ESCONDIDO GROWERS FOR AGRICULTURAL PRESERVATION Presents Agriculture in Escondido Contributions, Challenges and Opportunities

Transcription

1 ESCONDIDO GROWERS FOR AGRICULTURAL PRESERVATION Presents Agriculture in Escondido Contributions, Challenges and Opportunities November, 2012 Prepared by Mechel S. Paggi and Fumiko Yamazaki Funded by the California Avocado Commission

2 Agriculture in Escondido Contributions, Challenges and Opportunities November, 2012 Mechel S. Paggi and Fumiko Yamazaki

3 Table of Contents I. Introduction...1 II. Agriculture in San Diego County...2 Economic Contributions of Agriculture...4 III. Agriculture in Escondido...5 Economic Impacts...5 Eco-System Benefits...9 IV. Challenges...10 V. Opportunities...17 Appendix...19 List of Figures Figure 1- San Diego County 3 Figure 2- North County 3 Figure 3- City of Escondido.4 Figure 4- Escondido Agricultural Water Users by Commodity.. 6 Figure 5- Index of Prices Received by Growers for Fruit and Tree Nuts...10 Figure 6- Index of Prices Paid for INPUTS = Figure 7- Proportion of Production Costs for Avocados in Escondido Area, Figure 8- Probability of Net Present Value per Acre Greater than Zero, Figure 9- Probability of Net Present Value per Acre Greater than Zero, Figure 10- Probability of Net Present Value per Acre Greater than Zero, Figure 11- Probability of Net Present Value per Acre Greater than Zero, Figure 12- Probability of Net Present Value per Acre Greater than Zero, Figure A-1- Predicted California Price of Avocado..22 List of Tables Table 1- Economic Impact of Agriculture in San Diego County...5 Table 2- Economic Impacts of Avocado Production for the City of Escondido...7 Table 3- Indirect Business Taxes Attributed to Escondido Avocado Production...8 Table 4- Employment and Earnings Attributable to the Agribusiness and Ag-Tech Cluster... 6 Table A-1- Avocados: Production, average grower price, value, by State, 1980/81 to date. 20 Table A-2 (a-d) - Escondido Avocado Representative Farm Model

4 I. Introduction Agriculture has played an important role in the development of Escondido, just as it did in other parts of California and throughout the United States. In the middle of the last century avocados and citrus growers along with producers of chickens, turkeys, beef and dairy cattle were cited as the foundation of the City s economy. 1 Like many other areas where agriculture flourished close to developing urban centers, the pressures of that development were to change the face of the nearby rural landscape. Between 1960 and 1990 the population of Escondido reportedly expanded from around 16,000 to over 100,000. Today real estate reports indicate the total population to be 140,170 with 138,508 urban and 1,662 rural residents (201 farm, 1,461 nonfarm). 2 The City has become a haven for people whose livelihood largely derives from working in San Diego and other surrounding areas or in the local service and support enterprises they depend on. Despite this trend toward urbanization agriculture continues to contribute significantly to the economy of the City and supports the quality of life that helps make Escondido a desirable place to live. The San Diego County Farm Bureau reports that agriculture contributes over $240 million to the City of Escondido economy and supports between 2,000 and 3,000 jobs. 3 The benefits associated with agriculture in the Escondido area also include the provision of eco-system services such as the aesthetic attributes associated with open and green space along with carbon sequestration associated with tree crop production such as avocado and citrus. In the recent Escondido Comprehensive Economic Development Strategy report, agriculture is identified as a targeted industry cluster with a recommendation that this sector be the object of strategic focus with a view toward retention and expansion. 4 The report identifies a number of such clusters and how the City might engage in activities that support their enrichment. At the present time the City of Escondido is engaged in a debate with regard to the delivery, price and sources of water for the community. In this debate policy alternatives are being considered that address the various consumptive uses for water: residential, commercial, industrial, agricultural, etc. Some initiatives the City may implement to enhance the overall attractiveness to current and prospective residents, businesses and their employees offer the potential to change the environment for the better. In contrast, policy decisions taken by the City regarding water pricing and availability, will directly impact the sustainability of existing agricultural enterprises. Accordingly it is important that those decisions be made with as much 1 The Southern California Rancher, Accessed October, 12, Larson, Eric, San Diego County Farm Bureau, presentation, Agricultural Summit, Escondido Growers for Agricultural Preservation, October 3, Escondido Comprehensive Economic Development Strategy, The National Dale Group Inc., p 20, July, 19,

