Projects Funded for 2018-2019

Learning Where to Drill in Unconventional Shales

  • Mark Agerton

Abstract

Specific Objectives of the Project
Study whether and how three issues—selection on unobservable heterogeneity, learning about resource quality, and depletion—affect firms’ behavior in shale extraction. Understand what the implications are for energy prices in California agriculture and how unconventional shale resources might develop in California.

Project Report/Summary of Results
We often link increasing productivity in resource extraction to innovation in how firms extract. Yet resource quality—where—firms extract—is a key driver of productivity. Using a structural model and data from Louisiana's Haynesville shale, I disentangle the impacts of how and where firms extract natural gas. Mineral lease contracts, learning about geology, and prices actually explain more than half of growth in output per well—not just technological change. Neglecting this may lead to over-optimistic long-run supply forecasts. I also show that growth in output per well masked large distortions caused by mineral lease contracts, which reduced resource rents.
This work emphasizes the importance of accounting for interactions between institutions and unobserved resource quality in the supply of natural resources. It suggests that should shale resources be developed in California, we should be cautious about extrapolating productivity gains into the future.

Water Quality Regulation and California Agriculture

  • Joseph Shapiro

Abstract

Specific Objectives of the Project: Assess the efficiency of water quality regulation over the last 50 years, the importance of the weak regulation for water pollution for agriculture, and the potential of new regulatory tools to efficiently regulate water pollution.

Project Report/Summary of Results:
With support from this grant, this project resulted in two papers published in high-impact journals. These papers investigate the effectiveness and efficiency of US water quality policy, including soil and water conservation programs sponsored by the U.S. Department of Agriculture. The research reviews the last 50 years, discusses differences between regulation of point (primarily industrial and municipal) and non-point (primarily agricultural) source regulation, including data analysis from records in California and other states. The research discusses some new regulatory efforts, including Total Maximum Daily Load requirements, cap-and-trade markets for water pollution, and recent debates over regulating water quality in agriculture through debates following the Supreme Court’s SWANCC and Rapanos decisions, including the Obama Administration’s Waters of the United States rule.

This and related research has been widely discussed in the media, including over 20
(mostly national) news stories, received 800 comments and 45,000 views as the top science story on Reddit, and was featured in a Voxeu article.

This project also compiled extensive drinking water data for research on drinking water quality regulation. Extensive cleaning has been undertaken of the drinking water data, and ongoing research is linking this to other datasets for use in ongoing research on drinking water quality and agriculture.

The Potential for Adaptation to Climate Change in Field Crop Production

  • Pierre Mérel
  • Matthew Gammans

Abstract

Specific Objectives of the Project
The objectives of this research are to (1) quantify past adaptation to climate change in United States field crop production, (2) estimate the long-run consequences of climate change on this type of agriculture, and (3) assess the potential of one specific adaptation, double-cropping, to attenuate the potential losses resulting from climate change.

Project Report/Summary of Results
We have developed a theoretical framework whereby agricultural production is related to both contemporaneous weather and long-run climate through simple quadratic functions. The framework implies a long-run response function to climate that is the outer envelope of short-run responses to weather conditional on climate. Applying this framework to a 66-year panel of yields and weather, we simultaneously estimate short- and long-run responses to climate for the United States (US) corn sector. We find evidence of significant climatic adaptation. In the case of temperature exposure (captured through growing degree days), traditional “myopic” panel methods that do not explicitly model climate adaptation nonetheless deliver estimates similar to those of our estimated long-run response. We formally show that this is due to the large cross-sectional variation in climate temperature relative to locational weather fluctuations. In contrast, for precipitation, which exhibits larger year-to-year variation relative to cross-sectional variation, models that do not account for climatic adaptation deliver estimates that are biased, but can be viewed as an average of the long- and short-run responses.

In complementary work, we focus on one specific adaptive action: double cropping. Although prior agronomic research suggests that climate change may expand the area suitable for double cropping in the US, there is relatively little empirical evidence of the relationship between climate and farmers’ decisions to double crop. We link high-resolution land cover data with detailed soil and climate data to explain farmers' propensity to double-crop soybeans with winter wheat in the Eastern United States. We find small and slightly negative effects of warming on double-cropped acreage. A fixed-effects panel model of county yields further indicates that yields of double-cropped soybeans are about 9.9% lower than those of single-cropped soybeans. Accounting for both of these effects, we conclude that double cropping is unlikely to offset negative impacts of climate change on US crop production.

