons of California cherries in the market during the critical period for PNW cherry producers.

Production in Washington is also much higher than last year. Through July 15th of this year, WA shipments totaled 112,155 tons compared to 70,340 tons in 2022. Together, shipments from CA, WA, and OR in the four weeks from mid-June to early July were twice as large in 2023 than in 2022 (56,290 tons in 2022 vs. 113,480 tons in 2023).

Some of the additional volume has gone to an increase in international exports. The figure below shows that during that same 4-week period – mid June to early July – exports of cherries from the three states combined went from 10,645 tons in 2022 to 35,075 tons in 2023. Despite the increased exports, there was a 50+% in cherry volume on the domestic market in this critical period. As of the time writing (7/25/23) cherry packers are continuing to source export quality fruit and large export volumes will continue to show on USDA-AMS data in the coming weeks.

Of course, it is the low prices rather than strong production that cause problems for cherry producers. The figure below shows shipping point prices over the course of the 2022 season and up until this point in 2023. The gray lines represent prices for production coming from California and the orange lines represent Washington prices. Dotted lines are 2022 and solid lines are 2023. Because of the cooler than normal spring in CA and the resulting delay in the cherry crop, the pricing data show that cherry packers needed to heavily discount their California inventory in anticipation of the PNW cherries coming on the market.

There are several questions that come to mind related to the future of the PNW sweet cherry industry. Will we see further increases in production in California, perhaps aided by the development of warmer weather varieties? Will climate change increase the probability of unusual shifts in the timing of regional harvests, leading to more volatility in fruit prices and availability? Can export markets or value-added uses be developed to provide an outlet for cherry production in years like this? Finally, will low prices and large financial losses this year lead to a reduction in cherry acreage in the PNW or in CA?

If you have thoughts on this, please feel free to share in the comments or with an email. You can also subscribe below to get new posts sent directly to your inbox.

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Forestland accounts for a majority of land conversion in Oregon

Posted on July 7, 2023 by Dan Bigelow

In my previous post, I showed that there is less land development in Oregon compared to Washington and California. Furthermore, I pointed out that development in all three states has declined considerably in recent decades. From a land conservation perspective, this may seem like a positive trend for our state, although some may still be alarmed by the fact that over 400 thousand acres of Oregon’s land have been converted from farm and forest uses since 1982. Depending on your perspective, rather than the total amount of land that has been converted, what may matter more is the types of land have been developed. This has implications both for the types of ecosystem services lost and the rural economic sectors directly impacted by the decline in its respective land base.

Here, using the same USDA National Resources Inventory dataset for Oregon, I’ll examine the pre-development distribution of land use for the land that was eventually developed. The figure below breaks down total land development into five-year increments over the 1982-2017 period. First, it is important to note that total development has declined considerably since its peak during the 1992-1997 period, although the most recent period shows a slight uptick in new development.

In nearly every period, forestland represents the highest share of land that has been developed. The lone exception is 1987-1992, when slightly more cropland than forestland was developed. Forestland’s share of pre-development land use has ranged from 34% (1987-1992 and 2002-2007) to 53% (1982-1987). In terms of acreage, the peak forestland conversion also occurred over 1982-1987 when about 44 thousand acres were developed. Recent totals of forestland conversion pale in comparison, representing less than 10 thousand acres in both the 2007-2012 and 2012-2017 periods. Overall, roughly 163 thousand acres of forestland has been developed in Oregon since 1982, accounting for 40% of all new development in our state.

Of the other major land uses, cropland or pasture generally comprises the second-largest source of new development. In terms of acreage, the peak cropland conversion occurred in 1987-1992, when 26 thousand acres were developed (34% of all development in that period), while the peak pasture conversion occurred over 1992-1997 when 30 thousand acres were developed (29% of all development in that period). Over the entire 1982-2017 period, similar amounts of Oregon’s cropland (103 thousand acres) and pastureland (104 thousand acres) have been developed, with each representing about 26% of all new development. Rangeland, the last major use included, generally accounts for a small share of total development (34 thousand acres; 8% of the total over the entire period), likely due to its concentration in the less populated parts of eastern Oregon. It may be worth noting, however, that rangeland conversion rates have nearly doubled between 2007-2012 (2 thousand acres) and 2012-2017 (almost 4 thousand acres).

