OSU Applied Economics Outreach Blog

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.

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.  

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.

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

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 5^th 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.