The Minimum Wage and Productivity: A Case Study of California Strawberry Pickers

  • Tim Beatty

The Incidence of an Agricultural Boom

  • Aaron Smith

Abstract

Specific Objectives of the Project:

  1. Estimate the effects of the recent agricultural boom in the value of agricultural production on farm income, land values, land rental rates, and other input prices.
  2. Estimate the effects on employment, incomes and other aspects of the rural economy.

Project Report/Summary of Results:
US crop farmers experienced a large increase in crop revenue from 2007-13 due to high prices caused in large part by strong demand for corn from ethanol producers and for soybeans from China. Revenues have dropped since that time, although high government payments have cushioned the decline. How much of these high revenues flows to farmers, landowners, other factor owners, and the broader community. Using county data, we estimate that a 10% increase in crop revenue raises net farm income by about 10% in the current year and by 5% in the ensuing two years. Production expenses, especially fertilizer and seed increase by 2.5% in the current year and about 1.2% in the subsequent two years, implying significant returns to factor owners. Using data on Iowa farmland values we find that a 10% increase in crop revenue raises farmland values by 2.5% in the current and ensuing two years. We find similar, but less precise effects on land rental rates. Outside of agriculture, we find that increases in crop revenue have insignificant negative effects on non-farm income in the county. To obtain our estimates, we develop a novel instrumental variables approach to identify exogenous price shock using temperature and precipitation shocks.

The Impacts of a Declining Farm Labor Supply on Farming in California

  • J. Edward Taylor
  • Zachariah Rutledge
  • Diane Charlton

Abstract

Specific Objectives of the Project: Objective
1: To estimate recent and future trends in California farm wages.
2: To analyze the farm labor supply response to changes in farm wages.
3: To explore how increases in California farm wages affect the adoption of labor-saving technologies, the mix of labor-intensive crop production, and the employment of H-2A visa workers.

Project Report/Summary of Results
The funds provided through this grant enabled us to develop and implement an online survey of California farmers to study how they are adapting to the reduced availability of farmworkers. This survey was developed with the cooperation of the California Farm Bureau Federation (Sara Neagu-Reed and Bryan Little), who helped develop the survey and sent it to their members and affiliated grower groups on our behalf. The survey was tailored to elicit information related to (i) the extent to which farmers have had to increase wages to retain an adequate workforce, (ii) the use of farm labor contractors and the H-2A visa program, (iii) changes in acreage resulting from higher wages or reduced access to farmworkers, (iv) the adoption of labor-saving technologies, and (v) changes in cultivation practices resulting from labor scarcity. Over 1000 farmers responded to the survey. Some key findings from the survey include evidence that (i) the rate at which farmers have to pay higher wages to retain a sufficient workforce is increasing, (ii) the use of farm labor contractors and the H-2A visa program is expanding, (iii) some farmers are reducing acreage dedicated to labor-intensive crops and are switching into less labor-intensive crops like nuts and grain/row crops, (iv) many farmers (about 1/3 in our survey) have started using labor-saving technologies for the first time during the past few years, and (v) farmers are increasingly having to change cultivation practices as a result of reduced access to workers, including reducing or delaying pruning, weeding, and harvesting. Additional work will quantify the effects of labor shortages and higher wages on these various outcomes, but the survey format was tailored to facilitate these types of analyses and provide the data to conduct them.

We also engaged in a collaborative effort to co-author two Choices Magazine articles, one of which has been accepted for publication (the other is currently under review). The first article conveys the economic theory behind a farmer’s decision to adopt a labor-saving technology in the face of higher wages and includes a discussion about agricultural technologies that have been used and are being developed to help farmers produce with a smaller workforce. The second article discusses trends in farmworker employment and wages and draws upon previous research supported by the Giannini Foundation to provide estimates of how high farm wages will need to increase in order to keep the farm workforce stable.
Taylor and Charlton’s new book, The Farm Labor Problem: A Global Perspective, was published by Elsevier Academic Press in December 2018, with acknowledgement to support from the Giannini Foundation of Agricultural Economics. We created a website to feature the book and other farm labor research; see https://farmlabor.ucdavis.edu/.