In conclusion, recent patterns of land development in Oregon reveal a decline in overall development since the 1990s, with forestland being the primary type of land converted. While there has been progress in land conservation, the trends shown here suggest the need for continued efforts to strike a balance between development and preservation. Forestland provides timber and numerous ecosystem services, such as carbon sequestration, species habitat, and recreational land, while agricultural land (cropland, pasture, and range) provides food and its own set of ecosystem services. By understanding the patterns and types of land development, policymakers and communities can make more informed decisions surrounding the use of Oregon’s land resources for both current and future generations.

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Oregon develops far less forest and agricultural land than its neighbors

Posted on June 1, 2023 by Dan Bigelow

Oregon is well known for its comprehensive land use planning program. Initiated on May 29, 1973 under Senate Bill (SB) 100, the program marked its 50-year anniversary this week. SB 100 resulted in the development of 19 statewide planning goals that touch on various dimensions of land-related issues. Two foundational goals of SB 100 involve the preservation of agricultural and forest land. In practice, both are linked to a separate goal promoting the orderly expansion of cities through the establishment of Oregon’s well-known urban growth boundaries. Given the prominent role of land-use planning in Oregon, how do land development patterns in our state compare to our neighbors, Washington and California, in recent decades?

In this post, I’ll look at development patterns in Oregon and draw comparisons with neighboring states (Washington and California) over the 1982-2017 period, the most recent years available. To look at the development patterns of interest, I’ll be using microdata from the USDA’s National Resources Inventory, which is thought to be one of the most reliable sources of aggregate land-use information. As part of SB 100, municipalities in Oregon had to establish urban growth boundaries, most of which went into effect in 1980. The start of the 1982-2017 period thus broadly coincides with when Oregon’s land-use planning system really started to bind from an urban expansion perspective. However, it is worth emphasizing that the data presented below should not be interpreted as pointing to an impact of Oregon’s land-use planning system. For something like that, we would need a more rigorous statistical model (e.g., with data before and after the system was implemented and accounting for differences in land quality across states). Rather, the findings here simply describe land development patterns over most of the years since SB 100 was passed.

Land development (in 1000s of acres and as a percentage of starting undeveloped land) in Oregon, Washington, and California over 1982-2017.

The table above provides a five-year breakdown of land development for land that was originally in agricultural (including cropland, pasture, and range) or forest use over the entire 1982-2017 period. For each five-year period, the first number lists the acres of land developed (in 1000s) and the second (in parentheses) reports the developed acreage as a percentage of undeveloped land at the start of the period. A few things stand out. First, note that the amount of land converted in all three states increases over the first three periods before declining substantially in recent years. In other words, all three states are currently developing a fraction of what they had been in the mid-late 1990s. Oregon, for instance, developed 104,000 acres over 1992-1997, but just 21,000 over 2012-2017, amounting to a decrease of roughly 80%. In a recent publication, my coauthors and I highlight the widespread nature of this trend across the US, which we attribute to changes in commuting costs and household income levels. 

Second, development in Oregon has paled in comparison to Washington and California, in both absolute (acres) and relative (percentage) terms. With one exception, Oregon has developed less land than both its neighbors over each period. The lone exception is over 1982-1987, when Oregon developed 6,000 more acres than Washington. In total, the differences are stark. The 404,000 total developed acres in Oregon amount to 47% and 19% of total development in Washington and California, respectively, over this period.  As a percentage undeveloped land, Oregon’s development is also 47% of that in Washington and 33% of that in California.

Land development is a contentious public policy issue in Oregon. Once land is developed, it almost always stays that way, meaning that the loss of land that had previously been providing food, fiber, and forest products is generally irreversible. Private land-use decisions can involve difficult discussions among individuals that may have inherited land and cannot or do not wish to continue a family farm or forest operation, and I do not want to minimize these challenges. From a broader public policy perspective, however, context is important. As we mark an important milestone related to SB 100 and discussions regarding land use and housing supply in Oregon continue to unfold, it is worth keeping in mind we seem to have done quite well from a big-picture land conservation perspective.  

