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Regulations, water policies, labor shortages causing production costs to skyrocket

Tim Hearden, Western Farm Press

January 31, 2020

7 Min Read
Joe Del Bosque
Joe Del Bosque, a Firebaugh, Calif, grower of various crops, says his labor and water costs have skyrocketed in recent years.Tim Hearden

[Note: This is the first in a series of articles examining what California agriculture could look like in 2030 – a decade from now. First up: the perfect storm of regulatory and other burdens that are making it difficult for many farms in the Golden State to survive.]

On Joe Del Bosque’s farm in the heart of California’s San Joaquin Valley, two costs have skyrocketed in recent years – water and labor. And those costs will only keep increasing.

On the heels of a seemingly perpetual drought that has slowed surface water deliveries to a trickle and made water transfers complicated and expensive, Del Bosque and other growers face new pumping restrictions under the Sustainable Groundwater Management Act.

“SGMA may not affect us directly because our farm is largely surface water supplied,” said Del Bosque, owner of Del Bosque Farms in Firebaugh, Calif. “However, when SGMA kicks in, there will be more competition for surface water, driving our costs higher.”

The farm’s water costs have already more than doubled in the past 10 years, prompting Del Bosque to eliminate crops like cotton, beans and wheat, he said.

As for labor, Del Bosque has already seen California’s minimum wage go up from $7.50 a decade ago to $13 an hour this year. Those costs will continue to escalate, as will overtime costs as the work week gets shorter, he said.

“Two years from now, when minimum goes to $15, we’re facing labor costs that may drive more crops, like asparagus, out of production,” he told Western Farm Press. “This will affect labor-intensive crops negatively, and also force a loss of many jobs.”


Del Bosque’s farm isn’t alone. Since 2006, new state and federal rules have imposed significantly higher regulatory burdens on growers in the areas of food safety, water and air quality, labor wages and worker health and safety, note researchers at California Polytechnic University, San Luis Obispo.

For one Salinas Valley lettuce grower, overall production costs rose by 24.8 percent from 2006 to 2017, but the farm’s costs of regulatory compliance have risen by 795 percent, researchers Lynn Hamilton and Michael McCullough observed in a December 2018 report.

Those costs and burdens will continue to increase over the next decade, contributing to a perfect storm of challenges that will make it harder for all but the largest farm operations to survive, Hamilton and others say.

“It’s difficult to look into a crystal ball” and predict how many farms in the Golden State will still be around in 2030, Hamilton said in an interview. “I think water is the biggest piece out there that’s the unknown. Everyone we’ve talked to says they don’t really know what’s going to happen with SGMA.

“My sense is growers are going to keep going as long as they can” and look for an opportunity to receive payments or cost savings for taking less water, she said. “If they don’t have that income, the land has to be used for something else.”


In 2018, California producers sold nearly $50 billion in farm-gate products, including more than a third of the country’s vegetables and two-thirds of the country’s fruit and nuts, according to the state Department of Food and Agriculture. California is the leading U.S. state for cash farm receipts, accounting for over 13 percent of the nation’s total agricultural value.

But regulations that are unique to California threaten to put the state’s producers at a competitive disadvantage against other states or countries, Hamilton and McCullough wrote. Environmental regulations “cut across all crops,” Hamilton said, including water and air quality regulations that make it costlier to operate or even to remove large swaths of orchard.

“What we know about regulations in general is they’re essentially a fixed cost of doing business,” Hamilton said. “There are some that do increase with the size of operation, but they do essentially come across as fixed.

“When you have a fixed cost, the only way to manage that cost is to even that out over a larger number of acres,” she said. “That’s one of many factors that help increase the drive toward consolidation. Those costs are much more onerous if you’re a small operation.”

New rules being implemented or recently enacted in California include a waste discharge permitting program under which growers must submit annual farm and nitrogen management plans; surface water diversion reporting requirements for landowners with senior riparian rights; and a voter-approved initiative requiring that eggs sold in the state come from cage-free hens, to name just a few.


Among the most significant burdens for growers is SGMA, a 2014 law that required local entities to be set up to manage groundwater use in the state’s 127 high- and medium-priority basins. Critically overdrafted basins faced a Jan. 31 deadline to have sustainability plans in place; while other high- and medium-priority basins have until Jan. 31, 2022. All the basins must achieve sustainability by 2042.

In the San Joaquin Valley, ending the rampant overdraft of groundwater basins could require taking at least 500,000 acres of irrigated cropland out of production, the Public Policy Institute of California predicted last year. Land may be fallowed in places where excessive salt in soils has affected production, or rotational fallowing may be more economically attractive for some growers, PPIC Water Policy Center director Ellen Hanak has said.

Other, more recent projections have put the amount of land that must be retired statewide at closer to 300,000 acres, Hamilton said.

“Water is probably the most limiting factor” in planted acreage, she said. “Then assuming water is available, somebody will need to be able to figure out how to manage the regulations.”


Labor shortages and rising wages is another major burden California farms face. In fact, growers were complaining about a labor shortage even before the Legislature required all workers to be paid $15 an hour and farmworkers to be paid overtime after 40 hours in a week (down from 60) beginning in 2022.

A California Farm Bureau Federation grower survey last spring found that 56 percent of respondents were unable to hire all the employees they needed at some point in the previous five years.

“We’re getting close to a point where field work in agriculture is similar to or higher than the wages in other sectors,” said Dan Sumner, director of the University of California’s Agricultural Issues Center in Davis. “But the problem is the hours of work.”

Much of agricultural work is seasonal, making the 40-hour work week impractical in many circumstances, Sumner and others say.

With labor costs rising, there’s been a major push in California and nationwide toward mechanization of ag. More than half of farmers in the CFBF survey said they have started mechanizing tasks, while 31 percent said they were switching acreage to less labor-intensive crops.

“What we’re seeing is going a lot more toward nuts and less labor-intensive crops like citrus, rather than a more labor-intensive crop like stone fruit,” Cal Poly’s Hamilton said.

But some crops, such as strawberries, don’t easily lend themselves to machine harvests because they’re so delicate.

“I see a reduction in acreage” continuing through the 2020s, said Peter Navarro, a Watsonville grower and California Strawberry Commission board member. “It’s unfortunate because it’s going to affect employees. It would be nice to do shifts but we don’t have the workers for that. It’s an every-day deal, even in winter.”


When they mechanize, growers encounter more regulations. For instance, Steve Fennemore, a UC plant sciences specialist in Salinas, has been helping a company develop an autonomous weeder and is aghast at a state safety requirement that there be a person within 10 feet operating each agricultural robot in use.

“We have a tremendous labor shortage,” Fennemore said. “We have teams of robots working a field. Why do I need more than one person to run them?

“Shouldn’t we be encouraging this kind of research” into labor-saving tools, he asks. “We need to do everything we can to mechanize.”

All these burdens will make it more and more difficult for smaller operations to stay afloat, Cal Poly’s Hamilton and other researchers warn.

“I think what the general public doesn’t realize is how razor-thin the profit margins are” for farmers, Fennemore said. “They’re just scraping by and working 70 hours a week.

“I think we need to get to the general public that we have a crisis in ag,” he said. “We’re trying to be clean and neat about it. Give us a chance.”

[Next month: Lessons in survival from the strawberry industry.

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