5 information as possible with regard to their likely impacts on the agricultural enterprises that will be affected by those decisions. This report provides specific information regarding the contributions of agriculture to the economy of the City of Escondido. In addition, the report presents a specific example of the potential effects of alternative water pricing scenarios to the economic sustainability of Escondido avocado production enterprises. The information provided helps to quantify how decisions made today regarding the pricing of water for agricultural use can affect the potential for retention of existing agricultural enterprises as called for in the City of Escondido economic development plan. We begin by providing a review of the economic impacts of agriculture for San Diego County and the City of Escondido. Next we provide a profile of the agricultural production in Escondido that is dependent on the current municipal water delivery system. The following section presents the results of an analysis of the effects on the potential profitability of existing agricultural enterprises from the adoption of alternative water pricing scenarios with an example based on local avocado production. The final section of the report provides a discussion of the existing opportunities that lead to an outcome of mutual benefit to agriculture and the City of Escondido. II. Agriculture in San Diego County The city of Escondido is located in the area commonly described as North County with reference to the northern area of San Diego County (Figures 1-3). 5 To better understand the relationship of agriculture and the local economy it is useful to begin by examining that relationship in the larger context of the county as a whole. We focus on the role of agriculture and its contribution to income and employment in the county. In addition it is also useful to examine the contribution of agriculture to the provision of government services in the form of the tax revenue. Information on the impact of agriculture on Southern California was recently developed and provides the basis for our understanding of that relationship in San Diego County. 6 The study assesses how agriculture industries contribute to the rest of the economy in Southern California. The authors note that beyond its economic impact, farming also contributes to the landscape and broader ecosystem of the region. 5 City of Escondido Comprehensive Development Strategy, July, Vergati, Jessica A. and Daniel A. Sumner. Contributions of Agriculture to Employment and the Economy in Southern California, July,

6 Figrue 1. San Diego County Figure 2. North County 3

7 Figure 3. City of Escondido Overall agriculture is reported to contribute over $4.2 billion to the San Diego County economy and account for an estimated 32,283 jobs. The largest contributor to agricultural income and employment in San Diego County is found to be the greenhouse and nursery industry. The estimated value of the contribution of these operations was $729 million (Table 1). The UC- Davis study found that greenhouse and nursery sales constituted 17 percent of all San Diego agricultural output and nearly half of the county s farming output in The greenhouse and nursery industry were reported to account for around 3 thousand jobs. When ripple effects are included the greenhouse and nursery industry was estimated to have contributed $597 million in income and had a value added effect of $832 million. In addition to the greenhouse nursery industry, fruit production and the agricultural processing industry were determined to provide substantial economic benefits to the San Diego County economy. Fruit production was estimated to account for $569 million in sales and 7 thousand jobs in the Country. The processing of agricultural products has a reported industry output of $2.566 billion and generates an estimated 13,914 jobs throughout the economy. Other important contributors to the economy include vegetable and melon production accounting for an estimated $113 million and 1,180 jobs. 4

8 Table 1. Economic Impact of Agriculture in San Diego County Source: Vergati, Jessica A. and Daniel A. Sumner. Contributions of Agriculture to Employment and the Economy in Southern California, July, III. Agriculture in Escondido Economic Impacts The agricultural economy of Escondido can be viewed as a subsector of San Diego County s agricultural economy with the local economic impacts included as a part of the total for the county as presented in Table 1. Exact values for those impacts for Escondido are not readily available, however recent reports suggest that roughly 5,000 acres are farmed in and around Escondido with an annual crop value of $80.8 million providing upward of 3,000 jobs. 7 To gain a more detailed understanding of the importance of agriculture to the economy of Escondido we provide an example that focuses on the contribution of locally grown avocados, the predominant agricultural commodity produced in the area. In order to establish an estimate of the economic impact of Escondido avocado production on the local economy we draw on a number of information resources. A database developed as part of the Metropolitan Water District of Southern California (MWD), Interim Agricultural Water Program (IAWP) survey provides a detailed breakdown of agricultural production units by commodity. Information available from the California Avocado Commission provides the number of acres in avocado production (the dominant commodity produced by City farmers). In 7 Garrick, David. October 9, 2012, North County Times. 5

9 addition a study conducted in conjunction with the California Department of Food and Agriculture, California Grown program provides additional detail regarding the economic impact of avocado production in the State. A combination of this information establishes a foundation to develop estimates of the impacts of this agriculture sector on the City. Avocado production is a good choice to examine the contribution of production agriculture to the local economy because it is easily identified as the main agricultural crop grown within the area. A survey of producers who utilize water as part of the Interim Agricultural Water Program provides an accounting of individual production units by commodity and size. 8 The survey indicated that among agricultural users, avocado production accounted for 54% of the acres reporting single commodity production, an additional 35% of the total reported acreage being a combination of avocado and citrus (Figure 4). As reported, avocado production accounts for all or some portion of 94% of the reported agricultural acreage currently utilizing water provided by the City. Figure 4. Escondido Agricultural Water Users by Commodity 18 Parcels/ Acres 28 Parcels/ Acres 36 Parcels/ Acres Total Parcels 303 Total Acres Parcels Acres 143 Parcels 1556 Acres Avocado Avocado/ citrus Avocado/ other Citrus Others Source: 12/07 IWAP Final More recently, the California Avocado Commission reports Escondido has about 3,304 acres in avocado production. Utilizing information on average yields per acre and prices provided by 8 City of Escondido, IAWP Supply Reduction Implementation Plan November

