Thursday, July 14, 2022


California's farming industry hit hard by inflation, and consumers are not immune

In the heart of some of America's richest farmland is where you will find California's top agricultural export and the nearly 7,600 farmers who grow one of the world's most popular nuts.

David Phippen is a third-generation almond farmer. Phippen says his father taught him everything he needed to know about growing almonds in the Central Valley, known as the country's fruit and nut basket.

That love for almond growing turned into Travaille and Phippen, Inc. Based in Manteca, the company exports its almonds around the world.

"My brother and I really never had a vision of doing anything but be almond growers," he said. "Being haulers and shelters, and packers and shippers of that was kind of out of the box and something that we dreamed up later in life."

The amount of almond consumption has dramatically gone up since the time Phippen first started growing almonds.

California is the biggest producer of almonds and grows about 80% of the world's supply. Nearly 3 billion pounds were shipped and consumed all over the world over the last couple of years.

"People learned that it was a very healthy product," Phippen said. "So, there just been a growth going on my entire life."

But just as Phippen has seen growth, he's also experienced challenges, such as the rising cost of farming.

"Inflation has been going on our entire lives at some point," Phippen said. "It's been great in the 70s. In the 80s, inflation became a big issue, and then it kind of became less of an issue through the 90s, in the first decade of the year of the 2000s. But right now it has escalated and it's very problematic. During those times, the price of almonds escalated along with the price of the inputs. And what I see different this year, is the price of almonds has actually dropped considerably while the inputs that it takes to grow almonds have increased dramatically. And I'm not talking eight percent. I'm talking two times or three times the former cost. So, it's quite a squeeze right now and I'm concerned that a lot of growers are going to grow almonds this year and not be profitable. I haven't seen that in a number of years."

Inflation in the United States has hit a 40-year high.

Phippen told KCRA 3 that among the items costing "significantly more" is fertilizer.

"For nitrogen fertilizer, I believe we're about three times what it cost last year," Phippen said. "For potash, it's somewhere between two and three times."

According to the U.S. Department of Agriculture, the average prices for liquid nitrogen, red potash, and anhydrous ammonia have all skyrocketed above 100 percent since this time last year.

"We're down to supply and demand. And there's a huge demand for fertilizer right now."

Ninety-five percent of fertilizer used in the Central Valley comes through the Port of Stockton, and the main bulk of that has been from Russia.

In addition to the COVID-19 pandemic, supply chain issues, and rising gas prices, Congressman Josh Harder, D-Tracy, attributed part of the fertilizer price increase to the war in Ukraine.

"It doesn't make a whole lot of sense but Russia is one of the largest is the largest sources of fertilizer for the Central Valley and for farmers across California," Harder said. "When we closed those markets because of the war, then that has actually skyrocketed processes across the valley."

He said that banning fertilizer and oil from Russia is "the right thing to do."

"I don't think California farmers want to be financing the war that (Vladimir) Putin is doing in Ukraine," he said. "But there are costs that come from that decision. What we need to be focused on right now is how do we make sure that we're mitigating those costs to our farmers? How do we bring down that fertilizer price that people are paying because it's one of the most important inputs that people have?"

Bruce Blodgett with the San Joaquin County Farm Bureau said fertilizer is one of many costs going up.

"All of our input costs are through the roof. From equipment, parts, you name it," Blodgett said. "The same as everybody else trying to go down to the hardware store and find something to fix something in their house, parts aren't there. It's just it's extremely difficult. Prices keep ratcheting up higher and higher and higher and it's devastating."

How the rising cost of fertilizer impacts the consumer

Consumers are paying almost 12% more for groceries this year than they were last year, according to the USDA.

But despite what you think, higher prices aren't making farmers richer these days.

"None of us likes this. None of us, nobody in agriculture," Blodgett said. "The prices are higher for an agricultural commodity, but our costs have gone through the roof to where we're not even covering the costs of production in some of these things with all of the increased expenses that we're getting. So, nobody is happy in this situation when these higher prices in the grocery store are not reflected in the farm gate value. So the farm level value is not anything like it is at the grocery store level. So we're not benefiting from it either."

When asked if the increased cost of fertilizer impacts the consumer, Phippen responded with this:

"I think what you're suggesting is that it cost me more to grow almonds this year, so I raised the price to the person that buys the almonds to put them in the grocery store. And it actually doesn't work that way. Almonds are probably at a 10 or 20-year low at their prices, even though it costs more to grow them. So basically, the price of almonds is determined by supply and demand, not what it costs me to grow them. So short term, they're going to get to the grocery store at a fairly good price to the consumer — they should be lower than they have been previously. So, maybe that'll get consumption going a little bit. In the meantime, I've got to have some sustainability economically to stay in business to hopefully those prices would come back up and make my business profitable.
Last year, for our operations it cost us somewhere around $3,400 to $3,500 per acre in input costs to produce an acre of almonds. This year, I think it's going to be considerably more than that. When you think about the average production in California, which is around 2,000 pounds per acre, and they're worth somewhere around $2 a pound, there isn't a lot of margin there. We're getting maybe a $4,000 gross income and a $3,500 or more gross expense. There isn't a lot leftover. That's why I'm concerned some of the growers maybe won't be profitable this year."

Without a profit, the question becomes, how many of California's farmers can survive?

Phippen: I think most growers can for a short period of time. And when I say a short period of time, one or two years. But if this were to be a five-year deal, you would probably see fewer acres of almonds being planted. And some of the older orchards might be removed and not replaced.

Blodgett: That's our biggest fear in this process, is what we're going to see at the end of the year in the operations that may no longer be there. We saw it even last year with people pulling out vineyards and some people pulling out orchards. Some of that ground ended up getting replanted to something else and some of it didn't.

That's just pretty frightening to see that land go idle. Such an amazing resource we have here that's unlike anyplace else because we have the ability to capture water and we have the ability with great soil to grow things. And to not use this land for agriculture is almost criminal.

Harder: We've already seen about 30 dairy farms close in San Joaquin County over the last few years ... higher prices at the grocery store, fewer jobs for our workers, and a weaker economy for all of us.

What could be done to help farmers

The congressman said one possible point of relief is the Lower Food and Fuel Cost Act.

The bill passed the House with bipartisan support, and the part Harder helped write is said to help farmers implement nutrient management programs and lower costs overall.

"It lowers the cost of fuel, lowers the cost of food prices by making sure that we are getting relief on those gas prices, and making sure that we're helping farmers put together nutrient management programs to dramatically lower the cost of fertilizer that we have across the valley," Harder said.

Harder said we're already starting to see the impacts of his bill.

"Over the past few weeks, we've seen the price of gas go down a little bit, not nearly enough," Harder said. "But a lot of that is responsive to some of the actions that we've been able to take. We've already seen the price of fertilizer dip a little bit, but a lot more is going to be necessary, I think this just needs to be the first step of a much larger action plan. Bringing down the cost of fertilizer is important, but what we need to be doing is suspending the gas tax entirely."

Source: KCRA News