Agriculture a source of strength for the San Joaquin Valley

Out in the farmland, beyond the foreclosed homes and vacant storefronts, it might have been hard to hear the crash.

Agriculture has stayed fairly strong amid the economic troubles of the Northern San Joaquin Valley.

Gross farm income nearly doubled from 2000 to 2008, to an estimated $7.6 billion worth of milk, fruit, nuts, poultry and other products.

While this sector has some troubles of its own -- notably the still-low prices for dairy farmers -- experts see it as an overall source of strength for the region over the next few years.

"Agriculture is the engine that can drive an economic recovery in California," said Paul Wenger, who grows walnuts and almonds west of Modesto and is president of the California Farm Bureau Federation.

County crop reports likely will show a decline in gross income for 2009 because of the milk prices, but the trend clearly is up.

Contrast that with what happened in housing. Median home sale prices tripled in the first half of the past decade, then sank to their previous level by last year.

This brought foreclosure for one in seven of the region's homes and contributed to a recession that has pushed the jobless rate close to 20 percent.

Five years ago, farming advocates warned of development spreading across the fields and orchards. That threat could return sometime in the future, but for now ag is standing its ground.

"Agriculture will continue to shore up our valley's and our state's economy," said Mark Bender, chairman of agricultural studies at California State University, Stanislaus.

Graduates are finding plenty of job offers in farming and related fields, he said.

On the plus side

The valley has advantages that keep it in the front ranks of the world's food- producing regions: Mostly warm, dry weather from spring to fall. Ample irrigation water in most places, although the West Side has suffered from federal cutbacks. Roads, rails and ports that help move goods. Research and education that make farming and processing highly efficient.

Agriculture nationwide has also benefited from the sound state of the farm credit system amid the crisis in mortgage lending.

"We've got challenges with water, dairies are having their challenges, but overall, we've held up pretty well," said Leonard Van Elderen, president and chief executive officer of Yosemite Farm Credit, based in Turlock.

Farming is what economists call a primary sector, bringing money into the region from elsewhere. The farmers spend their income on tractors, fertilizer, pesticides, veterinary care and other needs. Plenty more of the region's residents work at places that process the raw products, including wineries, poultry plants, nut processors and fruit canneries.

"The money that comes into California turns over many times before it leaves," said Dave Long, president of Hilltop Ranch Inc., an almond processor near Ballico. It employs 220 people and expects to ship about 60 million pounds of nuts to 65 countries this year.

Long said the almond industry has seen average annual growth of 10 percent in recent years, and it could continue as consumers see the health benefits of this food.

The Modesto area is the nation's biggest producer of wine, which has its own economic ripples. The industry generated about 330,000 jobs in the state in 2008, according to a study done for the Wine Institute in San Francisco.

Domestic sales dropped 3 percent with the recession last year, the group reported, but it sees increasing consumption by younger adults.

The outlook is not so bright for some farm products. The canning peach industry, once a giant in the region, has contracted because of sluggish demand and the labor-intensive harvest. The dairy business, though still No. 1 in gross income, is mired in a price slump that started when the recession cut into export demand in late 2008.

Milk prices have been below the cost of production for most of the past 16 months. They started to improve in the fall, only to drop again.

An estimated 10 percent of the state's dairy farms closed last year, according to Western United Dairymen in Modesto. More are likely to do so this year, as lenders cut off the lifelines that had kept them going, said Kevin Abernathy, executive director of the California Dairy Campaign in Turlock.

He said the industry still has not solved its age-old dilemma: When prices are low, farmers produce more milk to keep up their cash flow. When prices are high, they keep up the volume to maximize their gains. Both contribute to milk surpluses.

"Without some changes, we will continue to see family farms go out of business and everything they worked for go by the wayside," Abernathy said.

Dairy industry's ripple effects

Despite the dairy farmers' plight, production has continued at the plants that employ thousands of north valley residents in making cheese, butter, ice cream, milk powder and other products.

A study done for the California Milk Advisory Board shows what dairy can do: In 2008, the industry generated an estimated 443,574 jobs in the state, including the ripple effect for truckers, grocers and other businesses.

Dairy has another strength: It provides year-round work, which is the trend for much of the region's food production. Fruit orchards and canneries, by contrast, mainly employ people in summer.

Many fruit growers have moved into nuts because they can be harvested by machine. They also cite the difficulty of assuring that farmworkers, mainly from Mexico, are here legally.

During the housing boom, growers said their labor supply dropped as workers found jobs in construction. With building much reduced, the people are not so hard to find.

The outlook for both workers and employers depends on the economy and on whether Congress finally agrees on immigration reform.

Over the long term, Wenger said, farms will likely need workers who are fewer in number but have more skills. This could include operating the machines that harvest nuts, wine grapes, canning tomatoes and other crops.

Facing challenges

Agriculture faces a challenge as well from groups claiming that dairy cattle and other livestock are mistreated. The egg industry was targeted in 2008 by a successful state initiative aimed at giving more space to laying hens.

Farmers also face rising costs for measures aimed at reducing air and water pollution. They have to keep manure out of waterways and move toward low-emission tractors.

Irrigation supplies are fairly secure for most of the region right now, but that could change in the coming years.

Fixes for the Sacramento-San Joaquin Delta could mean less water diverted from tributaries by the Modesto and Turlock irrigation districts and others. The MID and TID also face the federal relicensing of Don Pedro Reservoir, which could boost releases into the lower Tuolumne River.

But the push to protect the environment also brings opportunities for farmers.

They could grow their crops in a way that increases the capture of carbon dioxide, believed to be the main cause of climate change, and be paid for it under an emerging system. They could generate energy from cattle manure or orchard prunings, including a wood-burning plant proposed for Modesto.

The valley also could serve consumers who want to get their food close to home -- a movement that is especially strong in the Bay Area.

"People want to know where their food is coming from," Wenger said. "They want a face on the farmer."

He added that exports will continue to be vital to valley farming. Almonds, wine and dairy foods are among the top products from California.

Exports have been strong recently thanks to the weak dollar, which makes U.S. products more attractive, but this could change. Farmers also have to deal with trade barriers around the world.

The outlook for agriculture is never certain, whether it's the price of walnuts next year or the odds of rain next week.

But farmers in the valley have shown that they can keep producing when the economy overall is stumbling.

"I am cautiously optimistic that left to their own abilities, farmers will be able to create a lot of value and a lot of wealth and a lot of economic development for California," Wenger said.

Bee staff writer John Holland can be reached at or 578-2385.

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