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This milk parlor is at the Castelanelli Dairy near
Lodi, where, a year ago, searing summer heat resulted
in cow losses there and in several other San Joaquin
Valley counties. This year, stronger milk prices have
brightened the outlook for California’s $5 billion
dairy industry. Photo by Bob Krauter Capital Press |
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Farm
economy strong in the West
Despite
rough winter ag looking good in California
Bob Krauter
8/10/07
Capital Press
They've
been through blistering heat, bitter cold and drought, but
California farmers have survived the weather adversity and
appear to be on course for a favorable year. A mid-year check
of the farm economy reveals that stronger farm prices appear
to be the norm across much of the West.
California agriculture began the year with a severe January
freeze and a dismal Sierra snowpack that has reduced water
availability across many parts of the state. Still, there are
hopeful signs for a strong year, according to Ernest Hodges,
president of Sacramento Valley Farm Credit in Woodland.
"Typically, farmers in California do better in a dry year as
long as they have adequate water, and we have adequate water
for this year," Hodges said. "But we sure need to have some
good rains this winter, or it could be a different story next
year."
Many crops in the Sacramento Valley, including rice and
processing tomatoes, have benefited from favorable planting
and growing weather.
"Everything is a little bit early, and all of the crops look
good from a price standpoint," Hodges said. "The ethanol push
on corn and corn prices has had a beneficial, favorable impact
on most row crops. If you drive up the Sacramento Valley, you
see a lot more corn this year than you would in virtually any
other year. I have been here since 1982, and I can never
remember having this much corn in the ground."
Due to ethanol's impact on the corn market, more California
farmers are double-cropping with sunflowers for seed and oil
production rather than farming beans or other field crops.
Almond growers are expected to produce a record 1.3 billion
pound crop, which could put pressure on grower returns. Hodges
said the prune and walnut crops in his area appear to be
lighter, but the economics, especially for walnuts, look
favorable.
In January, citrus, strawberry, avocado and some vegetable
growers in the southern San Joaquin Valley and in Southern
California were hit by one of the state's worst freezes in
history.
Tim Leach, senior vice president for Fresno Madera Farm
Credit, said farmers have battled through the freeze, which
came on the heels of a severe heat wave last July, which took
a toll on dairy and poultry farms.
"We finance more than 200 crops, so take your pick," said
Leach when asked to assess the economic picture in his area.
"But generally speaking, the vast majority are looking at a
good year. The freeze did hit our citrus growers, but at the
same time, they learned from the early 1990s that they should
have crop insurance, and that really helped most of those
guys."
A relatively mild summer has helped stretch limited irrigation
supplies in many areas of the San Joaquin Valley as most
irrigation districts have shut off deliveries for the rest of
the season. Favorable growing conditions have put the state's
2007 almond and grape harvests about a week ahead of normal
schedule.
Leach said the state's $5 billion dairy industry marked a
turnaround last month when milk prices finally reached the
desired 3-1 ratio with robust feed prices.
"We finally got that in July, and that tells you that the milk
price is up and feed costs have leveled off. That's a good
sign," Leach said. "It's now time in our opinion for them to
sock some of that cash away. If they're smart, that's what
they'll be doing to get their balance sheets right-side up."
In the state's vegetable industry, leafy greens growers are
rebounding from last fall's E. coli outbreak that caused sales
for spinach, lettuce and other leafy greens to plummet for
several months. The industry is operating under a new
California Leafy Green Handler Marketing Agreement with a set
of standards that growers and handlers must follow to prevent
foodborne illness.
The news on the farm economy front is encouraging farther
north too. Brent Searle, special assistant to Oregon State
Agriculture Director Katy Coba, reported that the outlook is
promising in his state.
"In general, commodity prices right now have been as high as
they have in a lot of years. Wheat prices are sky-high, over
six bucks - I have never seen that in my lifetime," Searle
said.
Dairy prices are at historic highs and hay growers, too, are
baling better profits than they have for some time.
"If you are on the producing end of things, of course some of
that goes into inputs for others who are having to pay those
high prices," Searle said. "So that is a two-edged sword, but
in general agriculture is as good as it has been in a long
time."
Jay Penick, president and chief executive officer for the
Northwest Farm Credit Services in Spokane, Wash., had positive
words in assessing agriculture in the Pacific Northwest.
"If you had to grade it, I probably right now would give it an
A-minus," Penick said, noting that prices for virtually all of
the region's commodities are strong and farmers "have prices
that are allowing them to cover their costs and have a return
on their investment. That's probably the first time in many
years when we have had this number of commodities that have
been in that good of shape."
The few exceptions are fresh market onions, which have
suffered softer prices and timber, Penick said. Because their
fate is closely tied to the housing market, foresters could
see tougher times and lower prices. Even though the livestock,
dairy and poultry sectors have been hit with higher feed costs
associated with the demand for corn for ethanol production, it
hasn't dampened farm income prospects.
"Even when you take into account the high grain prices and the
impact they have on livestock producers, those livestock
production units are getting good enough prices to cover those
costs at this point in time," he said.
Bob Krauter is the California editor based in Sacramento.
E-mail: bkrauter@capitalpress.com.
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