The list includes development of large-grain combines, crawler tractors, the centrifugal irrigation pump, mechanical fruit and nut harvesting systems, aerial application systems, etc. Unlike much of U.S. agriculture, which is dependent on machinery and equipment lines of large national manufacturers, California producers rely on mechanical technologies from several sources—from large machinery and equipment lines for general purpose tractors and combines, from foreign manufacturers for specialized, precision equipment for special production uses , and from local inventor-manufacturers who design and/or take over the manufacture of equipment that was first developed on farms and ranches for very specific needs. The industry will maintain its reliance on productivity-improving and/ or cost-reducing mechanical technologies for continued economic success.An open border and a global economy bring the possibility of new pests that adversely affect the economic productivity of California agriculture. It is increasingly difficult to provide both effective monitoring of local production areas and thorough inspection of incoming plant and animal materials for potential threats to the state’s agriculture. Some examples: the Mediterranean fruit fly threatened the state’s fruit industry in the 1980s; foot and mouth disease, mad cow disease, and Newcastle’s disease are of constant concern to the livestock and poultry industries; African bees could imperil the apiculture industry; the spread of Pierce’s disease by the glassy-winged sharpshooter has already decimated southern grape-growing regions and has the potential to cause great economic damage if introduced into other major grape-growing regions; the spread of phylloxera required removal of grapevines and replanting on resistant root stock, etc. Adaptive pest management, required to maintain the economic viability of agricultural production through variety selection,square plastic pot integrated pest-management programs, eradication programs, cultural practices, and the like, will continue to be critically important to 21st Century agriculture.

Technology will be important in delivering quality products in larger quantities to diverse markets worldwide. Drivers 8 and 9 are listed separately in our table, but here they are discussed together as they are often of joint importance to market delivery of high quality products to both domestic and export buyers. In a demand-driven system, products must be quickly delivered to consumers in an assured form and quality. The produce of California’s farms and ranches has always greatly depended on national and international markets. Early on, international markets, which could be reached by sea, were more accessible than were interior domestic markets. That changed with completion of the transcontinental railroad in the late 19th Century. Ice cooling opened domestic markets for perishables in the early 20th Century. Post-WWII construction of the interstate highway system triggered another shift in the mode of transport—from rail to refrigerated trucks—for servicing domestic and nearby Canadian and Mexican markets. More recent innovations—refrigerated container shipments and air freight—permitted development of overseas export markets. Each major innovation led to structural changes in product mixes from extensive to increasingly intensive types of agricultural production. Efficient, timely transportation will continue to be of paramount importance to the economic viability of California agriculture. Early expansions of commercial agriculture featured livestock products and nonperishable commodities —products that required minimal processing and, in a relative sense, did not require extraordinary storage skills to maintain market acceptability. Subsequent development of the fruit industry went through several major changes, first from dried fruit to development of markets for processed and frozen products and then to a major emphasis on fresh fruits. Simultaneously, the challenge also was to deliver products to markets located more distant from producing orchards and vineyards. Scientific understanding of the post harvest physiology of harvested crops grew to be of paramount importance in the 20th Century, leading to practices that include quick post harvest cooling and control of atmospheric conditions during packing, storage, and shipping.

Parallel shifts are noted for the vegetable industry, which has also moved to a predominantly fresh product form for domestic and foreign consumers. In summary, the import of improved transportation technologies impacted the industry earlier than did a focus on processing and storage. In contrast, contributions to improved or new processing and storage technologies have been of growing significance, especially during the post-WWII period, underpinning the transformation of California agriculture from a majority dependence on extensive field and livestock products to one dominated by more intensive production of fruits, nuts, and dairy products that move to worldwide markets.Financial problems in the last two decades of the 20th Century and the related wave of megamergers of regional banks into national banks have changed the lending environment. Agricultural firms no longer compete in segmented capital pools for agricultural-related loans. This has been a major structural change. Now, credit markets are mostly nationwide markets with little or no differentiation in the designated portions of loan portfolios dedicated to agricultural firms—farms and businesses. The result is that all firms compete in much larger markets, putting additional stress and uncertainty on many small- to medium-sized farms and agribusinesses. Smaller firms may be competitively disadvantaged unless they have an economically viable niche market for product or services or unless they have non-farm sources of income. The distribution of farms by size of farm has become increasingly bimodal as the industry has been exposed to the several financial challenges during the recent two decades. In California and the United States there are growing shares of small-sized farms of minor commercial significance and a relatively small number of large farms that produce the majority of agricultural production. In between there is a group of small-sized commercial farms with operators who are dependent on farm sales as the chief source of income. Our assessment continues to acknowledge the realities of a capital-intensive industry facing significant structural changes in product markets that generally favor larger over smaller producers in meeting the quantity and quality specifications of supply contracts. Some will require capital not only to expand production but also to integrate production with processing and marketing activities , involving themselves in production of a wider suite of products or in other production regions —all efforts to maximize returns on internal and external sources of capital.

