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THE UC/AIC QUARTERLY
THE NEWSLETTER OF THE UC AGRICULTURAL
ISSUES CENTER |
VOLUME 13. NO. 2. 1999 |
Contents
Wine Outlook Workshop: Markets, Contracts,
Labor
Grower / Wine Construct
AIC Advisory Board
AIC Associate Directory
Farm Labor
China Symposium
Exotic Pests and Diseases: Biology,
Economics, Public Policy
UC Executive Seminar Set for Mid-December
New Center Volume Looks at Urban/Farmland
Issues
Sumner Speaks to WTO Session
AIC Publication List
AIC Video List |
Markets, Contracts, Labor
On July 7, the AIC held
its second annual Winegrape Outlook Workshop at the Buehler Alumni
Center on the UC Davis campus. About a dozen speakers addressed
the group on three main topics: international markets, winery/grower
contracts and risk management, and hired farm labor.
Wine Markets
As the world's fourth-largest wine producer, the U.S. has a well-established
role in the global wine market, but the winds of competition are
blowing.
About 150 growers, vintners and others at the Center's annual
Winegrape Outlook Workshop heard Barry Bedwell, president of Allied
Grape Growers, describe world-wide trends in the industry. Views
on the global and U.S. wine industry outlook also were presented
by Robert Nicholson of International Wine Associates, and Augustin
Huneeus of Quintessa Winery.
Three nations, the U.S., Australia, and Chile dramatically expanded
global wine exports during the 1990s. By 1997, all three were
exporting between 40 and 60 million gallons yearly, about as much
volume as Europe's Bordeaux region—although only about one-third
the market value. Europe's traditional wine countries still dominate
the world's wine supply, with France (20.3%), Italy (19.2%) and
Spain (12.8%) producing over half of the total. The U.S. share,
mostly from California, is 9.5%.
During the 1990s, trends in grape acreage and wine production
in different regions of the world varied:
- In Western Europe (France, Italy, Spain, Portugal, Germany,
Austria and Greece), both acreage and production trended downward
during the decade. Producing acreage, for example, dropped
as much as 20%.
- In South America (Argentina, Chile, and Brazil) and in
South Africa, acreage and production were generally steady.
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AIC Advisory Board
- William F. Allewelt, Jr., Chair
- President Emeritus, Tri/Valley Grower
- Karen Caplan President and CEO, Frieda's Inc.
- Dan Dooley, Vice Chair
- Attorney, Dooley & Herr
- Ralph Grossi
- President, American Farmland Trust
- Brenda Jahns Southwick
- Attorney
- California Farm Bureau Federation
- Betsy Marchand
- Special Program Coordinator
- Yolo County Flood Control and
- Water Conservation District
- Milenda G. Meders
- Friends of Extension
- Owner/Operator, Madera County Farm
- Jack Pandol
- President, Grapery, Fresno
- Henry Schacht
- Agriculture Consultant and Writer
- Terry Scranton
- Retired Executive Vice President
- Bank of America
- Dorcas Thille
- Hansen Trust Advisory Board
- Owner, J.K. Thille Ranches
- Richard Zacky
- Manager, Engineering & Development, Zacky Farms
AIC Associate Directors
- Science and Technology
- Julian M. Alston, Professor
- Agricultural & Resource Economics
- UC Davis
- International Trade
- Colin A. Carter, Professor
- Agricultural & Resource Economics
- UC Davis
- Resources and the Environment
- Keith C. Knapp, Professor
- Soil & Environmental Sciences
- UC Riverside
- Agribusiness Issues
- Jerome B. Siebert, Extension Specialist
- Agricultural & Resource Economics
- & Policy, UC Berkeley
- Rural-Urban Issues
- Alvin D. Sokolow, Extension Specialist
- Human & Community Development
- UC Davis
- Commodity Policy and Market Issues
- Daniel A. Sumner, Professor
- Agricultural & Resource Economics
- UC Davis
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- In the U.S., both acreage and production were higher. (Acreage
rose from less than 300,000 to between 350,000 and 400,000;
production went up more than a third.)
- In Australia both acreage and production were markedly higher.
A substantial part of Australian premium grape acreage (Chardonnay,
Shiraz, Cabernet Sauvignon and Merlot) is still non-bearing.
