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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