Rising employment costs have added to the pressures on California canning-peach farmers, who say additional expenses and regulations complicate efforts to make growing the crop pencil out.
Stanislaus County farmer Eric Spycher, who grows cling peaches, almonds and walnuts in Ballico, said of his peach crop, "The biggest challenge is labor. I mean the cost and the availability are both equally challenging."
Standing in an orchard of the Kingsburg Kling peach variety last week, Spycher checked in with employees who were undertaking the important job of pruning trees. Spycher said the pruning was about one-quarter complete, with a much smaller crew.
"We have about eight pruners and in the past we've had as many as 40, so we're really careful with our schedules for pruning and are trying to keep the guys working all of the time," he said. "We don't have a lot of extra help."
Sutter County peach farmer Ranjit Davit, who chairs the California Canning Peach Association board, described cling peaches as a labor-intensive crop, requiring trees to be pruned, thinned and harvested by hand—although processors have accepted some machine-harvested fruit in recent years. Davit said employment costs account for 70% of a cling peach grower's total cultural cost.
"Since mechanization options are limited, our industry continues to be dependent on having a viable labor force available to us in a timely manner," said Davit, who addressed growers and others last week at the association's 98th annual meeting Sacramento.
He said the increasing California minimum wage and rules on agricultural overtime pay combine to restrict farmers' options. In addition to increasing employment costs, Davit said, the workforce has changed considerably in recent years, adding, "We've seen decreases in both quality and productivity from the crews working in orchards."
Mark Burrell, managing partner of the WestMark Group, a strategic consulting firm in Gold River specializing in agricultural business, emphasized that most people working in agriculture earn much more than the base minimum wage, but added, "As the minimum wage moves up, it raises the boat for everybody."
"It is a fact that California is a high-cost, highly regulated business environment and it is becoming more so," Burrell said. "It's not simply the increase in minimum wage, it's the reduction of the workweek from six to five (days) and the reduction of the workday, from 10 hours to eight hours, that impacts this as well."
This business environment, he said, is forcing some production out of the country and driving investment in technology and innovation, particularly technology that can reduce employment needs.
"We don't have a single client that's not working as hard as they can to identify and adapt technology that's relevant, that is proven and that will both increase productivity and reduce costs," Burrell said.
California Canning Peach Association President and CEO Rich Hudgins said that for the cling peach business in California to survive, "Growers must be able to recover higher labor costs in the coming years or find new ways to offset these higher labor costs with more mechanization." If this fails to happen, he said, "our industry will be doomed to follow the Hawaiian canned pineapple industry into oblivion."
With an 8% increase in the state minimum wage as of Jan. 1, Hudgins said it is imperative for 2020 peach prices to reflect the higher employment costs growers are incurring. The 2019 grower price of $488 per ton was unchanged from 2018 pricing despite last year's 9% employment cost increase, he said.
The ultimate key to profitability, Hudgins said, is achieving a more balanced supply/demand position.
"Growers whose contracts expire in 2020 will not have contracts renewed by either Del Monte or PCP following the 2020 harvest," he said. "In addition, the association has nearly 400 acres of unsold orchards, most of which came out of contract following the 2019 season."
Assuming additional acres are pulled out before the coming season, the association projects a total of 16,000 bearing acres of cling peaches for the 2020 harvest.
The Canning Peach Association has worked with the U.S. Department of Agriculture to have canned peaches included in a Bonus Buy Program for food-assistance programs. Hudgins said he is hopeful about plans for an additional Bonus Buy from the 2020 peach pack.
Hudgins said the association had helped secure a 25% tariff increase on canned peach imports from Greece, which he said should limit the volume of imports coming into the U.S.
"California peach growers will eventually pay the ultimate price as our domestic markets shrink due to unfairly priced Chinese and Greek canned fruit imports," he said. "We will continue to be vigilant regarding retailer decisions on sourcing for their store brand products."
Acknowledging that processors need to be profitable, Davit said growers must also experience profitability to sustain rising employment costs.
"The processors must understand that growers need to see higher pricing in the coming year to offset increases in our production costs and for our continued success," Davit said, adding, "We must deliver fruit of the highest quality to processors to ensure their continued success."