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An overview and recent snapshot of farmland rental in Oregon

Posted on April 21, 2023 by Dan Bigelow

The challenges associated with farmland accessibility for new and beginning farmers comes up often in agricultural policy discussions. Renting land is typically seen as a natural first step to securing land access, due to the lower required financial capital costs when compared with a land purchase. In this blog post, I’ll take a look at some of the recent patterns and trends in cash rental rates for Oregon farmland and offer suggestions for how to tailor future data collection efforts to provide more useful information for Oregon’s agricultural stakeholders.

In terms of the overall landscape of Oregon farmland, rented land accounts for a relatively small proportion of all land in farms. Per the most recent data published in the 2017 Census of Agriculture, rented farmland in Oregon accounts for 30% (about 4.7 million acres) of all farmland in the state. This is relatively low compared the national figure, which stands at 39%. The comparatively low rental percentage in Oregon can likely be chalked up to a few things. One is the large amount of grazing (pasture and range) land in the state. If it is not owned by the federal government, grazing land is generally more likely to be owned by the producer using it. There is also a large amount of irrigated cropland in Oregon – roughly 27% of all cropland in the state was irrigated in 2017 – which is also less commonly rented out than non-irrigated cropland due to the capital and maintenance costs associated with irrigation infrastructure.

The US Department of Agriculture’s National Agricultural Statistics Service (USDA-NASS) conducts its Cash Rents Survey every summer to collect data on the per-acre rent paid for non-irrigated cropland, irrigated cropland, and pastureland. A unique aspect of this survey is that it provides county-level data on an annual basis. Additionally, at just one and a half pages in length, the survey is very short and less complicated compared to other USDA surveys, which tends to produce a higher response rate. In 2022, 53% of the 3,733 surveyed producers responded to the cash rent survey in Oregon.

The 2022 county-level cash rental rates for Oregon are shown in the table below. For each county, the first number shows the 2022 cash rental rate for that particular type of land (a “-” indicates that no data are available for that county-land type combination) and the number in parentheses is the average value over the previous five years (2017-2022; note that there was no survey in 2018).

A few patterns in Oregon’s cash rental rates stand out. First, as one would expect, irrigated cropland is rented at a premium compared to non-irrigated cropland, with the statewide difference in 2022 being $160/acre, which is larger than the five-year average difference of $145/acre. The irrigation premium is attributable to the higher-valued crops that require irrigation water. The 2022 increase in this premium may reflect the multi-year drought Oregon’s producers have endured that has made irrigation water scarcer, and hence more valuable. Irrigation premiums tend to be largest in the drier parts of the state — e.g., Wasco ($334.50/acre) and Umatilla ($300/acre) had the highest irrigation premiums in 2022, whereas Benton ($26/acre) and Linn ($49/acre) had the lowest.

To give a better sense of the recent patterns in cash rents across the state, I’ve also mapped the cash rents for the same categories using the percentage difference of the 2022 value from its five-year average. All of the maps have the same color scale to facilitate a comparison across different cash rent categories. Non-irrigated cropland rents are down by 3.9% statewide but were up in most counties in the Willamette Valley and along the Columbia Basin, with Wasco (42%) and Columbia (45.7%) seeing the biggest gains. Irrigated cash rents are generally up statewide (4.5% overall) but are down in most counties in central and southeastern Oregon. Recent pasture rents show the largest amount of variation, with large drops in most eastern counties, particularly Harney (-57.8%) and Gilliam (-43.8%), contrasting with the large gains in Linn (46.4%), Jefferson (37.7%), and Tillamook (36.3%).

Moving forward, there are several pieces of information that would help to paint a more complete picture of Oregon’s farmland rental markets. For one, a major shortcoming of the current USDA cash rent survey is its limitations for tracking pasture rental. Renting out land used for grazing on a per-acre cash basis is relatively uncommon. While per-acre cash rental is the most common type of arrangement for cropland, pasture is more typically rented out on a per-animal unit month (AUM) or per-head basis, but these types of arrangements are not accounted for in the current USDA-NASS survey. Although the survey is designed to pick up the majority of cropland rental arrangements, it’s also worth noting that share-based rental arrangements are not included, though these represent a fairly small fraction of all rented cropland.

