| Speeches by ODA Director Katy Coba |
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| Agriculture and Oregon Economy |
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March 30, 2004 - Agricultural Lands in Transition Conference
'The Impact of Agriculture on Oregon’s Economy – Does it Really Make a Difference?'
I think you know how I’m going to answer that rhetorical question -- but I want to clearly articulate for you why the answer is a resounding “Yes!”
I’m fond of saying that “It’s all about agriculture!”
Why do I say that?
- Do you know of any other industry in Oregon that has more than 1,800 family businesses that have operated continuously for over 100 years? There are that many family farms in Oregon that have successive generations operating the same farms. Agriculture families help create social and economic stability in communities all over the State.
- Next to forestry, no other aspect of our economy covers the broad spectrum of land mass that is tied to agriculture – more than half of the state’s private property is managed by family farmers – some 17.3 million acres of it.
The land base is the critical infrastructure -- a “factory without walls” – that is managed year after year after year to generate new wealth from the soil. These lands are the necessary element that enables expanded economic development throughout Oregon with agriculture production and value-added processing.
These lands are also the base for the future of renewable energy – wind, solar, bio-fuels, bio-mass, methane powered electricity plants, micro-hydro projects, and other technologies will be tied to the natural resource base of these lands. I will talk more about this later.
- And here’s a key point that’s often overlooked -- land isn’t easily moveable. The production base is anchored here and represents a stable economic resource. We hear much these days of “out sourcing” and jobs moving off-shore to other countries. Agricultural land—unlike a bricks and mortar factory – won’t move overseas at any moment, rendering large investments in buildings and equipment idle or obsolete.
- Agricultural land is a sustainable and renewable resource. Oregon producers are employing some of the most progressive and advanced practices in the world to ensure their lands function as working, producing, economically viable and environmentally sustainable operations.
- Agriculture generates jobs throughout the food chain – agriculture is more than production – but production is the central component that keeps the machine going. In overall terms, agriculture is Oregon’s number two industry, accounting for more than 150,000 jobs (8% of total jobs, 1 in 12) that are related to production, input industries, processing, transportation, storage, and marketing (not counting retail food sales or restaurants).
- The overall industry payroll tops $2.8 billion and the total output of ag-related economic sectors accounts for nearly 9% of Gross State Product.
- Agriculture and related industries are everywhere in Oregon. Agriculture is rural and urban. Five of the top six ag producing counties are located in the Willamette Valley and are within an hour´s drive of Oregon´s two largest cities, Portland and Eugene.
- Oregon agriculture is very diverse. We are blessed with many micro-climates and geographic regions that enable production of over 200 specialty commodities.
This diversity contributes to the economic vitality of the industry and the breath-taking landscapes that result from hard work and proper management of resources.
- Oregon is more reliant on trade than most states. We move over 80% of total ag production across state lines, with half of that leaving the U.S. for destinations in Japan, Korea, Taiwan, Egypt, the EU, and many other nations. Hence, agriculture brings in “new dollars” to the economy, year after year.
- Agricultural products, by volume, are the largest export through the Port of Portland, making up over 60% by tonnage. By value, agriculture ranks second, representing nearly 20% of all Oregon’s exports.
- Exports are up again with the moderating dollar value. This is another sign that agriculture is regaining strength and building on its economic base.
Another positive sign for the agriculture economy is an improved net farm income – a measure of the residual money left to the grower after paying production expenses, including labor costs, land and equipment rent, fuel, electricity and other outlays. In recent years, farmers have spent nearly $3.4 billion annually in Oregon to raise their crops and livestock. This is money multiplied throughout the State’s communities.
In summary, agriculture plays a critical role in Oregon’s economy. To think otherwise is to plant one’s head in the sand – a crop that isn’t likely to yield much output.
But the industry is faced with challenges, to be sure.
Consolidation in the food industry with mega-international retailers sourcing goods worldwide means our growers and processors here in Oregon face increased costs, fewer outlets, changing consumer preferences, and increased demands related to food safety, natural resource management, and product quality.
Many small and medium-size growers are turning to direct marketing through Farmers’ Markets, road-side stands, internet sales, and arrangements with local restaurants and food outlets. These are important venues for these operations and provide local consumers with the opportunity to buy fresh, high quality produce directly from growers. An estimated $20 million in sales in Oregon are conducted through these channels. This represents less than one-half of one-percent of total Oregon production, however, and illustrates the critical importance of our overseas and out-of-state markets.