There is substantial interest in this area of research, as can be seen by recent invitations for us to present work related to this topic at conferences, including the UC Davis Agriculture and Natural Resource Annual Vegetable Crops meeting, the World Bank’s Future of Work in Agriculture conference, the Department of Labor’s NAWS at 30 conference, and the Gifford Center for Population Studies’ Farm Labor 2019 conference.

The Effect of Immigration Enforcement on Agricultural WorkersMovement

  • Meredith Fowlie

Abstract

Objectives of the Project:
This research project aimed to see how recent changes in immigration enforcement affected the movement and employment of Hispanic immigrant farm labor in rural California.

As stated in the grant proposal, this project relied on a few important facts. First, California agricultural communities are heavily dependent on the employment of undocumented farm workers. Second, after taking office at the end of January 2017, there was a large increase in arrests made by Immigration and Customs Enforcement (ICE). This increase in enforcement activity likely has had an effect on the employment and movement of these Hispanic immigrants, potentially causing significant economic problems for the communities that rely on their labor.

Measuring the impacts on agricultural output is likely to be a difficult research problem, but a more simple first order question to be answered is if the change in policy had a noticeable effect on Hispanic communities. This project sought to use a proprietary dataset of movement from 25 million cell phones in the United States. The dataset records the location of each phone every 15 minutes, and from this, we planned to measure a number of important things. First, the distance traveled by each phone each day is a rough proxy for the employment or other economic activity of the user. Two, measuring how frequently cell phones visit agricultural areas may be a leading indicator of agricultural employment, especially among communities that are likely to be underrepresented in government databases. Three, measuring how often likely agricultural workers move from one community to another is a potentially important sign of those workers’ economic prospects and the health of an industry that depends on migrant labor.

Progress of the Project:
Soon after receiving this grant, we worked to complete the data use agreement (DUA) with the data vendor, Safegraph. The data use agreement required University approval, and we worked closely with the Berkeley Office of Intellectual Property & Industry Alliances (IPIRA). IPIRA required us to work with the Berkeley Information Security and Policy office to develop a security plan under the Minimum Security Standards for Electronic Information. To that end, we created a Protection Level 1 security plan that relied upon storage and processing of the data on secure Amazon Web Service (AWS) servers. The security plan, made with consultation from AWS, was eventually approved by Information Security and Policy office and submitted to IPIRA.

In the meantime, however, the relationship between Safegraph and IPIRA became strained after a few rounds of negotiation on amending Safegraph’s standard DUA and other unforeseen issues. In late 2018, we were told that the data Safegraph were willing to share with their academic partners had changed. In early 2019, we were able to amend our DUA to accept the new form of data and were finally given access to it.

The new data that was shared by Safegraph was far less rich and restricted our ability to answer the questions we hoped to address. Instead of sharing the geolocation of every cell phone in their sample every 15 minutes, Safegraph reported the number of unique visits to Safegraph defined places of interest (POIs) each month. Safegraph also reported the count of visits by likely home census block group (CBG) of the visitors to each POI. This was censured, however, so that CBG visit counts were only reported if at least 5 visitors were detected at a POI in a certain month. POIs are for the most part commercial locations (restaurants, grocery stores, big box stores, hotels), plus medical offices and some schools. Farms were notably omitted from POIs, and visits by employees were specifically not included.

The restrictions on the type of data provided drastically changed the scope of the questions we could answer. Without the panel of daily locations, we could no longer tally the length of daily trips of cell phone owners who were likely Hispanic and or immigrants. We also could no longer track agricultural workers as they traveled with harvesting seasons. In addition, the limits of POIs to mostly commercial locations (and not farms) prevented us from tracking agricultural employment at all.

As a result, we narrowed our research questions to investigate if the inauguration of Donald Trump and the subsequent large increase in enforcement activity impacted Hispanic communities by reducing the number of visits made to commercial locations and trips for medical treatment. In order to do this, we matched the CBGs listed in Safegraph data to census data on the percent of respondents identifying as Hispanic from the 5-year American Community Survey (ACS).

We tested this hypothesis by looking at the reported number of trips made in three geographies: the entire state of California, the central valley of California, and two bordering counties of California and Arizona. The identification strategy employed was a difference in difference, where trips being made to POIs in the two months before the inauguration were compared to trips made after, with the treatment variable (after inauguration) being intersected with percent Hispanic from the 5-year ACS. In one specification, Yuma County in Arizona and Imperial County in California are both used in a triple difference. These counties were chosen because they border each other, and January and February is the harvest season for lettuce. This triple difference was conducted to measure if the more conservative immigration policies in Arizona would have a difference in the movement of potential lettuce workers and their families under more aggressive immigration enforcement.