"Their wine will have a major impact on world markets," said
Bedwell. Australia may have "a perceived premium position"
in future global markets, Nicholson added, but California
is in a position to challenge. Australia's wine industry plan
calls for $4.5 billion in annual sales by the year 2025. In
1998, Australia's domestic and export wine shipments were
about one-third of California's.
Meanwhile, Bedwell said, recent state figures have increased the
estimates of bearing and non-bearing wine grape acreage in California,
with a 44% increase in total acreage of primary premium varietals
projected by the year 2001. The North Coast region, he added,
is in the least exposed position in regard to potential over-production,
followed by the Central Coast, the North Valley, and the Central/South
Valley.
Based on his many years as a key figure in the industry, Augustin
Huneeus had some sage advice for the California wine industry:
Don't count too much on exports. Chile, for example, can produce
quality wines cheaply. But California wines have a unique advantage:
California itself. "In 40 years, the one constant I have seen
is the evolution toward quality. But it is place, much more than
variety, that defines a quality wine. Our wines, grown here—that's
what we should sell," Huneeus said.
Grower/Winery Contracts
In June, the Center sent a questionnaire about winegrape contracting
practices to all 12,000 growers and wineries in California. Preliminary
findings from this survey were reported by Dale Heien, Rachael
Goodhue, and Hyunok Lee of the UC Department of Agricultural and
Resource Economics. Survey questions dealt with written versus
oral contracts, methods of determining price, bonus/penalties
and other aspects of winegrape contracts. A detailed report will
be published by the Center later this summer.
A few highlights of the preliminary analysis, based on about 2,000
responses:
- Statewide, 70% of responding growers use written contracts,
11% use oral only, 9% use both (with different wineries),
and 10% use neither. The highest percentage of written contracting
was in the southern San Joaquin Valley (74%) and the lowest
in the Central Coast (56%).
- Pricing procedures are almost evenly divided among "stated
in contract" (31%), "negotiated yearly" (27%) and "reference
price," tied to some more general level (35%).
- The average California grape grower has been in business
19 years, and with the same winery for nine years. The figures
were generally similar in all regions.
- Grape acreages reported by respondents reflected industry-wide
patterns (indicating that the survey returns are representative):
25% of the respondents, 10 acres or less; 22%, 11 to 25 acres;
15%, 26 to 49 acres; 11%, 50 to 99 acres; 11%, 100 to 199
acres; 8%, 200 to 499 acres; and 9%, 500 acres and more.
Contracts are one form of risk management. Lee described another:
federal crop insurance, a tool used by some growers to mitigate
the impact of substantial fluctuations in yield. Catastrophic
coverage is provided at no premium and $60 processing fee for
50% yield guarantee at 55% of the USDA price. Although multiple
peril crop insurance has been available since 1981, only about
7% of California grape growers are insured. Participation is higher
in the Central Valley than in coastal regions.
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AIC Staff
- Daniel A. Sumner, Director
- Ray Coppock, Communications Specialist
- Sandy Fisher, Administrative Specialist
- Karen Jetter, Program Researcher
- Kathy Karg-Eichler, Office Assistant
- Marcia Kreith, Program Analyst
- Laurie Treacher, Office Assistant
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The AIC Quarterly is published four times a year by
the University of California Agricultural Issues Center, One Shields
Avenue, Davis, CA 95616. For additions or corrections to our mailing
list: telephone 530-752-2320, fax 530-752-5451 or email agissues@ucdavis.edu.
The AIC Quarterly, AIC Issues Brief, a complete list of
our publications and more can be found on our website at https://aic.ucdavis.edu.
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Farm Labor
Monthly farm employment in California ranges from 200,000 in February
to 600,000 in September. Weekly wages average $230. Nine out of
ten workers are immigrants, and four or more of the ten are probably
unauthorized. That's the sketch of California farm labor provided
to the Winegrape Outlook Workshop by Philip Martin, UC Department
of Agricultural and Resource Economics.
Middlemen (farm labor contractors, custom harvesters and other
third-party employers) have become more important and now account
for about 40% of all farm employment—50% to 60% in some seasonal
tasks.
Farm employers are challenged by four developments:
- Minimum wage rates (now $5.15 federal, $5.75 in California),
the possibility of future raises in that rate, and the high
percentage of fringe benefits in total labor costs.
- The new INS strategy of comparing paperwork (checking social
security numbers, for example) and telling employers to inform
their employees of discrepancies.
