Specific Objectives of the Project
Production of a dissertation investigating the effects of the Federal Milk Marketing Orders on international trade in dairy products.

Summary of Results
This project is investigating the effects of the U.S. Federal Milk Marketing Orders (FMMOs) on trade in dairy products. The FMMOs implement price discrimination in the beverage milk market and redistribute gains to milk producers through blend pricing. Higher returns for dairy farmers increase the quantity of milk supplied to the market, while high prices in the beverage milk market reduce quantity demanded, leading to increased quantity in the dairy product manufacturing sector. Over the past two decades the U.S. has become a net exporter of dairy products, and this project investigates the role played by the marketing orders in that transition.

The research funded by this grant focused on the movement of farm milk and trade in dairy products within the United States. The marketing orders set regional prices for beverage milk, influencing the price received by milk producers in that region. This paper uses recent developments in the trade literature to model the process by which milk is delivered to different regions across the U.S and how dairy products are distributed to buyers. The dairy product market will include domestic demand from across the U.S. as well as demand facing the U.S. from the international market. We use simulations to compare a baseline scenario with the FMMOs in play to counterfactual scenarios that remove the regional price discrimination and revenue pooling.

The model of interstate trade will be supported by a second paper focused on empirical estimation of dairy product demand. Whether U.S. dairy policies have an impact on the international dairy product market depends on whether the U.S. faces a downward sloping world demand curve for tradable dairy products. This paper will use an econometric model of U.S. net exports and exogenous shifts in marketing order policies to estimates the world demand curves for tradable dairy products.

This research will be extended to an international scope to investigate the impacts of FMMO policies on international trade more broadly. While the model of interstate trade allows dairy product manufacturers to export products to the international market, the impacts of the FMMOs on that market are not explicitly modeled. The international trade model with consider U.S. imports and exports in the context of the global market for dairy products. This paper will focus on the U.S. shift from net importer to net exporter of dairy products and the extent to which changes in FMMO policies caused that shift.

Alongside the main goals of this project, it was a natural extension to study the impacts of the COVID-19 pandemic on the dairy industry. In the early stages of the pandemic school and restaurant closures impacted demand for dairy products, and milk producers reacted to falling prices by reducing production. Milk and dairy product prices were volatile throughout 2020. We initially focused on explaining these impacts in the western states for a publication in the Western Economic Forum. We outlined the government response to the pandemic and payments received by the dairy industry in 2020. This study was expanded to use forecasting methods to evaluate the magnitude of the impacts relative to historical data. There are outstanding questions to investigate, such as the impact of government purchasing programs on the market for dairy products, so we are developing a follow-up project to study these questions.

Specific Objectives of the Project
The average employment of hired workers in California agriculture has been rising, topping 420,000 in 2015, almost three times the 152,000 average employment in the state’s food manufacturing industry. Almost 850,000 unique workers fill these full-time equivalent jobs, a ratio of two workers per FTE job.

This project focused on three issues. First was immigration, and how the stepped-up enforcement of the Trump Administration affected the supply of labor to California agriculture. Second was the effect of fewer unauthorized newcomers and less follow-the-crop migrancy, prompting 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 labor-compliance programs on fruit and vegetable growers.

The project supported a major conference April 13, 2018 at the UCD Law School that attracted over 120 participants to discuss NAFTA, H-2A, immigration and ALRB issues. Dissemination included research articles, shorter papers in ARE Update, and Rural Migration News (http://migration.ucdavis.edu), which analyzes the most important farm labor and water issues facing California agriculture each quarter for over 1,000 subscribers. There were also numerous interactions with federal and state analysts, journalists, and others interested in farm labor issues.

Project Report/Summary of Results
Farm employment has been rising as more expensive land and water is used to produce labor-intensive fruits and vegetables. Employment Development Department show that average farm employment has been rising by 10,000 a year, and the number of unique workers employed in agriculture had increased by 20,000 a year, so that in 2015 almost 850,000 unique workers filled an average 420,000 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, making farm workers less flexible to move to where farm jobs are being created. 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.
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 determined by labor cost trends. Responses will vary by commodity, and be 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.

Specific Objectives of the Project
Hired workers do most of California’s farm work, almost all were born outside the US, and two-thirds are not authorized to work in the US. Agriculture uses about 80 percent of the state's developed or storable water that can be delivered via dams and canals, and received no federal and 20 percent of contracted state water in 2015.

This project conducted research, held conferences, and disseminated reliable and timely information on the labor and water challenges facing California agriculture. The research brought together data from several sources to establish a reliable baseline against which to assess the likely effects of immigration reforms. The slowdown in Mexico-US migration has generated 4-S responses among farmers: satisfy current workers to retain them longer in the farm work force, stretch the current work force with mechanical aids that increase productivity and make farm work easier, substitute machines for workers, and supplement the workforce with H-2A guest workers.