Findings:
The ideal data (which had been promised but not delivered) would have included the home census block group of each visitor to every POI. The data provided, however, strictly censored the home POIs of visitors if there were under 5 visits a month from that census block group. This meant that we ran 2 imperfect specifications: (1) using all visits, but assigning the demographics of the census block the POI was located in to all visitors, and (2) using only visits from visitors whose census block group was identified.

Using the first strategy, we found no statistical difference between counts of visits from CBGs with large proportions of Hispanics and those without in the geographies we expected to see them in: California at large, in the Central Valley specifically, and when comparing California boarder counties to Arizona counties. While the original data as promised may have given us a clearer picture, with the available data, we were not able to reject the null hypothesis that increased immigration enforcement had no effects on the movement of targeted communities in California. We had also hypothesized that the effect would be more pronounced in important types of POIs (medical offices or schools) where immigrants were more likely to come into contact with government agencies, but we found no statistical difference in visits to these locations.

We conducted the same regressions on the sample of visits that had home location identified. These regressions traded one type of error (misspecifying the home location of the visitors) for another type (censoring of the data). Our results were not materially different, however, and we could not reject the null hypothesis of no effect on visits.

We believe we could have conducted a better study with more conclusive results with the original data we were promised, but with the data we were provided, we were unable to reject the null that the inauguration of Donald Trump had no effects on the number of visits to stores, schools, and hospitals made by people living in Hispanic neighborhoods in California.

The Cost of Gluten Avoidance: Evidence from US Scanner Data

  • Thibault Fally

Abstract

Specific Objectives of the Project:

  1. Provide new stylized facts to document issues and consumption patterns related to gluten consumption and gluten-avoiding diets across US households
  2. Quantify the costs of gluten avoidance, substitution patterns, as well as the recent changes in the supply of gluten-free food products in the US
  3. Quantify the effects of these changes in demand for the supply side
  4. Publish the final article in a top refereed journal, as well as a summary in the ARE Update and one ERS/USDA publication.

Project Report/Summary of Results:
The project was delayed due to having access to the IRI scanner data only starting August 2019. We are still working on the project, but we have a series of new stylized facts on gluten avoidance (objectives 1 and 2). Contrary to our expectations, richer households are not more likely to avoid gluten, relative to poorer households; and gluten-avoiding households are very similar to other households in terms of expenditure shares across a hundred broad categories of food items (suggesting an elasticity close to unity across broad categories). But gluten-avoiding households spend much more on individual products (within broad categories) having a “gluten-free” label. In addition, we confirm that gluten-free-labeled products tend to be 20~30% more expensive. We are still working on estimating elasticities of substitution before we are able to compute our final estimates of the “cost of gluten avoidance."

Sustainable Economic and Environmental Considerations of Recycled Municipal Wastewater Reuse in Irrigated Agriculture: An Empirical Regional Framework with Application to Escondido, California

  • Ariel Dinar

Abstract

Specific Objectives of the Project
The overall objective of this proposed research is to examine the feasibility of a long-term arrangement between the City of Escondido and the avocado growers in the region, regarding the sale of treated wastewater by the city to the growers. Such agreement would maximize long-term benefits for the region. The stability of such agreement will be investigated empirically, accounting for costs and benefits of both the city and the farming sector, from this agreement. Necessary constraints will be imposed to ensure proper considerations of the impacts on the environment resulting from use of treated wastewater for irrigation.
Specific objectives include:
(2) Apply a regional model that was developed in a recent research project. The model includes optimization of benefits to irrigated agriculture (the consumer of the wastewater) and to a city (the source of the wastewater), subject to regulation of externalities from use of treated wastewater in the form of GW pollution. The model will be calibrated to the region of Escondido in San Diego County, California, using empirical data on treatment cost functions, agricultural production functions and aquifer water pollution, which was collected in the Escondido site during a controlled field experiment in the past 6 years.
(2.1) The empirical model will allow avocado growers in the region to plan their production for the future, with uncertain freshwater availability and unknown quality.
(2.2) The Empirical model will allow the City of Escondido to plan its future treatment facility expansion with population growth and likely revised state wastewater disposal regulations.
(3) Extend the empirical model to several additional regions with similar conditions along the coast of California, where wastewater is being treated and disposed of to the ocean.

