On Wednesday and Thursday of this week, the annual Organic Produce Summit was held in Monterey, California. Thursday morning was filled with educational sessions with one of them covering the economics of organics. Walt Duflock of Western Growers moderated a conversation with Ricardo Crisantes of Wholesum and Joe Gardiner of Treehouse California Almonds. Crisantes is a greenhouse vegetable grower in both Arizona and Mexico while Gardiner is a third generation California almond grower. Both companies are committed to growing organic produce and share the challenges and opportunities they are faced with.
Automation has long way to go
Organic consumption of fresh fruits, vegetables, and nuts shows a steady growth curve, but the domestic market is faced with several challenges. Acreage is being lost due to the high cost of production with labor playing a big role. The California ag industry spends $16.3 billion annually on labor at an average hourly rate of $19. While there is an opportunity for automation, this is mainly related to non-harvest. For most fruit and vegetable commodities, automated harvest continues to be a struggle area and about two-thirds of labor costs are harvest related.
How is the domestic market holding up? Ricardo Crisantes with Wholesum starts off by saying that their Arizona-based greenhouses all rely on domestic labor. "We grow produce 365 days per year and while we've relied on H-2A labor in the past, the program is more designed for a time frame of 10 months or less," he said. "This doesn't fit our mode of growing and in addition, we want to keep the people that we've trained."
Low pricing
Over in California, Joe Gardiner mentioned that the tree nut industry is highly mechanized. However, the labor that is required is mostly foreign labor. "We have some crews coming in for harvest, mostly from Mexico and Guatemala," he said. However, labor is not the main concern for Gardiner. The increase in input costs combined with historic low pricing on the other hand is causing big headaches. "Prices have been low for the past three to four years and we've seen some massive bankruptcies as well as family farms falling out," Gardiner shared. However, despite numbers being in the red, most farms will keep going for as long as they can. "Growing tree nuts equals a 25-year investment. We're in it for the long haul and hopefully, there will be better times ahead."
While the costs to grow produce organically are higher, the main challenge in the almond industry is yield loss. "We are faced with a reduction in yields of 40 to 50 percent, which means almond prices would have to be double to be at the same level as conventionally grown almonds. Yields will need to improve to survive."
As a result of increased cost challenges, California is forecast to lose 32 percent of farmed acreage between 1997 and 2052. Just this year, California is expecting organic almond acreage to go down 30 percent, having a significant impact on supply. To keep the supply going, growers are increasingly demanding a price upfront. Infield contracts are being established before harvest, which is a new trend.
© Marieke Hemmes | FreshPlaza.comFrom left to right: Walt Duflock, Ricardo Crisantes and Joe Gardiner.
Organic price premium ceiling
While the price point of almonds at the farm has been historically low, the organic almond category is reaching a price premium ceiling. "How much further can we go before consumers replace almonds with alternative options?" In the tomato category, organic has been faced with price erosion as the premium on organic produce is getting smaller. "For organic Roma tomatoes, we receive a 12 percent premium while the price premium on organic grape tomatoes is about 18 to 20 percent," shared Crisantes. The premium on tomatoes on the vine is about 30 percent and the premium on snacking tomatoes varies from five percent all the way up to 30 percent. "In the snacking category, we are hitting the top of the market," Crisantes said. "If the premium on organic would be higher, customers may start trading down."
One thing is clear, both growers want to continue creating the best experience for the consumer while farming sustainably. "To continue to be successful in the organic space, integrity is key," said Crisantes. "We need to partner with our retail friends and double down on messaging. As long as the flavor of organic produce meets or beats conventional produce, it will be sustainable. We can't sacrifice the consumer experience."
For more information:
Ricardo Crisantes
Wholesum
www.wh.farm
Joe Gardiner
Treehouse California Almonds
www.treehousealmonds.com
