Letter: Labor, input cost increases challenge growers

10/17/2013 10:21:00 AM
Eric Schwartz

Tell it to The Packer | Letter to the Editor

Eric Schwartz, chief executive officer
United Vegetable Growers Cooperative, Salinas, Calif.

The impact of the impending California minimum wage increase seemed to go unnoticed by many.

The first $1 per hour in 2014 alone represents a 12.5% increase over the current minimum wage.

In vegetable production, labor can represent 30% or more of growing costs, so a 12.5% increase on 30% of your costs means your growing cost just went up almost 4%.

There are other costs that are tied to wages such as taxes, insurance, and some benefits, which will also go up, so the true increase will be more than just a percentage change in the hourly rate.

Growers paying a premium over the minimum wage today for skilled labor will have to maintain that spread because of the pressures from other industries competing for the same shrinking labor pool.

Unfortunately, increasing labor cost isn’t the only challenge growers must contend with.

Recent spikes in land rents, water shortages, and insurance premiums are already facing vegetable growers today.

In addition, we haven’t even begun to address the effects of the Affordable Care Act.

Severe water shortages in California’s Central Valley and ground scarcity in the traditional berry and grape regions have created tremendous pressure on land availability and rents.

Historically, growers have offset many of these escalating costs through the utilization of fully depreciated equipment, productivity improvements, and record yields fueled by near-perfect weather conditions.

The vegetable production industry is at an inflection point.

Fully depreciated equipment is worn out and needs to be replaced, and growers can’t continue to gamble on record yields increasing even more.

Unlike other industries that lend themselves to automation, growing safe, high quality vegetables and leafy greens is still a hands-on art.

The vegetables many people take for granted start with the dirt and the growers that grow them.

Growers need to be able to recoup these extraordinary and unprecedented costs if they are to remain viable in the future.



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