California uses a combination of federal, state, and local water projects to capture, store, transport, and import surface water to meet demand around the state. The largest water projects are the federal Central Valley Project and the State Water Project.The amount of water per acre used by urban areas varies according to land use, population density and water use efficiency. In some areas agriculture may use less water per acre than nearby urban development while in other areas the opposite case may be true. Groundwater provides 30 percent of the supply used by agriculture and the urban sector in a normal non-drought year. Agriculture accounts for over 90 percent of the groundwater used in the San Joaquin, Tulare Lake, and Central Coast hydrologic regions. Only a portion of the applied water is actually used by the crop. The remainder percolates through the soil, flows downstream to other uses, or is irrecoverably lost due to other factors.The ratio of ETAW to applied water is an indication of irrigation efficiency. The amount of water applied to a particular crop depends on many factors including plant evapotranspiration, soil properties, irrigation efficiency, and weather. Plant intake is the primary purpose of water application, but water is also applied to crops for cultural purposes such as frost control, facilitating cultivation and leaching of salts out of the crop root zone. There is a wide range in water application rates among crops and hydrologic regions. For example, depending on the hydrologic region, anywhere between 2 and 10-acre-feet/acre are applied to alfalfa annually. Hay production,nft growing system including alfalfa, accounts for almost 15 percent of total irrigation water used in agriculture. Cotton accounts for about 12.5 percent.

The top 12 commodities, those that represent 60 percent of the total value of California agriculture, account for about 48 percent of the water used for irrigation in the state. Agricultural surface water costs differ greatly by hydrologic region and source of supply. According to the Department of Water Resources, the 2003 Central Valley Project contract rates range from $2 per acre-foot in the Sacramento Valley to $27 in the county of Tulare and almost $30 in some areas of the Delta. Almost one-third of California’s irrigated acreage used sprinkler, drip or trickle systems in 1998. The rest used gravity flow systems such as furrows. More than one method was used on some acreage.Technological innovation, fueled by research and entrepreneurship, has been a driving force in U.S. agriculture during the past century, leading to both higher yields and lower prices. In California, technological change has facilitated significant yield increases for many crops as well as other changes. Inputs have been used more efficiently to produce greater quantities of output. For instance, cash receipts per irrigated acre increased by 35 percent between 1960 and 1995. This can be attributed partially to the development and implementation of more efficient irrigation, such as drip systems, and partially to a change in the type of crops produced. The most recent analysis available finds that the productivity index for California agriculture doubled between 1949 and 1991. During the 1990s, particularly toward the end of the decade, computers were increasingly incorporated into farming operations. In only two years, between 1997and 1999, the number of California farms with Internet access doubled to 46 percent, and reached 51 percent in 2001. Overall, about 36 percent of California farms reported using computers in their business operations in 2001, compared to 29 percent for the United States as a whole, although there are several states with higher usage than California.In 2001, U.S. agricultural experiment stations collectively spent $2.3 billion on scientists’ agricultural research. The University of California Division of Agriculture and Natural Resources accounted for about 10 percent of those resources.

The DANR includes scientists with the UC Berkeley College of Natural Resources, the UC Davis College of Agricultural and Environmental Sciences, the Division of Biological Sciences, and the School of Veterinary Medicine; and the UC Riverside College of Natural and Agricultural Sciences. The DANR’s two major organizational units are the Agricultural Experimental Station and the Cooperative Extension . The AES is basically a multi-campus research organization, with a staff of near 700 academics distributed in more than 50 different departments. The CE constitutes the main outreach program, with about 400 specialists and advisors dispersed throughout the state. During the 1990s DANR aggregate funding stayed approximately constant at an average of $235 million per year. From 1999 to 2002, total funding increased in constant terms by 25 percent. The three campuses ,accounted for 72 percent of the 2002 annual DANR expenditures, while regionally based units accounted for 14 percent of the budget, and statewide academic programs and their support 12 percent. In 2002, about 80 percent of total funding came from government sources ; 13 percent came from private gifts, grants and contracts, and 7 percent from other sources, such as county government, endowments, sales, services, etc.Agriculture creates significant ripple effects throughout California’s economy. Each dollar earned within agriculture fuels a more vigorous economy by stimulating additional activity in the form of jobs, income and output. In general, the greater the interdependence in the economy, the greater the additional activity, or multiplier effects. These multipliers may be applied to the county, state and regional levels using the IMPLAN4 model. Multiplier effects can be represented by four measures that reflect the impact that agriculture has on the state. The first measure, sales impact, records how agricultural purchases influence total private sector sales. A second measure is the amount of personal income produced directly and indirectly by the economic output of agriculture and agricultural processing. The third measure calculates the total value-added linked to agriculture. “Value added” in this case is equal to the value of goods and services sold by a firm or sector of the economy, minus the cost of inputs and services used to produce those goods. A final measure is the number of jobs in agriculture, agricultural processing and other sectors of the economy related to agriculture in the state.