Other information that would be worth tracking is the renewal frequency of farmland rental contracts and the length of landlord-tenant relationships. To this point, although the USDA-NASS data gives a sense of cash rents in the current year, the values may be misleading if the rents were set several years prior. Multi-year contracts are especially common for irrigated land due to the investments in sprinkler and water delivery infrastructure required for irrigated production. In work I did previously at USDA’s Economic Research Service, we found that a large amount of land is rented between the same landlord and tenant for multiple years. Even if contracts are renewed annually, this makes it harder for cash-strapped new and beginning producers to access the land they need to build and grow their operation to a commercially viable scale.

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How Important is Crop Insurance to Oregon?

Posted on March 23, 2023 by Tim Delbridge

Legislators and advocacy groups are in the middle of negotiations related to the 2023 Farm Bill, and the federal crop insurance program is a big part of the discussion. Crop insurance is the largest farm program in the Farm Bill and is both a major tool for farm-level risk management as well as a significant subsidy program. There are calls for reductions in crop insurance program spending, and other legislators and producer groups are working hard to defend the program and grow it in strategic ways. With this context, I thought it would be interesting to pull together some information on Oregon’s participation and experience with the federal crop insurance program over the last 10 years. Farmer participation in the crop insurance program depends heavily on the farm’s crop mix and where they are located, with specialty crop producers much less likely to participate than producers of the largest commodity crops. The figures and statistics that follow are generated from the USDA-RMA Summary of Business (SOB) data that is publicly available (but can be difficult to wrangle).

One way to think about Oregon’s “return” from the crop insurance program is to look at the total amount received by Oregon farmers net of their insurance premiums. Figure 1 below shows the difference between the amount that Oregon farmers received from the crop insurance program in indemnity payments and the amount that they paid into the program in premiums over the past 10 years. The last three years, and 2021 in particular, had large crop losses and high indemnity payments, but in most of the last decade the state’s farmers netted between $10 and $30 million from the crop insurance program.

Figure 1. Oregon farmers’ net return from crop insurance program by year.

The average “return” from crop insurance to Oregon is roughly $48 million per year, which is not much compared to states that are stronger in crops with higher crop insurance participation rates. Figure 2 shows Oregon’s 10-year average annual net subsidy compared to those received by the 10 largest recipient states. The list is dominated by states producing major commodity crops, with California making the top ten because of the scale of their agriculture industry rather than particularly high rates of participation in insurance programs.  

Figure 2. Average net return to farmers from crop insurance participation from 2013-2022.

Though crop insurance plays less of a role in Oregon than in many other states, many Oregon farms benefit from the risk management provided by the program. Figure 3 shows the liabilities by crop for Oregon in 2022. This number is the total crop value that is insured. The top two crops are wheat, along with pasture/rangeland/forage. For producers of crops that are not insurable on an individual basis, or diversified farms for whom it would be cumbersome to insurance all crops separately, whole-farm revenue protection can be a viable option, and the product had more than $50 million in liability in 2022.

Figure 3. Insurance liability by crop, Oregon 2022.

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Should Oregon food and beverage companies export their products?

Posted on March 11, 2023 by reimerj

The answer could be “yes” for many companies.  Almost by definition, many potential customers reside in other countries.  Exports could substantially increase company revenue.  Yet there are reasons why some Oregon companies may not need to or may not want to.

First let’s consider some of the benefits of exporting.  Many Oregon companies produce a unique, high-quality product.  If the product is popular in the U.S., it will be popular in many other countries as well.  You can find, for example, Oregon craft beer and wine for sale in Australia and Japan, just as you can find it for sale in Ashland, Astoria, and Baker City.  Selling the product overseas can increase company profits.

A bonus is that exports help local economies.  Economics research shows that regions with lots of exporting firms have greater prosperity than regions with few firms that export.  Exporting is associated with faster economic growth and more innovative firms, all of which leads to greater regional prosperity.  Exporters tend to employ more workers and pay better wages.