- Increased attention on farm labor contractors who violate
labor laws, particularly those paying less than minimum wage.
- Changing labor union strategies.
Mechanization, Martin pointed out, can be a crucial factor. It's
easier to mechanize an expanding commodity such as wine grapes,
because new acreage can be planted for machines. About half of
the wine grapes grown in the Central Valley and the Central Coast
are mechanically harvested, but only 20 percent of those in the
North Coast. Generally, the less expensive the grapes, the more
likely they will be mechanically harvested.
In response to questions, other points made by Martin and by Herbert
Mason, California State University, Fresno, professor and new
member of the state Agricultural Labor Relations Board:
- The day labor market, in particular the construction industry
with its higher wages, draws off many agricultural workers.
- Changes in the welfare system are not expected to have any
impact on the agricultural labor supply, since virtually all
new agricultural workers come from outside the U.S.
China Symposium
The AIC co-sponsored a symposium with the International Agricultuaral
Trade Research Consortium which attracted about 100 scholars from
around the world to San Francisco on June 25th and 26th. Two full
days of economic research presentations included intensive discussions
of China's trade policies, analysis of World Trade Organization
membership for China, China's domestic agricultural policy, and
prospects for agricultural trade growth. AIC director Daniel Sumner
chaired the meeting and associate director Colin Carter made a
plenary session presentation. Draft papers from the meeting are
available on the AIC website at:https://aic.ucdavis.edu
Exotic Pests and Diseases:
Biology, Economics, Public Policy
The increasing threat to California (and the world) of exotic
pests and plant and animal diseases is a complex puzzle that demands
equal attention from biologists, economists and public policy-makers—and
it got that attention during the Center's recent conference in
Sacramento.
"Pest and disease prevention and eradication programs, on
both the animal and plant sides, are the very infrastructure of
our agriculture; they are like roads and bridges," said Ann Veneman,
former secretary of the California Department of Food and Agriculture.
Since some invaders are urban and environmental pests, all Californians
have a stake in exotic pest policy, Center director Dan Sumner
said.
More than 150 policy-level stakeholders, and others, took part
in the day-long conference. In addition to broader analyses of
the global problem, they heard reports of 14 case studies developed
in collaboration with CDFA, the US Department of Agriculture's
Animal and Plant Health Inspection Service (APHIS) and agricultural
industries. High-ranking government spokespersons included CDFA
Secretary Bill Lyons, USDA Deputy Secretary Richard Rominger,
and Isi A. Siddiqui, trade advisor to the US Secretary of Agriculture,
as well as Veneman.
"Our objective in this project is to use the science, the
regulatory information and the economics to consider the full
set of costs and benefits associated with exotic pest programs,"
Sumner said.
The lead-off session featured presentations on the biology of
invasive species by UC Davis Professors Jim Carey (Entomology)
and Mark Rejmanek (Evolution and Ecology). Sumner then outlined
economic principles for evaluating exotic pest policy.
Two points reiterated by regulatory agency officials and others
are the need to (1) coordinate programs and (2) convince decision-makers
as well as the public of the scope and urgency of the threat.
Lyons: "When animal and plant disease and pest prevention are
debated in the public policy arena, especially as they relate
to budgetary policies, key data on the value of these programs
are often lacking."
Rominger pointed out that a presidential executive order last
February coordinated federal agency exotic pest and disease programs
and established a National Invasive Species Council.
Veneman: "I'm not saying the public should fund every pest and
disease prevention and eradication program—but I certainly
think public funding has a strong role. We need to keep educating
legislators and the public."
The conference marked a milestone in the Center's project, Exotic
Pests and Diseases: Biology, Economics, Public Policy. Still to
come are completion of the policy analysis of particular pests,
and evaluation of specific regulations. A volume of scientific
papers is planned. The proceedings of the May 25 conference are
scheduled for publication in October. (If you would like your
name on the distribution list, contact the Center.) A 13-minute
Center-produced video outlining the problem in California, the
regulatory programs and the policy issues—also titled Exotic
Pests and Diseases—is now available. ($15. includes shipping
and sales tax.)
UC Executive Seminar Set for Mid-December
This year's annual UC Executive Seminar on Agricultural Issues,
with the theme "Marketing Through the New Global Retailers," is
scheduled for December 13, with senior executives and directors
of West Coast food companies among the speakers. The UC Center
for Cooperatives joins AIC in co-sponsoring the event.