Project Report/Summary of Results
Wastewater has become a valuable resource in many regions of the world that face increased level of freshwater scarcity. Reuse of treated wastewater is associated with high economic benefit, but it can also lead to pollution of the environment and water bodies. As such, explicit conditions must be defined to determine the optimality of wastewater reuse for society. In this project, we developed a regional multi-sectoral model of water quantity-quality interaction among the urban, agricultural, and environmental sectors.

Interested in the feasibility of reuse, rather than the stability of the regional arrangements, we apply a social planner’s approach to the regional problem. We formally derived sufficient conditions that support the superiority of infrastructure development and conveyance of treated wastewater for irrigation, when measured against other common disposal alternatives (such as ocean disposal, or disposal to nearby dry riverbed). Using a numerical illustrative example, which relies on data and results from existing literature, we were able to replicate our theoretical findings, as well as to examine their robustness, when several supporting assumptions are relaxed.

We then turned to the region of Escondido in Southern California, where such issues are the forefront of discussions between the city of Escondido and a group of avocado farmers. We collected data from a group of representative growers that are part of the IGAP farmer association to estimate the cost of production of avocado in this region. We obtained soil and climate parameters, as well as groundwater aquifer characteristics in the region. Based on the soil data, climate data, and prices of inputs and the output, we were able to calibrate a production function for the avocado crop in the Escondido region.

Using data and information on wastewater treatment cost from the literature and from the website of the Escondido City Wastewater Treatment Facility we estimated a treatment cost function for Escondido. This function is included in our regional model for the purpose of identifying the cost of unit of treated wastewater under various scenarios that will be part of the analysis we will conduct.

A final component in our analysis is the prediction of population in the city of Escondido in the future, which will affect the amount and cost of treatment of wastewater. We use population estimates for various future years and include it in the model.

We completed the process of (1) calibrating our model to observed parameters such as water availability, avocado prices, cost of wastewater), (2) defining institutional arrangements for a possible agreement between the city of Escondido and the avocado growers for different constraints imposed for protecting the aquifer water quality and quantity.

Methyl Bromide: still around after all these years - A Case Study of StructuralChanges in Agriculture

  • David Zilberman

Abstract

Specific Objectives:

  1. To understand why the use of an expensive and environmentally problematic chemical has persisted for decades - and how its use patterns have adapted to regulations and have affected production patterns and land use. This will be done through:
    (a) A review of the history of methyl bromide through literature in agricultural and environmental sciences and economics. This review will allow for the development of a timeline of the technology and its patterns of use over time. This review will emphasize the dominance of methyl bromide in soil fumigation, its interaction with other practices, and how its introduction led to structural changes of California strawberry production. An important part of the analysis is the discovery of new data sources.
    • Initial analysis suggests that the introduction of methyl bromide, together with other fumigants, led to major increases in yield and major changes in crop rotation. We will continue to refine our analysis, obtain new data sources, and thus lay the foundation for our econometric analysis and simulations.
    (b) Econometric analysis of the impact of the introduction of methyl bromide and other fumigants on yield of strawberries (with possible expansion to other crops). This will use data on yield per acre, acreage, prices, fumigant use, and other variables at the county level over time, beginning in the 1950s.
    (c) Econometric analysis of the impact of fumigant changes on land use patterns using county level crop report data. We will also use data on prices and other economic variables to assess changes in land use patterns over time.
  2. To develop an economic modeling framework that will enable simulation of the economic impact of changes caused by the introduction and use of methyl bromide fumigation over time.
    • Impacts on land use and crop rotation
    • Gains in terms of output and economic surplus due to reduced incidence of disease (root rot, Verticillium wilt)
    • Post-fumigation land value
    • Cultivar selection criteria
  3. The analysis will assess how these impacts change in response to environmental regulations and technology modification.

Proposal Narrative:

Methyl bromide has been one of the most prominent agricultural chemicals in California since UC scientists discovered fumigation strategies using methyl bromide, in combination with other chemicals, in the 1950s. This discovery provided broad spectrum pest control and led to changes in land use and profitability increases in multiple crops. Strawberry growers in particular were able to avoid costly crop rotations, grow strawberries on the most suitable land, and increase both yield and quality.