The project supported a major conference April 15, 2016 at the UCD Law School that attracted over 100 participants to discuss water, labor, immigration, and union activities. Dissemination included research articles, shorter papers in ARE Update, and Rural Migration News, which analyzes the most important farm labor and water issues facing California agriculture each quarter for over 1,000 subscribers.

Project Report/Summary of Results
Farmers often fear shortages of water and labor. Both have been in short supply in recent years due to drought and reduced Mexico-US migration. California agriculture may be at a crossroads on both issues, facing higher costs and more uncertainty about the availability of two critical inputs.

Despite the drought, farm sales have been rising. Farm sales were $47 billion in 2012, $51 billion in 2013, and $53 billion in 2014. Three factors shape the longer term outlook for water. First, most climate-change models expect warmer winters that are less suited to California’s water storage and transport system. Second is the hardening of the demand for water, as trees and vines that must be watered for 20 to 30 years replace annual crops on land that can be fallowed in dry years. Third is the possibility of water marketing to shift water around the state.

The average employment of hired workers in California agriculture rose 12 percent over the past decade, reaching 415,000 in 2014. Average employment is a measure of full-time equivalent jobs, not farm workers. Some 829,000 unique workers filled these jobs, a ratio of two workers per FTE job.

Farm employers face labor challenges, including paying the statewide $15 minimum wage by 2022. The federal minimum wage was $7.25 an hour in 2015, which was 42 percent of the $17.40 US median hourly wage of all US workers, while the California minimum wage of $9 was 47 percent of the state’s $19.15 median wage. Median wages vary within California, and the $15 an hour minimum wage in 2022 is projected to be 70 percent or more of the median wage in the San Joaquin Valley that includes half of the state’s farm workers.

The H-2A program has been expanding, quadrupling in California to over 10,000 jobs certified to be filled with guest workers in the past five years. If there is no DAPA or other immigration reforms, the farm labor stage could be set for a return to the 1950s, when some farmers built housing on their farms and others joined labor cooperatives that housed Bracero guest workers and moved them from one farm to another employed as needed.

Farm sales have risen despite drought and declining migration, demonstrating the adaptability of California agriculture.

Specific Objectives of the Project

The project summarizes the existing federal and local agri-environmental incentives for waste-management practices of livestock operations and examines specially the choices faced by dairy farmers in California. This research will contribute to our understanding of how specific incentive mechanisms interact with each other and under what conditions multiple levers are necessary. This research will also help us to understand farmers' decision-making under regulatory uncertainty and complexity. Findings of this project will shed light on the future design of agri-environmental payment programs.

Summary of Results

This grant supported research on how a local air quality regulation (Rule 4570) has affected the economic performance of dairy farms in the San Joaquin Valley. Estimated adoption rates of different pollution-mitigation practices reveal that dairy farms have adopted labor-intensive production practices to comply with the air quality regulation. Using farm-level cost data on a panel of dairy farms, The project estimated the effects of the regulation on the costs of milk production. Econometric results indicate that the air quality regulation has not significantly affected the total costs of milk production. Estimates from different specifications indicate that the regulation may have reduced feed costs during some periods, perhaps because some pollution-mitigation practices can reduce feed fermentation.

Specific Objectives of the Project

Model producer provision of food safety, with empirical applications to the fresh produce and shell egg industries that are important in California. The applications include estimating effects on nutrition through reduced consumption of fresh products in response to heightened safety concerns. Lacking econometric estimates, we are likely to design and conduct experiments to ge nerate needed data.

Simulate the effects of the Food Safety Modernization Act of 2011 (FSMA) on imports of fresh tomatoes.

Summary of Results

Using the funding from the grant, John Bovay was able to finish his strong dissertation on "Regulation of Production Practices and Product Attributes: Farm Animal Welfare and Food Safety". This consisted of three essays on the regulation of food safety and one on the economic and political factors that drove California voter support for a referendum on standar ds for the housing of egg-laying hens. We have published one and expect to publish two additional peer-reviewed articles based on material in John Bovay's dissertation. One will be about the effects of the Food Safety Modernization Act, and the other about factors that drove voter support for legislation on the housing of egg-laying hens in California

The first round of analysis that we have carried supports the simulation results of our bioeconomic model of bee foraging. In the conditions of commercial almond orchards, bees fly quickly and reach most of the trees in an orchard under most weather conditions. The effect of hive distance to a tree on yield is accordingly small. This finding is helps understand a common practice among almond growers which is to place bee hives in groups of 20 to 24 every 10 acres or so. The rapid diffusion of bees through the landscape also has implications for the prevalence of externalities, which we document and model in a related research effort. We are in the process of extending the analysis to the temporal aspects of pollination by combining data on bloom development and bee activity in collaboration with Patrick Brown from the Department of Plant Sciences at UC Davis.