We have all felt the seismic shift from the pandemic and its impact on our lives and livelihoods. Throughout the pandemic farmers and farm workers have worked diligently and continually to deliver healthy and safe fruits and vegetables to consumers. But the pandemic further exposed the tight margins of farming and the intense cost pressures being faced in agriculture today.
The Grower Shipper Association of Central California (GSA) commissioned a new analysis by economists to examine the cost impacts of the pandemic as well as other factors, such as supply chain issues, which are putting pressure on agriculture’s ability to sustain food production in the region.
The mission of GSA is advancing families, food and farming in Central California. These types of analyses are an important way to assess vulnerabilities associated with increasing costs as well as identify potential areas where better solutions may be necessary to advance our mission. It also allows GSA to assess their role in supporting members and ag employees by relieving or alleviating economic burden through solution-driven work.
This analysis provides a short and long-run outlook and focuses on current, continuing and impending cost pressures within a landscape of the economic fundamentals of supply and demand. While there are numerous crops produced in our region, the economists determined their analysis would focus on one crop specifically in order to appropriately identify industry cost pressures. Therefore the analysis examines the per carton costs of growing and shipping iceberg lettuce.
The economists determined the total cost to produce a carton of iceberg lettuce is over $17 per carton. The average baseline production budget for Salinas Valley iceberg lettuce shows typical costs to grow, harvest, and pack is around $15 per carton. According to the analysis, the estimated increase in direct lettuce production costs identified is $2.12 per carton. This includes a $0.68 increase to growing costs and a $1.44 increase for harvest, packing, and cooling costs including a $0.67 increase due to operational changes related to COVID-19.
At an average price of $15 to $17 per carton, grower-shippers are not able to cover production costs. The economists state that an increase of $2.12 per carton with 24 heads of lettuce may seem immaterial from the consumer perspective – this would work out to $0.09 per head. However, they point out that this change is quite significant for farmers and shippers.
These findings are sobering and reinforce GSA’s commitment to support our mission through results oriented efforts. As an example, GSA’s work to protect employees from the spread of COVID-19 included the creation of a model quarantined housing program as well as a mass vaccination program responsible for having immunized a majority of the farm workers in the region. While the primary objective of this effort was to keep farm workers and their families healthy, the development and operation of this vaccination program, in partnership with Clinica De Salud Del Valle De Salinas, also likely lowered the economic burden of COVID-19 on ag employers since it allowed the region to continue consistently harvesting and shipping produce.
As we address the economists’ findings, GSA and the farmers and farming companies we represent understand their responsibility to grow safe food, protect farm workers, nurture and sustain our farms and the environment around them and be good neighbors and stewards of our communities where we live and work. We acknowledge that thoughtful, outcome-oriented regulations can provide necessary baseline uniformity that govern practices in the workplace including environmental and food and worker safety protections that benefit our community and consumers. However, when new regulations or legislation that impacts agriculture are being considered, farmers should have a seat at the table and cost impacts should be discussed and evaluated, especially in light of the profit margins identified in this analysis.
While a safe workplace, a healthy environment and safe food are of paramount importance, a strong economy creates important opportunities and support that benefits our communities and should remain a priority as well. In fact, 77% of Bay Area and Central Coast residents agree that agriculture was most or very important to the quality of life and the economy of California in a survey conducted by GSA. This reflects the value of agriculture, including job-creation, support of community initiatives and charities, preservation of green and open spaces and local food production.
Learn more about the findings from this economic analysis on our new page in the Our Work section of the GSA website. On this page you will find a white paper outlining the findings of the analysis as well as a link to the full report.