- Meeting the expectations and quality desires of our customers -- overseas as well as domestic -- is driving changes in how growers and processors do business, and the products they are producing.
- Quality assurance and traceability for food safety and production practices is a growing demand by both food and non-food ag product buyers worldwide. It’s a trend we have to pay attention to.
- ODA has been working with the industry in responding to such customer demands, and Oregon is recognized around the country for creating voluntary certification programs that match growers and processors efforts to these changing market demands. The Good Ag Practices (GAP) and Good Handling Practices (GHP) voluntary certifications are keeping Oregon producers in markets they likely could not access otherwise. We are also evaluating whether there is market value in a voluntary certification for “sustainable agricultural.”– and it’s not easy to define what that means! The primary components are economic viability, stewardship of the resource base, and social or community development. How one documents and certifies these components is challenging.
There are a number of other voluntary certification programs that exist for specific niche markets which growers can access, ranging from Salmon Safe, to The Food Alliance, to the USDA organic certification and so on. Additionally, growers and processors shipping overseas may have to meet specific program guidelines for those markets.
In a recent trip to Europe I learned about market expectations there and the EuroGAP certification program that will likely be required by producers and processors here in order to export to European countries.
Growers in Oregon face higher costs than other parts of the country and around the world. Our labor costs are higher. Our land costs are higher in some cases. Our electricity is no longer bargain priced. We face high transportation costs to move product to the Eastern U.S. markets. And growers are facing increased competition from imports that are taking away traditional markets.
So Oregon agriculture and related industries have to capitalize on the comparative advantages we enjoy.
We have an ideal growing climate and soils for many specialty crops, some of which are non-edible. Nursery and greenhouse crops top the chart for agriculture in Oregon as the number one commodity with sales last year of three-quarters of a billion dollars. The quality of our products -- due to management techniques and a unique climate -- are used by a well-organized grower association to promote these products to buyers.
Grass seed is another example of a crop that Oregon dominates due to superior production practices, specialty varieties, and unparalleled growing conditions. Oregon’s cool-season grasses maintain a quality reputation all over the world.
It may require significant efforts to develop technology for mechanized harvesting and other tasks to enable production of certain fruits and vegetables to continue here. A certain amount of niche market production will likely always rely on hand labor to maintain a superior quality for specific uses. But labor rates are making it extremely difficult for traditional growers who face competition from Mexico, China, and other countries with much lower pay scales.
Another opportunity that holds great promise for the future of agriculture, in my view, is that of renewable energy. This is an area where new technology can create breakthroughs in application and economic viability. Growers in the mid-West have already taken advantage of this by building ethanol plants, wind farms, and other cooperative ventures. I’d like to mention a few ways renewable energy can fit in Oregon.
- Oregon’s infrastructure of irrigation canals and piped water systems present opportunities for small-scale, micro-hydro energy generation that can assist in the offsetting pumping costs and water conservation. New technology will make this possible in the next decade.
- Oregon wheat growers are examining the feasibility of an oil-seed crushing facility that would transform mustard seed, canola or other oil-seed crops into the base oil for bio-diesel, bio-based lubricants, and other bio-based products.
- Several Oregon dairies are involved with the anaerobic digestion of manure. The Port of Tillamook now has three large tanks that hold the daily hauling from dozens of dairies. Individual dairies are also developing digester projects that can reduce odors, manage nutrients, cut land application costs, create value-added compost products, and generate electricity.
- A growing number of farmers are participate in lease agreements for siting of wind towers, and some producers are making efforts to form their own companies to actually own the towers and sell the electricity.
These are all ways that Oregon producers are beginning to evaluate additional uses of their land and structural assets for potential cost savings, increased revenue flows, and generation of energy in a clean, sustainable way for Oregon’s citizens and businesses.
You will likely see more of these technologies even in urban areas.
For example, Kettle Foods, a premium potato chip maker, has installed the largest solar array in the Northwest on its roof. The energy production can power up to 25% of its needs during peak summer production.
Another unique effort going on in Oregon agriculture is that of “supervised price negotiations” between grower organizations and dealers or buyers. This is a process where the department acts as an impartial oversight body to convene the parties for a respective commodity and allows them to discuss all factors affecting prices and negotiate a recommended price. The process provides anti-trust immunity protection and enables all participating dealers and grower organizations to have a meaningful exchange of information and ideas about pricing. It is currently being used in perennial ryegrass and seafood. Other commodity groups are exploring the option. We are still working out a few of the kinks as we learn how this can best serve our industry, but I believe it presents a unique and important opportunity for Oregon agriculture.
