Most headlines profiling dynamics affecting the 2018-2019 California citrus industry focus on Mother Nature, trade disputes, and an industry concerned about spreading Huanglongbing (HLB) in urban Southern California. Economic pain being inflicted is seemingly out of industry control. Nevertheless, not learning from these challenges compounds potential impacts in the future. Stated another way, you can’t fix history, but you can affect the future.
Industry growers and leaders are huddled around conference tables, at coffee shops, and at workshops discussing the dynamics that are resulting in a less than satisfactory year for the California citrus producer.
Too much heat over too many days resulted in too many small-size fruit dominating the harvest. All this leads to a consumer who is not too interested in small fruit, thereby creating inventory problems for the industry. The inventory buildup and resulting reduced prices per carton will lead to less than satisfactory per-acre revenues.
The administration’s challenge to offending countries regarding unfair trade practices was primarily focused on other business sectors, yet these countries chose to retaliate rather than negotiate. Their retaliation came in the form of higher tariffs on many agricultural commodities, including citrus. The end result was a product that was very expensive upon arrival thus demand was reduced.
Or, many countries reached a trade agreement that excluded the U.S., thereby placing U.S. arrivals at a higher price than competition originating elsewhere. Industry marketers are working feverishly to find a home, a profitable one, for dislocated tonnage. Fortunately the reputation of this industry regarding exterior quality, flavor, and consistency of both has created positive momentum for exports, but some loss is felt.
Detections of HLB in Southern California are increasing. Approximately 1,200 trees have now been removed. Farming costs have risen to protect commercial areas from Asian citrus psyllid. One economic impact report placed the cost per acre at approximately $265 more in farming costs.
Looking to the Future
Addressing the challenges now, as a problem develops, is what is needed to avoid potential crisis. Work groups, industry forums, and individual marketers, in conjunction with their trade associations, are developing solution paths to offset these challenges.
We can’t control the temperature and heat wave duration, but we can adopt farming practices that offset some of the negative effects. To a person, the practices employed by China against other business sectors had to be challenged. Previous administrations talked about corrections but were unable to create a satisfactory playing field. The citrus industry, and other colleagues, understand the need for perceived draconian action steps.
Whether the retaliation gets mitigated in the near future or not, the industry is taking steps to offset negative impacts. Maintaining open lines of communication with our administration is a must. Creating offsetting solutions to sustain profitable net revenue per acre is the goal. Creativity and cooperation are foundation building blocks for achieving this goal.
Regarding the increased detections of HLB, the industry is “all in” on several fronts to stop the spread to commercial groves. Whether it be assessing themselves for an operation program to find the bug and disease before it finds a commercial grove, or it is committing significant research dollars to accomplish this more effectively while finding a cure, is not a pick on and ignore the other pathway scenario. The industry must do both, and it continues to do so.
Can We Survive?
Those outside our industry may look at these dynamics, may see other factors such as state government affecting the bottom line via costly regulations, and may just wonder how growers will survive. Can the financial community afford to front farming costs with this uncertainty? Will the customer base, defined as the retailer and then the consumer, remain loyal? Can they afford to remain loyal as industry seeks to attract higher dollars per carton in order to sustain profitable net revenues per acre?
Will a comparative disparity develop with more off-shore product finding a profitable haven beneath our per-carton revenue needs? It sounds like a row of dominos falling against each other, and no question this could occur. But individuals will overcome these industry challenges. Already, some solution paths have been developed. Others remain in the development stage, and still others are being strategized with two or three options yet to be fully vetted.
This evil triangle of rising farming costs, climate, and marketing challenges in the export and domestic market, are not being ignored. For the California citrus industry we have identified the problems that need to be addressed in short order and into the future. That is step one. Step two is offering and implementing agreed-upon solutions. Step three is being flexible enough to adapt these solutions to real time. That has been and continues to be done.
So, am I worried about our industry’s future? Yep, but I am confident that history will record how we identified problems before they became crisis and how we were able to survive this challenging time.