California grower recommendations on supply chain resilience

(The Packer)

How can the produce supply chain have more surety, more resilience, more strength?

The government has asked for input on the question, and some big industry associations are providing some thoughtful replies.

Below, here are excerpts from the document submitted by the California Fresh Fruit Association and the California Table Grape Commission:

 

"The primary question posed by both the President’s Executive Order and USDA is how would stimulus relief programs and spending, related to food supply chain resilience as authorized by the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021, help increase the durability, resilience, diversity, and security of the supply chains within the U.S. agriculture sector. To sufficiently respond to this question, it is important to evaluate the stimulus relief that was and continues to be provided to fresh fruit producers by USDA.

The previous Administration initiated two rounds of direct payments to producers.

Unfortunately, how the stimulus was provided reduced, and in some cases eliminated, its desired effect. Program parameters of the Coronavirus Food Assistance Program 1.0, were fashioned in a tiered system with:

1. the highest payment eligibility for those producers who had crops that suffered a five percent-or-greater price decline between mid-January and mid-April as a result of the COVID-19 pandemic,

2. a second payment for those whose product shipped but subsequently spoiled due to loss of marketing channel, and

3. a third payment for producers who had shipments that did not leave the farm or mature crops that remained unharvested.

Both the Association and the Commission’s member organizations were not in the market for the price decline time period set in CFAP 1.0. CFAP 1.0 also did not consider immature fruit on vines and trees yet to be harvested. Generally, CFAP 1.0 focused on past harm. A focus on past harm as opposed to ongoing harm does not suitably address farmer injury particularly in markets where there are few forward contracts, no price guarantees, or no established predictive price modeling for fresh fruit. These tools, that work for other agricultural products, are not available and do not exist for fresh fruit whether looking forward or after injury has occurred.

The second round of stimulus or the Coronavirus Food Assistance Program 2.0, revised the payment program and based the support on the calculation of a producer’s eligible sales for calendar year 2019. While seemingly easier, a major deterrent for fresh tree and vine fruit producers to sign up and participate in the either CFAP 1.0 or 2.0 was that both programs contained payment limitations that did not provide consideration for input costs or commodity value. Payment limits significantly discouraged sign-up and the limit level did not reflect fruit producer income as a proportion of the support. In fact, the construct of payment limits and Adjusted Gross Income has its foundation in Congressional farm bills designed specifically for row crops. The limits assume that higher income directly relates to higher profit. Such an assumption does not provide consideration for high-risk crops. In addition, unlike row crops or program crops, a tree fruit or vine fruit producer cannot change their planting decisions from year to year. Tree and vine fruit producers have a high multi-year investment at the time of planting with fixed costs in the out years unless the farm or vineyard is sold, or the high-cost high value permanent crop is removed.

It should not be misunderstood; both the California Fresh Fruit Association and the California Table Grape Commission see a potential value in stimulus relief programs. In order to provide a greater level of realized security, resilience, and durability, however, stimulus payments must be executed with respect to the differing factors between permanent crop producers and those that can choose what they want to plant on farm year to year or within their growing season. This factor coupled with an acreage payment approach would have the most substantial stimulative effect during a supply chain disruption of any measure resulting from an external cause, i.e., a trade or supply chain disruption. USDA implemented an acreage-based payment approach as a part of the 2019 Market Facilitation Program for select specialty crops impacted by trade actions of foreign governments. This approach was welcomed and recognized as effective by industry.

With regard to spending related to the food supply, the Farmers to Families Food Box Program provided significant relief to farmers and their food distributors when no other outlet was available. The 400-plus member organizations of the Association and Commission received much-needed direct relief from the program and many openly attested to the program as having sustained their farming operations. Many member organizations would have had to dispose of food at a significant loss or worse, closed their family farming operations if not for the Box Program. Instead, the Box Program provided an efficient outlet for America’s fresh fruit producers to find a home for their farms’ produce. It is our recommendation that it or a similar program be permanently available as a part of emergency response.

Regulatory Supply Chain Actions to Curb Industry Vulnerabilities

The U.S. supply chain, while not fragile, has significant weaknesses for which only government can intervene. Three areas of vulnerabilities are: the availability of trucking, the availability of sea shipping containers, and the availability of worker safety and personal protective equipment (PPE).

Both the availability of trucking and sea containers has been and continues to be a large measure of supply chain security risk that weakens the efficient movement and avoidance of quality and condition issues for fresh fruit. Currently, trucking costs are significantly higher than prepandemic rates, one-third more and sometimes higher when comparing trucking costs as reported by the Agricultural Marketing Service Specialty Crops National Truck Rate Reports. The June 16, 2021, report also indicates that transportation is either in slight shortage or in short supply.

There is little evidence that the shortage will subside over the Summer months and into the Fall when the largest need to transport U.S. fresh fruit occurs.

The availability of sea containers for the shipping of agricultural products surfaced as an issue for U.S. exporters generally in late 2020.

While the Federal Maritime Commission (FMC) has regulatory jurisdiction, several months have passed with no solution and the regulator has yet to complete its initial investigation on the lack of availability of shipping containers. The significant amount of time it takes for a shipper to realize a formal enforcement proceeding by FMC is too lengthy. Faced with these circumstances, many fresh fruit exporters forego actions against carriers and suffer losses to no avail due to carrier container availability or slowed ports services.

Action must be taken to shorten the time period between the reporting of problems with a carrier and realized relief.

It is well known that PPE was in short supply for both medical and emergency responders as well as for critical infrastructure workers like those in the agriculture producer and distributor sector. Significant increases in inventory in our national strategic PPE stockpile and access to the stockpile by designated critical infrastructure sectors during a public health concern would greatly enhance industry’s availability to protect employees and keep pace with supply and demand.

Trucking, container availability and PPE will continue to be primary causes of added risks for the agricultural and food production fresh fruit supply chain if additional or enhance regulatory action is not a part of emergency response efforts.

Other Recommendations for Consideration

Suspension of Trade and Tariff Retaliatory Actions

In 2018, the United States government took the initiative to address unfair trade practices around the globe with particular emphasis on China. As a result, an average effective tariff ranging from 50 to 70 percent was placed on table grapes and tree fruit exports. These tariffs have continued to be in place despite their market restraining effects. The U.S. should immediately suspend all trade related actions resulting in retaliatory tariffs that do not compromise U.S. physical national security. The availability of open markets across the globe through reduced retaliatory tariffs would have served the fresh fruit industry well and provided added supply chain resiliency to the sector.

Improved Agricultural Production Efficiency

Dependence on manual and hand labor in the specialty crop sector continues to be the predominate method to plant, monitor, and harvest fresh fruits and vegetables. In fact, of the United States’ 20 most widely consumed fruits and vegetables, 17 still require hand harvesting.

In almost all cases, hand harvesting results in higher food prices compared to other food categories. Domestic labor is increasingly limited due to an aging workforce and the lack of interest among younger candidates. In addition, sources for foreign labor are curbed due to border restrictions as a result of COVID-19 and the continued public health concerns in foreign countries.

USDA should develop programs specific to specialty crop producers to encourage the adoption and investment in the use of mechanized and automated agri-tools. Payments or forgivable loans to producer operations under such a program should be formulated to provide a significant offset to their investment that is associated with improved efficiencies. Such a program would spur producers to make significant changes in production practices and add efficiency to systems of agricultural production management."

 

TK: These recommendations come from the experiences of hundreds of growers and should be seriously considered by policymakers.

The need to accelerate mechanization, to solve transportation chokepoints, to free export markets from tariffs, to maximize any stimulus aid for growers - all of these issues are critical to understand and to act on.

 

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