Another challenge the industry must address is the impending transfer of agricultural lands -- in the next 20 years 75% of farmland in Oregon will change hands as Oregon’s aging farmers retire. Tax laws, development pressures, and the general economic climate will influence how many young farmers enter agriculture in Oregon and the characteristics of these farms.
It’s crucial that we do all we can to keep agricultural economically viable and of interest to our young people. FFA, 4-H and Agriculture in the Classroom are important programs for all of us to support in our schools for the long-term sustainability of this industry. I encourage you to support these programs.
Finally, I will make a comment about natural resources management. This continues to be an area where farmers often feel that non-farmers are trying to micro-manage their businesses. Court rulings are having impacts on pesticides and other crop protectant materials and how they can be used, water allocation and usage, and land management requirements related to endangered species.
As you know, the Oregon Department of Agriculture is responsible for agricultural water quality and other ag resource management, and does this through permitting or licensing and inspection of confined animal feeding operations, nurseries, pesticide users, and basin water quality planning efforts. I believe Oregon is at the fore of these efforts and we can build on these initiatives for voluntary certification and other market-driven programs that assist growers in gaining value through their attention to resource management.
So, in spite of the challenges, there are many positive things afoot:
- A declining value of the dollar has boosted exports and made Oregon products more competitive in the world market. Our exports are up.
- Many commodity prices are higher than they’ve been in the past five years.
- Net income is up.
- Producers are finding ways to add value to, or direct market their products and gain more return for their efforts.
- Others are getting involved with renewable energy projects.
- The efforts of producers to manage their land and water resources in a sustainable way are being recognized and more federal funding and incentives will be available to reward these efforts.
- Every day I hear of interesting and innovative efforts by growers as they adapt, make new products, or form new partnerships for pooling resources, buying or marketing collaboratively.
What do I see ahead?
- I see new opportunities in renewable energy and bio-based products.
- I see new meat and other processing facilities in the not-too-distant future.
- I see new certification programs tailored to niche markets that assist growers in serving specific consumers.
- I see new food products developed for ethnic demands and tastes as consumer purchasing power changes. Thirty (30) of the U.S.’s 100 largest cities now have a “minority” as the “majority” population. Increasing numbers of ethnic groups are seeking foods that fit their culture and tastes. This is another opportunity for agriculture and food processing for those with their finger in the wind.
- I see opportunities related to demographic changes –- more U.S. households now have pets than children. More households own horses now than in 1900. Ours is a culture of friendships with fuzzy things. Agriculture is the basic source of products for much of the pet-food industry, and this presents great opportunities for those who can latch onto it.
- I see new ways of using our resource base to generate additional income for producers.
- I see new partnerships between growers and conservation interests that benefit both.
- I see more opportunities in direct marketing. Internet grocery shopping almost doubled from 2000 to 2002, with about 10% of consumers doing some amount of buying online. Oregon growers rank near the top in the nation for usage of computers in their business, some of it related to on-line direct to consumer retailing. Specialty fruits and other prepared products can fit nicely into this niche arena for some of our producers and processors.
- I see more opportunities in farm-based recreation and agri-tourism.
- I see more emphasis on sustainability and development of marketing programs that highlight Oregon’s leadership in this area.
- I see adoption of technologies that streamline production and processing.
- I see the introduction of new crops, and perhaps even the shifting away from some commodities we have traditionally produced here.
- I see opportunities in nutraceuticals -- one of the largest growth businesses of the 21st century in the U.S. will be the health & nutrition industry, fueled by 76 million baby boomers in search of maintaining their health and appearance. The Atkins diet is driving a wave of demand for beef. And fruits and vegetables fit well into the renewed interest in wellness and those wanting to lose weight. Health and nutraceutical products are predicted to grow to $500 billion in the next decade -- tremendous opportunities for new products and increasing demand if agriculture can structure itself to share in the growth.
- I see a vibrant, but somewhat different agricultural industry than exists today.
These and other developments are already underway. Change is accelerating. These are exciting but challenging times that require quick thinking, acute judgment, new business arrangements, and collaborative efforts.
Oregon agriculture and related industries will continue to be a viable part of this State’s economy, communities, and natural resource base. I encourage all of you to be a part of that through supporting our farmers and ranchers as they transition to new ways of doing business. Thank you for the opportunity to speak with you.
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