Methyl bromide was scheduled to be completely phased out of soil fumigation in the US by 2005 because of its contribution to ozone depletion. Scientists have searched for pesticide substitutes for several decades, due to its (1) high cost and (2) environmental impact. In the absence of an effective substitute, California strawberries were provided critical use exemptions, which were renewed until 2016. Even after these ceased, substantial amounts of methyl bromide are still used to prepare plants, which are then transplanted to the field.

The economics of eliminating methyl bromide and the status of available alternatives have been discussed extensively. In contrast to the analysis of the impacts of phaseout, economists have paid scant attention to the introduction of methyl bromide and its history. Much of the research on the economics of pest control emphasized the cost of replacement of one technology with another. However, it has often neglected the environmental side effects of these potential alternatives.[9] We aim to show in this study that understanding the evolution of a pest control strategy and its impacts, via a multidisciplinary approach, is essential in assessing the impact of regulation in the present and design of future policies.

Our study will build on earlier investigations we conducted showing that the introduction of methyl bromide resulted in fundamental changes to the strawberry industry, and secondary effects in California agriculture as a whole. The replacement of earlier practices with fumigation allowed growers to (1) shift from multi-year planting schedules to annual ones, (2) improve fruit yield and quality, (3) reduce rotation among crops, and (4) generate positive externalities where lands, previously used to grow strawberries, remained relatively disease-free and would improve subsequent production. Furthermore, disease control reduced selection pressure for resistance traits in new strawberry cultivars, simplifying the breeding process.

Our project consists of several parts. We will expand our literature review of methyl bromide fumigation, which we have constructed over the past two years. The literature review provides us with familiarity with multiple data sources and will guide us in pursuing objective 1A. We aim to adapt models from pesticide economics (Waterfield and Zilberman, 2012; Samtani et al, 2012)[8][11] to incorporate some of the major features of this narrative. These models will provide the foundation of our econometric analysis and simulation. One of our challenges will be to use our model and data for the development of a counterfactual model to estimate acreage savings from cultural changes, including the shift away from migratory planting and the introduction of monocropping, as well as the impact of cultivar selection criteria emphasizing yield and quality over disease resistance.

Project Relevance:
This project will demonstrate the importance of incorporating historical analysis with standard econometric analysis, and will additionally demonstrate that understanding the importance of path dependency in assessing impacts of policies. It will also help to understand some of the challenges that are associated with replacing “undesirable” pest control strategies in agriculture, and the resulting direct and indirect implications. It will allow us to better assess the value of methyl bromide and why it continues to persist despite significant efforts to replace it. It may also provide better justification for more novel strategies, including more precise fumigation, use of biotechnology, and improved cultural practices.

Health and the Provision of Health Care of Agricultural Workers

  • Jeffrey Perloff

Abstract

Specific Objectives of the Project
We investigated whether hired, seasonal agricultural workers have health care insurance and use it conditional on the workers’ legal status, the type of their employer, Medicaid Expansion, and the Affordable Care Act.

Project Report/Summary of Results
Farmworkers, regardless of their legal status, are more likely to have health insurance after the Affordable Care Act (ACA) went into effect in 2014. However, only farmworkers newly eligible for Medicaid increased their use of healthcare services. Farmworkers eligible for the ACA subsidy did not change their use of healthcare services.

After the ACA went into effect, farmworkers covered by Medicaid and those eligible for the ACA subsidy (except immigrant farmers with green cards) were less likely to visit the Emergency room and more likely to use healthcare providers such as private doctors/clinics, hospitals, community centers, dentists, and other healthcare providers.

In addition, after the ACA went into effect, employers are less likely to cover the healthcare expenses of farmworkers who are covered by Medicaid or eligible for the ACA subsidy. The healthcare expenses of these farmworkers are more likely to be covered by Medicaid, public clinics, out-of-pocket and other financial sources.

Guest Workers in California Agriculture

  • Philip Martin

Abstract

Specific Objectives of the Project
The average employment of hired workers in California agriculture was 425,000 in 2016, almost three times the 152,000 average employment in the state’s food manufacturing industry. Almost a million unique workers filled these full-time equivalent jobs, a ratio of 2.2 workers per FTE job. Both average employment and workers per job have been rising.

