Farmers Finding Hard Row to Hoe : B of A’s Midyear Study Cites Double Whammy of Freeze, Drought

When the Christmas freeze swooped through the California heartland last winter, it left in its wake acres of ruined lemons and oranges, thousands of unemployed laborers and communities too crippled to care properly for their poor.

In addition, five years of drought caused farm acreage to drop, with cotton plantings among the hardest hit. Other thirsty crops have declined as well.

Despite this battering from Mother Nature, industry experts have hoped that the state’s farm economy would continue to grow this year, buoyed by the crop diversity that has saved it from disaster in the past.

Such continued growth from one of the state’s major industries, experts hoped, could offset woes in other big industries such as real estate, construction and aerospace. And that could help rescue the state from a recession that persists despite signs of recovery elsewhere in the nation.

But those hopes are beginning to fade.

A midyear farm forecast released Thursday by Bank of America, one of the state’s biggest farm lenders, predicts that after four years of solid growth, sales and profits of California’s farm economy will shrink this year. It cited, among other things, the devastation of the drought and freeze.

The bank was quick to point out, however, that the resilience of the state’s agricultural sector “will be evident this year, despite the severe weather conditions.”

“Yes, it’s down, but it’s pretty resilient, and the overall financial health is pretty good,” said Fred Cannon, B of A senior economist and author of the 1991 agriculture report. And the bank foresees resumed growth at a rate faster than inflation during most of the 1990s.

In addition, he said, the state’s farm economy is adapting to the reduced water availability with help from the state water bank, which bought water from farm water districts and sold it to urban and agricultural users.

But not all agriculture experts and farmers agreed with the bank’s forecast. Many point to the freeze-devastated Central Valley, where unemployment is as high as 50% in some communities, and question farming’s ability to bounce back.

“You can’t go down to Tulare County and talk about the resilience of the farm economy. They’ll lynch you there,” said Frank Limacher, agricultural economist for the California Department of Food and Agriculture. “You’ve got to be very careful in these reports to talk about the farmers rather than the farming communities, and I don’t see a lot of these communities coming back real quick.”

B of A predicts that total sales of farm products in 1991 will dip 3.4% to $17.2 billion and that net farm income will fall 10% to $5.4 billion. By several measures, including land values, the state’s farm economy has grown steadily since it hit bottom in 1986 during the national farm crisis.

The picture nationwide for 1991 is similar to that in California, although perhaps a little less gloomy. U.S. agriculture will see a slower 1991, with farm receipts slipping about 2.3% to $170 billion and net cash income dropping nearly 9% to $50 billion, according to the American Farm Bureau Federation. The group blamed falling prices for some commodities and a reduction in government subsidies.

The numbers “are down somewhat from last year, but last year was a very good year. It was a record year,” said Terry Francl, an economist with the industry group.

Despite freeze, drought and a dramatic drop in dairy prices since last winter, California farmers in general will not face ruin because debt is low and the market for many farm products remains strong, Cannon said.

“Certainly, individually and farm by farm there are problems,” Cannon said, “But overall, it’s not a disaster by any means.”

At the California Department of Food and Agriculture, B of A’s report was met with some skepticism.

“It’s a very risky business to forecast in the middle of the year,” especially because many commodity prices are volatile and the state’s large crop-export program can fluctuate with currency values, Limacher said. For that reason, the department makes no forecasts and is still working on delivering accurate statistics for last year, he said.

B of A’s midyear forecast for 1990 was overly optimistic, and Limacher said he suspects that this prediction may be overly pessimistic. “I’m hesitant to be really critical of their report because I’m in awe of their ambition. But it’s a bit early to say,” he said.

Citrus crops were hit hard by the December freeze, yet even there the picture is mixed.

Industry estimates put this year’s navel orange crop at about 75% of the average for the past four seasons. But higher prices should keep overall income at least at the level of the previous four years, if not higher, said Joseph F. LoBue, director of marketing for LoBue Bros., a citrus grower and packer in Lindsay, Calif.

But don’t try telling Central Valley farming communities that citrus wasn’t slaughtered this year by the freeze.

“We didn’t pick anything this year. That did make it kind of tough,” said LoBue. The company laid off 450 people, although it has recently been packing some Valencia oranges, he said.

“It’s a pretty major disaster around here,” LoBue said, noting that unemployment in Lindsay is running about 50%.

And the drought has taken its toll on California’s cotton crop, said Gene A. Lundquist, vice president of Calcot Ltd., a Bakersfield-based cotton marketing cooperative with 3,300 members in California and Arizona.

“We have 25% fewer acres than we would have had if we didn’t have the drought,” Lundquist said. And cool weather after the March planting probably will lead to lower production on the state’s 900,000 acres of Upland cotton and 59,000 acres of Pima cotton, he said.

“When you compare to last year, I think we’d have to paint a little less rosy picture,” he said.

But few are willing to call 1991 a catastrophe for farmers.

“The drought is not going to cause us to dry up and blow away,” said Mike Henry, a spokesman for the California Farm Bureau. “Agriculture is going to stay.”

Farming Frustrations

Hard hit by the December freeze and the ongoing drought, California’s farm economy will contract in 1991, according to a report by Bank of America. The report’s highlights:

* Total cash receipts--the value of the sale of raw farm products--will decline $600 million in 1991 to $17.2 billion. The decline will result from the combination of freeze damage to crops, drought-reduced acreage and lower dairy prices.

* Exports will decline somewhat in 1991, to $4 billion from $4.2 billion last year. Reduced cotton production because of the drought will be the primary reason for declining exports.

* Agricultural water deliveries are being dramatically reduced this year as a result of the fifth year of drought. But farm acreage in the state will decline by less than 15% because of increased ground water pumping and the new state water bank.

Source: Bank of America

California Farm Revenues

1980: $14.0 billion

‘90: $17.8 billion*

‘91: $17.2 billion*

* Estimates by the Bank of America

Source: California Department of Food and Agriculture