I’m asked all the time what are growers thinking about the future of the industry? What is the mood out in the groves? My standard answer is, “It depends on who you talk to and who they just got off the phone with.”
Opinions are across the board. Some growers are pessimistic doom and gloomers; some are generally mystified as to what the future holds and some are relentlessly optimistic and have decided to be “all in” on Florida citrus come heck or high water.
Despite the varying opinions, everyone agrees there will be no Florida citrus industry if we don’t embark collectively on a major replanting effort. Estimates indicate that we need to put 20 million trees in the ground over the next 10 years to maintain our infrastructure.
The problem is that the current economics don’t necessarily give growers a lot of confidence in spending the money to re-plant or establish new groves. The sky-high cost of protecting trees from HLB and the psyllid is a ROI killer.
Consequently, job No. 1 at Florida Citrus Mutual is working to uncover, create, or publicize incentive programs designed to mitigate the risk and give growers a financial nudge and the confidence to plant trees.
We have a couple in the portfolio now, plus a game changer incentive we are on the cusp of getting approved.
Tree Assistance Program
Under the USDA’s Tree Assistance Program (TAP), citrus growers are reimbursed for planting trees lost to HLB. The TAP reimburses a portion of the cost of nursery trees, planting, and land preparation. The main beneficiaries are small- to medium-size growers limited to an adjusted gross income of $900,000. So far, TAP has paid out $6.8 million for an average of $19,800. The TAP has resulted in 1 million trees planted.
Both Coca-Cola and Florida’s Natural have instituted private programs to encourage growers to plant trees. Coke’s is a long-term escalating price floor contract while Florida’s Natural created an interest-free loan program of $10 per tree planted in new acreage. After 10 years of bearing fruit, the loan (1/10 per year) is forgiven. Both programs have been very successful.
Citrus Grove Renovation/Re-establishment Support Program
FDACS recently announced the Citrus Grove Renovation/Re-establishment Support Program. The cost-share program will reimburse growers at 75% of costs with a maximum payout of $250,000. To take part, growers must utilize improved nutrient and irrigation management equipment such as tree microjets/drip lines, variable rate pumps, automation, and soil moisture sensors. Commissioner Adam Putnam, truly one of the industry’s staunchest supporters, did yeoman’s work putting this program together.
Emergency Citrus Disease Response Act
The big project I mentioned earlier is getting the Emergency Citrus Disease Response Act passed and signed into law. Unlike a cost-share or reimbursement program, the measure provides a significant tax incentive to growers who plant trees. Through the Act, growers can immediately expense the cost of planting new citrus instead of the standard 14-year depreciation period under the current IRS rules. It would be available for 10 years.
We believe the tweak to the IRS code will give small, medium, and large growers the opportunity to seek capital from lenders and outside investors to reinvest in Florida citrus. The tax incentive will attract badly needed capital to the industry.
In September, the U.S. House of Representatives overwhelmingly passed the bipartisan measure and we are cautiously optimistic the Senate will pass it and the President will sign it into law.
Florida Department of Citrus economists indicate that individually the aforementioned programs improve ROI by 1% to 3% for a high-density planting. Although not linear, they are additive. For instance, a private program offering floors and rises combined with expensed costs may improve ROI by as much as 3.5%.
With a baseline 6% ROI on a grove, growers can participate in the federal, state, or private programs and boost that ROI to nearly 10%. Now we are talking!
Trust me when I say everything we do at Mutual these days is about pulling the industry through these tough times and preserving our $10.8 billion industry and its 62,000 jobs.