Yet exporting will not be the right decision for every company.  Recent research in the OSU Department of Applied Economics examined the decision to export among Oregon food and beverage companies.  Survey respondents included beverage producers like wine and beer companies (47%) and producers of dairy products, fruit, vegetables, meat, and seafood (53%).  Surveyed companies were evenly split between companies with annual sales above $5 million, and below $5 million.

Thirty percent of the companies told us that they currently export some of their products.  Yet even for them, exports generally accounted for less than 25% of total sales.  Clearly the U.S. market will remain of primary importance for most Oregon food and beverage exporters.

So why didn’t 70% of the companies export anything?  The short answer is that exporting can be challenging.  While 21% of exporters said it was “not at all difficult” to start exporting, 50% said it was “moderately difficult” or “very difficult” to start.  Sometimes it is hard to find a reliable export partner.  There are extra costs from exporting, as exporters need an average 1.6 more employees to handle the exporting side of the business.  Languages may be different, and other countries may have unfamiliar packaging and food safety standards.

What role, if any, is there for government?  Exporting can create economic opportunities for a whole region, so policymakers may well want to support exporting.  A number of Oregon exporters said that state- and federal-assistance programs were helpful to them, particularly when starting out.  Trade missions and lists of potential trading partners can be very helpful.

If you like this topic, there is more information.  Please check out this publication:

https://onlinelibrary.wiley.com/doi/full/10.1002/jaa2.5

Contact:  Jeff Reimer, 541-737-1415, jeff.reimer@oregonstate.edu

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Labor Challenges and Import Competition Facing Oregon Specialty Crop Farms

Posted on January 26, 2023 by Tim Delbridge

Many Oregon fruit and vegetable producers have had a hard time finding sufficient labor in recent years, and have seen costs increase significantly. A recent USDA-ERS publication on the labor challenges facing specialty crop growers includes some data and conclusions that are highly relevant to Oregon farms and are worth a look. The authors, economists Linda Calvin, Skyler Simnitt and Philip Martin, explore trends in labor costs and import competition, and outline some strategies being employed by the specialty crop industry in response.  

The wage data cited in the article show that agricultural wages have risen more than 3 times faster than non-agricultural wages from 2001 to 2019 (16% vs. 5% after being adjusted for inflation). Minimum wages have been increasing in many states, and Oregon has the 5th highest minimum wage in the country. Furthermore, the phase-in of recent agricultural overtime legislation (i.e., Oregon House Bill 4002) will likely increase the labor costs of Oregon farmers even more.

The solutions cited in the USDA-ERS article include investing more in automation, relying more on H2A labor, substituting away from labor-intensive crops, and for many large produce companies, expanding their own production operations into Mexico or other Latin American countries. These strategies are generally more accessible to larger, well-capitalized firms, and contribute to upward pressure on the average size of commercial farms. The H2A program, for example, is supplying an increasing share of farm labor, but can be difficult to navigate and requires the employer to find qualified workers in their home countries and supply housing once they arrive.

Perhaps the most striking piece of information from this USDA-ERS report is the degree to which imports have increased in the fruit and vegetable category in recent years. Table 1 from the report (included above) shows that while domestic production of fruits and vegetables has been stagnant or declined from 2000 – 2019, imports have increased 129% and 155% for fresh fruit and vegetables respectively. The specialty crops with the largest increases in imports seem to be those grown by large U.S. produce companies that manage their own production operations in Mexico. These include lettuce, berries, and tomatoes, and others.

Focusing on significant Oregon crops, we see that imports as a share of domestic availability has increased significantly since 2000 for blueberries as well as snap beans, broccoli, and cauliflower (Table 2). The share of the domestic snap bean market that is imported has grown 282% since 2000, and this figure for broccoli and cauliflower is 203% and 437%, respectively. Some of the increases reflect fresh-market product imported from warmer climates during Oregon’s off season, likely putting pressure on Oregon’s processed veg producers. Crops that can be stored (e.g. apples, pears) have seen little change in imported product market share.  

There is no doubt that labor cost and availability will continue to be a challenge for Oregon specialty crop growers. There will continue to be pressure on Oregon farms to rely more heavily on labor saving technology and imported labor through the H2A program, either directly or through farm labor contractors. Of course, these solutions are not perfect and can be difficult for smaller operations to manage effectively.

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