Rising Costs Squeezing Small Farms

Peter Sinton / SF Chronicle 29nov00

Family farmers, including those from California -- the dominant farm state -- have been losing ground.

U.S. fruit production fell 10 percent in 1999, declining for the second consecutive year, according to the U.S. Department of Agriculture.

Between 1992 and 1997, the number of U.S. farms with land set aside for orchards and vineyards declined by nearly 10,000, or 13.5 percent, to 106,069. The state with the largest loss was California, where nearly 2,300 farms disappeared even as the number of acres devoted to fruit production increased.

Reasons for the decline:

-- PRICE SQUEEZE -- AS SEED, fertilizer and other agricultural suppliers consolidate, farmers have to pay higher prices for their supplies. Soaring fuel prices and rising interest rates are putting additional pressure on debt- heavy farmers.

At the same time, the dwindling number of grower cooperatives and food processors, and mergers among food wholesalers and retailers have led to more centralized buying. As a result, small farmers have less bargaining clout and get less for their products.

Prices received by fruit and nut growers have declined or been stagnant. During the past 10 years, the index of fresh fruit prices received by growers fell 18 percent, while consumers saw prices increase 62 percent.

• LABOR COSTS -- THE MINIMUM WAGE IS SET TO GO UP 50 CENTS TO $5.75 an hour in January and another 50 cents the following January. Many California farmers already pay a lot more than that for experienced hands and equipment operators.
• REGULATORY COSTS -- THE COST OF COMPLYING WITH ENVIRONMENTAL, labor and other laws is exploding. For example, a small farmer who needs just 10 seasonal workers to harvest a crop must spend time and money to comply with the Fair Labor Standards Act, Occupational Safety and Health Act, Immigration Reform and Control Act, Migrant and Seasonal Agricultural Worker Protection Act, and Worker Protection Standards.
• RISKS -- LARGER FARMS ARE BETTER ABLE TO ABSORB FINANCIAL AND OTHER RISKS AND EXPENSES THAN SMALLER FARMS.
• GLOBAL COMPETITION -- IMPROVEMENTS IN TRANSPORTATION TECHNOLOGY AND GENETICS HAVE MADE FOREIGN CROPS MORE COMPETITIVE IN U.S. markets. Meanwhile, many price-support payments to U.S farmers have been phased out since the Freedom to Farm Act was enacted in 1996. By contrast, foreign crop subsidies have continued.

As a result of these factors plus the strong dollar, U.S. exports of fresh fruits, vegetable and nuts to Europe have declined 4.6 percent since 1995 while imports increased 43.6 percent. For example, apple juice concentrate imports from China and other countries have more than quadrupled since 1990.

E-mail Peter Sinton at psinton@sfchronicle.com