Dealing with the changing structure of retailing and food distribution
and its implications for the food industry, the day-long seminar
will hear presentations by industry leaders on:
- Outlook for food and agriculture
- Dr. Jerome Siebert, Economist, UC Berkeley
- Marketing through the food chains: the food service industry
- Dick Spezzano, Consultant and retired VP, Produce and Floral
Division, Vons Markets
- Christine McGlasson, Director, Food Services
- Marketing, Blue Diamond Growers
- The challenge to major food commodities
- Harry Cleberg, CEO, Farmland Industries
- Don Schriver, Exec. VP, Dairy Farmers of America
- Lunch speaker
- Richard DeBurgh, Food Service Director, Glendale School
District
- The challenge to fresh and frozen fruits and vegetables
- Russ Hanlin, Retired CEO, Sunkist Growers
- Dennis Mullin, CEO, Agrilink Foods
- Marco Dimare, The Dimare Company
- The challenge to nuts and branded lines
- Walt Payne, CEO, Blue Diamond Growers
- Tom Shelton, President, Joseph Phelps Vineyards
- Concluding observations
- Mahlon Lang, Moderator, Director, University of California
Center for Cooperatives
The seminar will be held from 8:30 AM to 4:45 PM at the Doubletree
Hotel in Sacramento. Also open to all is a reception and dinner
held the evening before the seminar (December 12) at 6 PM at the
Doubletree.
New Center Volume Looks at Urban/Farmland Issues
Sometimes a single viewpoint illuminates an intractable policy
problem, but often a group of informed—and intimately concerned—observers
may come closer to real-world solutions. That's the approach of
a volume just published by the Center. It's California Farmland
and Urban Pressures: Statewide and Regional Perspectives, described
as "a comprehensive view of California's farmland protection problem."
The 210-page book consists of papers by 10 authors, representing
a diverse set of backgrounds and perspectives, including community
activists, farmers, land use experts and UC academics. Edited
by Albert Medvitz, Alvin D. Sokolow and Cathy Lemp, it is the
first single volume to address many different but highly relevant
aspects of the farmland-urbanization issue in California: fringe
area problems, the state policy framework, the work of land trusts,
local policy developments, and land market dynamics.
With an introduction by Sokolow and Medvitz, the volume presents
both statewide patterns and regional and local studies. Sokolow,
with the UC Davis Department of Human and Community Development
and associate director of the Agricultural Issues Center for Rural-Urban
issues, is an extension specialist in public policy. Medvitz is
a Rio Vista rancher, international consultant on environmental
and agricultural issues, and a regional director of the California
Farm Bureau Federation.
In their introduction, Sokolow and Medvitz look at the seriousness
of the often over-simplified problem, including the urban side
of the equation: "The great challenge in California is to figure
out how to maintain a healthy and prosperous agricultural industry
in an urban and rapidly urbanizing state. The most pertinent policy
tools thus deal with the direction, rate and efficiency of urban
growth." Although local governments currently "do the heavy lifting"
within a state policy and legal framework, they add, "It is possible
to strike a reasonable balance in which state policies and guidelines
are made more explicit and local governments are given substantial
fiscal incentives (including increased local revenue-raising capacities)
without severely restricting the ability of communities to decide
their public futures."
The first chapters deal with historical and demographic trends
in California, urban fringe conflicts, the state policy context,
and private sector efforts (land trusts, conservation easements).
The regional and local chapters describe trends and developments
in Napa County, Marin County, the Central Valley/North Bay, northern
Sacramento Valley, and Ventura County, focusing on the forces
of urbanization, farmland policy and community politics.
California Farmland and Urban Pressures is available from the
Center for $20. (Price includes postage and sales tax.)
Sumner Speaks to WTO Session
On June 28, the USDA and the U.S. Trade Representative held a
one day session in Sacramento to hear views on the upcoming round
of multinational trade negotiations. Center director, Daniel Sumner
presented views on an agricultural negotiating position and strategy.
Sumner noted the benefits of rapid elimination of trade barriers
and export subsidies and pointed out that extending the Uruguay
Round Agreement would create open markets for agriculture in about
a decade. Sumner cautioned that re-opening of previous agreements
or focusing internal support would delay a deal with little effect
on market opening.
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