This project focused on three issues. First was immigration, asking how stepped-up enforcement of laws prohibiting the employment of unauthorized workers affects the supply of labor to California agriculture. Second was the effect of fewer unauthorized newcomers and less follow-the-crop migrancy that reduced the flexibility of the farm workforce and prompted farm employers to respond with 4-S strategies, viz, satisfy, stretch, substitute, and supplement current workforces. Third was analysis of the likely effects of the state’s increasing minimum wage, which will reach to $15 an hour in 2022, and the effects of buyer-imposed programs that, for a fee, monitor wages and working conditions on fruit and vegetable farms.

The project supports several major activities, including research articles, shorter papers in ARE Update and Rural Migration News (http://migration.ucdavis.edu), and a major conference, which was held April 5, 2019 at the UCD Law School and attracted 120 participants to discuss how other countries obtain seasonal farm workers, the H-2A program, and immigration issues. The results of the project are disseminated widely, including in the new edition of Giannini’s California Agriculture book and to the more than 1,000 subscribers to Rural Migration News. The project had numerous interactions with federal and state analysts, journalists, and others.

Project Report/Summary of Results
Farm employment has been rising as more expensive land and water is switched to labor-intensive fruits and vegetables. Average farm employment has been increasing by 10,000 a year, and the number of unique workers employed in agriculture has been expanding by over 20,000 a year, so that in 2016 almost a million unique workers filled an average 425,000 farm jobs.
The hired workers on crop farms are aging (average 40 and approaching the average 42 of all US workers) and settling in one place with their families. Follow-the-crop migration has almost disappeared, and there are fewer unauthorized newcomers, making the current farm workforce less flexible. Farm employers are responding with 4-S strategies. Employers try to satisfy current workers to retain them longer and stretch them with mechanical aids that increase productivity and make farm work easier. The third strategy is substitution, replacing workers with machines, or switching crops, and the fourth is to supplement with H-2A guest workers, who have become the flexible newcomers to the farm workforce.

In the medium term, the two dominant strategies are likely to be substitution and supplement, a race between labor-saving technologies and guest worker admissions. Responses vary by commodity, and are influenced by policy decisions. For example, the raisin industry is likely to shrink faster as labor costs rise and some farmers mechanize while others switch to almonds. Strawberries are more likely to supplement with guest workers and use conveyor belts to stretch workers until there is a mechanization breakthrough. Imports are the wild card in responses, and may play an important role in supplying some commodities to US consumers.

The project monitored the impacts of farm labor developments on the competitiveness of California agriculture, conducted research that was published in a variety of outlets, and made presentations to a dozen groups ranging from the CA Association of Winegrape Growers to the National Milk Producers Federation, plus talks in classes at UCD and elsewhere.

Economics of Groundwater Quality in California Agriculture

  • Ellen Bruno

Abstract

Specific Objectives of the Project:
The objectives of this project were to explore the empirical linkages among groundwater extraction, groundwater quality, and land use in a groundwater basin that suffers from seawater intrusion. We estimated the probability that a farmer switches crops in response to changes in groundwater salinity. With an estimate of how decisions are impacted by water quality, we can evaluate the economic impacts of changes in water quality on farmer welfare, which has implications for understand the costs of climate change and sea-level rise.

Project Report/Summary of Results:
Many coastal agricultural regions are at risk of sea-level rise and groundwater overdraft, which lead to saltwater intrusion of underlying aquifers. Increased salinity levels in irrigation water can lead to crop yield reductions and degraded land quality. This project considers the value of groundwater quality in agricultural production using micro-level data from California's central coast. We combine panel measurements of groundwater salinity and fine spatial land use data with property ownership boundaries to predict the likelihood that farmers shift crops in response to a change in groundwater salinity. This allows us to estimate marginal damages associated with changing salinity while incorporating the adaptive response of crop switching. Results inform our understanding of the social marginal cost of groundwater extraction and the potential impacts of sea-level rise to coastal agriculture.

Consumer Valuation and Economic Impacts of Certified Transitional and Organic Products

  • Richard Sexton
  • Ashley Spalding

Abstract

Specific Objectives of the Project
We proposed to analyze an innovative approach—transitional organic labeling—as a way to generate price premiums for farmers in transition, and to lower economic barriers to organic conversion. In order to assess the impact of the new label, we proposed to develop a conceptual model of how this label influences the product-characteristic space and price premiums, and conduct market-level experiments to better understand consumer preferences for organic foods and willingness to pay for an organic-transition label.