Thus, for these firms, access to capital will continue to be important if they are to respond successfully to changing economic realities into the 21st Century. Our assessment also recognizes the increasing scrutiny of the creditworthiness of small- and medium-sized firms, which require higher levels of internal funding for loan security. While changes in capital markets are of limited concern to small farms that are characterized by residential, retirement, or part-time farming interests, financial stress will likely persist for medium-sized operations attempting to remain commercially viable. Viability is challenged by the low return on small levels of production and the difficulty in competing for production contracts favorable enough to attract adequate levels of external financing. Without a successful adjustment outcome, they will be destined to either exit the industry or, at best, experience even lower levels of returns on management and internal capital and/or be increasingly dependent on non-farm incomes.Labor availability and cost, always important to California growers and processors, will be influenced to greater degrees by global political and competitive conditions. The entry of waves of cheap labor pools from Asia and the Americas has been, over time, fostered both by legislated programs and illegal immigration. While past periods of uncertain labor availability and/or rising labor costs have fostered development of important labor-saving technologies, the magnitude of recent growth, as well as the intensification of agricultural production, has resulted in more than offsetting increases in labor requirements. Total hired-worker employment in agriculture grew from about 200,000 man-year equivalents in the early 1960s to nearly a quarter million by the mid-1990s. While the number of regular workers did not increase over the period,square plant pot seasonal employment did increase significantly, rising from 50 percent to 64 percent of average employment . Agriculture’s need for a cheap supply of relatively unskilled seasonal labor, as unattractive as this initial employment opportunity may be, has provided a common starting point for numerous immigrant groups who later move to more attractive jobs throughout the economy. At a time when California agriculture is nervously watching the production potentials of low-labor-cost competitors for U.S. and world market shares, two domestic policy issues loom on the horizon, casting much uncertainty about ample labor supplies. First, continued high recessionary unemployment may reduce prospects for legal, guest-worker types of federal programs. Second, tighter borders instituted as a part of elevated homeland security measures could reduce available supplies of low-cost labor to both agriculture and non-farm service employers. President Bush’s recently proposed immigration reform may reduce labor uncertainty if legislation follows to move a portion of the illegal immigrant workforce to legal, green-card status. Overall, drivers 10 and 11 are judged to be less positive for agriculture in the coming years. Both are critically important. They differ only in their effect on farms with different characteristics. Increased segmentation of financing favors farms with more favorable commercial opportunities; medium-sized farms will continue to be financially challenged. Labor availability issues concern firms of all sizes.Superior management capability and effective implementation are the hallmark of firms that achieve better economic performance even while constantly undergoing structural adjustment. Management expertise is one characteristic of firms surviving turbulent economic challenges. Successful California farmers and producers have accepted forces of change, including those often thrust upon them from external sources, as they seek to reduce per-unit costs of production as well as to react positively to production innovations and opportunities for new commodities and product forms.

Adaptive skills are a necessity, including an acceptance of inherent risks and uncertainties along with strategies for managing potential risks to the firm, whether it be a farm, a ranch, or an agribusiness that extends beyond the farm gate. Our evaluations of the three major historical epochs reflect the ever-increasing contribution of superior managerial skills to development of California agriculture. California farms and ranches, often more diverse in structure than is common elsewhere, are extremely demanding of managerial skills. The existence of multi-product, integrated firms requires higher levels of managerial expertise. Smaller firms also require superior management in order to compete. The premium for a range of superior management skills will continue to be valued in forthcoming responses and initiatives that will be key to success and survival in California agriculture.Marketing is obviously important to California farms and agribusinesses. Management and important institutional innovations contributed mightily to the growth and development of California’s agriculture, especially in the early 1900s. Among the important institutional innovations were an exemption from U.S. antitrust laws, permitting growers to act collectively to process and market their crops and to share information; bargaining through grower cooperatives ; and growers’ ability to act collectively to control various aspects of marketing their products by federal legislation and state legislation . These were especially important to the growth of specialty-crop production . As the state’s capacity to produce specialty crops expanded, several commodities quickly developed a dominant marketing cooperative that controlled a majority of the California market volume. Examples included Sunkist , Sunsweet , Sun-Maid , Almond Growers Exchange , Blue Anchor , Nulaid , Diamond Walnut , Calavo , California Canners and Growers, and Tri Valley Growers . Early emergence of marketing cooperatives especially fostered the growth and development of irrigated agricultural production featuring more perishable fruits and specialty crops, but several cooperatives also emerged for field crops, e.g., RGA and CalCot . Cooperatives gave growers the opportunity to achieve scale economies by integrating collectively to gain benefits of larger volume processing and marketing activities as well as to benefit from joint information sharing and bargaining activity . Government-organized federal and state agricultural marketing agreements also grew from inception in popularity and importance, recently accounting for 54 percent of California’s agricultural output, being most important for animal products, vegetables, and fruits and nuts and least important for field and nursery crops . Depending on the specific marketing order, producers are required by law to contribute toward financing mandated marketing programs, the most common being for quality control involving standardized grades and minimum-quality standards by inspection, generic advertising and promotion in domestic and foreign markets, and research. The contribution of both cooperatives and marketing orders has been increasingly challenged in the recent past, such that we must conclude that their importance has declined in the late 1900s and will likely continue to decline in the future .