Posted on 10/15/2002 12:41:46 AM PDT by farmfriend
A REQUEST FOR AN EMERGENCY DECLARATION OF RELIEF FOR THE RAISIN INDUSTSRY
THE REQUEST
A request is made of the Governor to declare a state of emergency in Fresno County to allow relief for the raisin industry nearing a state of collapse. This request would allow Federal loan and loan guarantee programs and other institutions to roll over financing for repayment in future years, and to initiate additional financing on realistic repayment terms.
WHY THIS IS NEEDED NOW
In the past thirty-six months drastic decreases in domestic and world market prices for raisins are causing one-third of California’s 5,500 raisin growers to have gone out of business or who are in the process of closing down. These farm families who on average grow on forty-five acres were often referred to as the mainstays of their rural communities. Another third do not have the assets to survive more than one additional season, and perhaps within two years the industry will close. Four thousand agricultural workers have lost their jobs; another eight thousand are in jeopardy. Rural communities in Fresno County losing their major industry will suffer devastating losses of local businesses and jobs.
The growers have identified the causes of the market decline, developed a workable plan to cope with these, and now need one to two years to bring stability back to their industry, long noted as among the most stable of all California agricultural products. What they need is protection from creditors and lenders for a short-term period to allow them to work through situation. A declaration of an emergency would permit loan deferments to occur without the lenders or loan guarantee programs facing penalties from regulators.
SCOPE OF THE PROBLEM
More than 5,500 growers produce California’s 272,000 acres of raisin grapes, primarily in Fresno County. A historically stable market, income at the farm gate has ranged from $850,000,000 to $875,000,000 a year providing direct employment to 13,075 full time equivalent workers, and in fact providing the primary support for more than 25,000 industry employees.
During the past three years several converging factors have driven the prices raisin growers receive well below the cost of production. The problem is of a magnitude greater than simply individual farm families losing their assets, but is one of a potentially larger scale regional impact. The growers have identified the causes for this and have a practical program to address these. What they need is time to work out these issues, and protection from loses, their land and assets before they can do so.
There are five categories of loss: land value, annual income loss to growers, jobs, loss to others in the community, reduced tax collections.
Land value
Raisin grape land three years ago was selling for $10,000 to $12,000 an acre; current prices are in the $3,000 - $4,000 and acre range. Reduction in land value averages $7,500 an acre x 272,000 acres or $2,040,000,000 industry-wide. To the average farmer with 45 acres of raisin grapes this is a $337,500 loss of equity, leaving only $135,000 of real estate, often times less than the mortgage on the property. This widespread loss of land values if not promptly addressed has the potential of spilling over to land equity throughout the region.
Annual grower income
Prices paid at the farm gate have declined from a historic $3,500 to $3,650 an acre to less than $1,175 an acre. This is less than half the cost of production, and far less than expenses not including interest, depreciation and amortization. Since the decline in prices occurred three years ago, more than one-third of all grape growers have left the business either voluntarily or involuntarily, and the rate is accelerating as asset reserves dwindle. The annual decline in income to the industry is $2,400 x 272,000 acres or $652,000,000. The reduced gross income per grower exceeds $1,000,000 on average.
Jobs
Four thousand jobs a year are being lost to the industry and without intervention this rate will rapidly increase.
Community losses
Income from raisin grapes primarily stays in the community. The two major types of purchases manufactured out of the region, heavy equipment and chemicals, account for less than 20% of gross income. More than 75% of gross grower income is used within the region. A conservative estimate of the times income re-circulates is based on the percentage of primary income means a re-circulation of 3 times. Thus the loss of income to the community is nearly $2 billion a year. This could eventually impact the region by as many as 20,000 jobs.
Reduced tax collections
The state is losing payroll taxes on thousands of jobs, sales taxes on hundreds of millions of purchases, property taxes on future lower land assessments of several billion dollars, and excise taxes collected by Alcohol Beverage Control amounting to $12,500 for each acre of raisin grapes no longer processed to high proof products such as brandy.
Three years ago several factors converged simultaneously on the California raisin market.
THE PROGRAM OF CORRECTIVE ACTION
An effective program of corrective action requires immediate steps to bring production and consumption into line, and longer range solutions to increase demand and establish a system to assure that accurate market forecasts are recognized within the industry, and that action early in a production year can be taken to prevent (or at least minimize) oversupply. These steps include:
For implementation in the short term
For development and implementation over time
ACKNOWLEDGEMENTS
We would like to acknowledge the following information sources: The California Department of Food and Agriculture, the California Employment Development Department, the University of California Cooperative Extension Service, the Raisin Bargaining Association, and the Raisin Administrative Committee.
No but there is a wealth of information on the web site. The book is worth the read.
Ping.
Don't know much about the raisin industry, but Central Valley growers have for years been dependent on demand from "Jug Wine" makers (this is Carlo Rossi/Gallo Port country). In the past, these comprised the majority of wine produced in the state. Now that Americans are demanding premium wines from Napa/Sonoma/Mendocino and the coastal areas, growers in the Central Valley are in alot of trouble.
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