Project Report/Summary of Results
A vertical differentiation model of consumer choice has been constructed to analyze consumer decision making for a product category with organic and conventional products vs. expanding the category to include organic, transitional, and conventional products, where the transitional product is viewed as having intermediate overall quality relative to the organic (high quality) and conventional (low quality) product. Analysis of the model shows that transitional organic products command a premium relative to conventional products and that the competition introduced from transitional organic products reduces slightly the premium afforded to organic products.

The model is also used to study farmers’ decisions regarding producing conventional product or undergoing conversion to organic. Results show that introduction of a transitional organic premium relative to the conventional price causes more acreage to convert to organic than in a world without transitional organic. In long-run equilibrium organic premiums are reduced due to the expanded organic supplies incentivized by the transitional organic premiums. A bottom-line conclusion is that a transitional organic certification can be a useful tool to incentivize organic conversion and help to improve the U.S. organic trade imbalance.

Consumer Demand and Marketing Strategies for Locally Produced Foods

  • Kristin Kiesel

Abstract

Specific Objectives of the Project
California produces over 400 agricultural commodities, including high-value dairy products and meats, a third of all vegetables, and two-thirds of fruits and nuts consumed nationwide (CDFA, 2017). Situated in close proximity to this agricultural abundance are affluent metropolitan areas, uniquely positioning California to capitalize on the rapidly expanding demand for locally grown and produced foods. This project contributes to a better understanding of consumer preferences for local foods, and interdependencies with other premium attributes (such as organic). It will explore which marketing strategies are needed to establish and promote local supply-chain relationships. More specifically, conducting an in-store experiment in a specialized retailer in Sacramento will allow us to estimate how purchasing probabilities for local, value-added products are influenced by food labels and information displays at the retail level.

Project Report/Summary of Results
In collaboration with the Davis and Sacramento Natural Food Co-ops, we completed both consumer surveys and the proposed in-store labeling experiment. While the analysis of our data collected in the in-store labeling experiment in ongoing, we presented the results of our survey analysis this summer at the AEA Annual Meeting and summarized key findings in a recent ARE Update article.

The 2008 Farm Act defines local foods as those sold fewer than 400 miles from the product’s origin or within the state in which the product is produced. However, consumer perceptions of distances that define local foods range from the belief that baked goods, eggs, and produce are local only if they originate in the same city/town as where they are sold, to the beliefs that milk and dairy are local if they are produced in state, and frozen and shelf-stable goods are local as long as they are made in the U.S. Consumers paid more attention to local production than any other attributes, including avoidance of genetically modified ingredients in a recent Nielsen study comparing awareness of 16 different food-related causes, but transport miles might not be their only or even primary concern. To many consumers, local foods are defined by direct-to-consumer sales or direct distribution to local retailers in regional markets. Some associate “localness” primarily with adherence to organic and/or sustainable production practices or with small family farms. Others are motivated by a desire to ensure the livelihood and economic stability of all members of their community. Finally, consumers might simply perceive local foods to be of higher quality than other products.

Our survey analysis of consumer perceptions confirms that a local label can evoke all of these beliefs. Despite stores’ precise definitions based on mileage and a generally high consumer awareness of these definitions, we detected biases in consumer perception regarding the meaning of a local label. When consumers were asked to pick the statement most likely to be associated with a local label displayed by the store, the stores’ definitions did not dominate, and responses varied widely. In one of the two stores, 204 consumers stated that a local label most likely implied that a food item was of a higher quality and produced by a small farm or business using only organic ingredients. Across both stores, far more consumers reported stronger associations with one or more of these characteristics than the actual definition used by the stores. We also find that consumer perceptions of local labels do not compete with other value-added attributes such as organic production. Instead, consumers view these as complements and increase their stated willingness to pay.

These results in combination with our completed feasibility studies for proposed business models aimed at improving access to local markets for small food businesses and farmers supported by separate USDA Local Food Promotion Planning Grants allow us to conclude that the promotion of local foods is first and foremost relationship marketing. Local labels relying on specific, proximity-based definitions will likely not be able to communicate authentically and credibly what consumers are looking for in local foods. Rather, they restrict the geographic areas in which farmers can market their goods. In contrast, regional umbrella brands would allow farmers and small businesses operating in urban and more rural communities to preserve their unique product offerings while creating economies of scale when marketing and distributing their local foods. Our continued research in this area will be able to provide specific recommendations regarding marketing strategies for local retail stores.