These multiplier effects may be demonstrated by tracing the activity of an individual farm. A farm’s sales impact would include all the inputs used on that farm, such as machinery, fertilizer, electricity—anything farm dollars buy. The personal income from the farm would include the farm’s income and a portion of the income of those from whom the farm purchased inputs. The farm’s value added would be equal to the cash receipts from sales of farm products less the costs of inputs that went into producing those goods. The jobs related to the farm’s efforts would include labor on that farm as well as in input and output industries that rely on business from that farm. For example, agricultural machinery manufacturers, chemical manufacturers, processors, and people working in retail food trade have jobs that are related to agriculture. The economic impacts shown in Table 22 can be interpreted as an indication of how the state would be affected if agricultural production and processing were to cease, and the associated inputs were not reemployed in any other economic use. Multiplier effects differ by commodity since some commodities may be related to more input and processing industries than others. For example, dairy production is related to a relatively extensive processing sector,vertical hydroponic nft system for which a wide range of inputs and specialized machinery has been developed. Hence, the dairy industry may have a greater effect on the economy in terms of multiplier effects than some other commodities. Multiplier effects may differ by region due to geographic dispersion of industries related to agriculture, aggregate size of agriculture and type of commodities produced in that region. Some industries have more local impacts, while others have impacts that are spread farther afield. For example, county or multi-county multiplier effects do not include input and processing industries located outside of that region, even if those industries are located elsewhere in the state. Similarly, state multiplier effects do not include input and processing industries located outside of the state. Thus, multiplier effects for commodity groups with geographically diffuse input and processing sectors may be underestimated. Through multiplier effects, agricultural production and processing account for about 6 percent or 7 percent of the state’s total income, value-added, and jobs. Fruits,tree-nuts, and vegetables represent about half of these totals, while dairy and poultry products, and grains are also major contributors.

Marketing California’s agricultural production presents unique opportunities and challenges. Because of its climatic advantages, California is able to produce a great variety of products that are not grown extensively elsewhere in the United States. The California Department of Food and Agriculture estimates that the state is the leading U.S. producer for about 65 crop and livestock commodities. Fifty-five percent of the value of California agriculture’s $26.1 billion in 2002 farm gate sales is contributed by the fruit , vegetable , and nut industries. Indeed, California dominates the U.S. horticultural sector, accounting for approximately 37, 55 and 85 percent, respectively, of the 2002 farm gate value of the principal vegetables, fruit, and tree nuts produced in the United States . California’s leading position in the $30.8 billion U.S. horticultural industry is explained by climatic, technological, and infrastructure advantages, as well as the market- and consumer-driven orientation of its agribusiness managers. Given the importance of horticultural crops to California agriculture, and to the nation, our discussion draws heavily on examples from this sector.Many of California’s fruits and vegetables are highly perishable, and production is seasonal. A major challenge in marketing is to ensure both the high quality of these products and their availability to consumers year-round. Another key challenge facing marketers is the maturity of the U.S. market. Both the U.S. population growth rate and the income elasticity of demand for food are low, meaning that the market for domestic food consumption expands only slowly over time, and firms are essentially competing for share of stomach. This competition has intensified given the high rate of new product introductions and expanded year-round availability of formerly seasonal items, often through imports. Both of these factors have led to a greater array of substitute products, frequently dampening demand for large-volume staples like oranges and apples. California’s bounty also presents opportunities. Through the diversity of its agricultural production, firms marketing California produce have the opportunity to provide food retailers with complete lines of fruits, vegetables, and nuts. Because California produces a large share of the U.S. supply of key commodities such as almonds, lemons, olives, lettuce, prunes, strawberries, table grapes, processing tomatoes, and walnuts, California producers and marketers traditionally had unique opportunities to exercise control over the markets for those commodities. However, expanding world supply of many commodities has reduced California’s share, increasing competition and presenting new marketing challenges. This chapter documents the importance of marketing in both U.S. and California agriculture and highlights the institutions that have emerged and the strategies that have been pursued by California’s food marketing sector to compete effectively in this market environment.The U.S. food industry is the largest in the world. The final value of food sold through all retail channels was $485.2 billion in 2002 with an additional $415 billion sold through foodservice channels . Marketing functions account for the largest share of the U.S. food dollar, and the percentage of food costs due to marketing is rising over time. Food marketing thus has an important effect on the welfare of both consumers and farmers. The U.S. Department of Agriculture maintains two general measures of relative food costs. The market basket consists of the average quantities of food that mainly originate on U.S. farms and are purchased for consumption at home. The farm share of the value of the market basket remained stable at about 40 percent from 1960- 80 but has declined rapidly since then, to 30 percent in 1990 and 21 percent in 2001. Table 1 depicts the trend in farm share for selected commodities of importance to California. Although farm value has traditionally accounted for more than 50 percent of retail value for animal products such as meat, dairy, poultry, and eggs, those shares have now fallen well below half.