10 local producers and the University of California Cooperative Extension it is estimated that Escondido avocado producers received direct revenues from production of over $35.6 million in 2010 and $25.6 million in The impact of this revenue generation for the City increases as it works its way through the economic system. The ripple effects refer to an accounting of direct spending by growers, the amount of additional business activity created by such spending (referred to as indirect effects ) and the additional amount of business activity resulting from the spending caused by the incremental income of those people who benefit from the indirect effects (referred to as induced effects ). As evidenced from the previous two years agricultural revenues can change significantly from one year to another. Accordingly for this analysis we will use the average value of revenue over the last two years, $30.6 million, to account for variations that can occur depending on climate, market and other conditions largely outside the control of an individual grower. To estimate the economic impacts associated with local avocado production we have utilized results from a study conducted by the California Department of Food and Agriculture, as part of its assessment of the California Grown initiative of the Buy California Marketing Agreement. The study, conducted by Tootelian & Associates, a Sacramento, California-based marketing and management consulting firm provided estimates for the statewide impacts of individual specialty crops based on a combination of traditional economic impact assessment methodology, IMPLAN analysis, and economic feeder models to provide input data for analysis and bring the economic impact down to a more understandable level to assess the impact in more detailed ways. 10 Among the results of the study was a statewide impact assessment for avocado production. We have utilized proportionate indirect and induced coefficients to establish a baseline estimate of the impacts of local avocado production for Escondido (Table2). Table 2. Economic Impacts of Avocado Production for the City of Escondido OUTPUT Direct Indirect Induced Total Farming Revenue $30,600,000 $3,568,388 $68,170 $34,236,559 Manufacturing $2,188,892 $1,227,221 $3,416,113 Wholesaling $688,210 $579,922 $1,268,132 Retailing $66,321 $1,292,122 $1,358,444 Real Estate $648,214 $498,957 $1,147,171 Professional Services $1,639,374 $1,917,860 $3,557,234 Administrative $68,074 $138,550 $206,624 Education $35,905 $150,848 $186,753 Health $68 $1,118,398 $1,118,465 Arts, entertainment, recreation $43,861 $216,400 $260,261 Accommodations, food services $60,005 $501,386 $561,391 Other $1,217,780 $1,756,279 $2,974,059 Total $30,600,000 $10,225,093 $9,466,113 $50,291,206 The impact of avocado production on employment is also difficult to determine from readily available data. Coefficients associated with the statewide impact report are again utilized to 9 Average production of 9,000 lbs. per acre; 2010 average price $1.20 per lb.; 2011 average price $0.86 per lb. 10 California Department of Food and Agriculture California Grown Economic Impact Study. August,

11 approximate a value for avocado related jobs. If we assume 2 full time equivalent jobs for every avocado production unit, and that the number of parcels reported in the IWAP survey approximates the number of units, direct employment related to avocado production would be expected to be around 554. Based on this estimated direct employment number we would expect another 294 jobs accounted for by the indirect economic effects and 155 resulting from induced effects for a total of 1,003 jobs attributable to local avocado production. An additional element of the importance of avocado production to the economy of the City of Escondido is the amount of tax revenue generated. An approximation of the tax revenue attributable to the City based on the statewide multipliers for indirect business taxes and average direct revenue derived from avocado production is about $1.8 million (Table 3). Table 3. Indirect Business Taxes Attributed to Escondido Avocado Production INDIRECT BUSINESS TAXES Direct Indirect Induced Total Manufacturing $57,886 $23,156 $81,042 Wholesaling $98,162 $82,143 $180,305 Retailing $6,999 $176,581 $183,581 Real Estate $70,721 $56,056 $126,777 Professional Services $32,207 $48,216 $80,423 Administrative $947 $1,991 $2,937 Education $293 $1,250 $1,543 Health $0 $8,964 $8,964 Arts, entertainment, recreation $1,369 $12,581 $13,950 Accommodations, food services $3,875 $30,117 $33,992 Farming $874,213 $57,863 $1,324 $933,400 Other $23,581 $128,278 $151,860 Total $874,213 $353,903 $570,658 $1,798,774 The importance of avocado production is only one example of the important contribution agriculture makes to the economy of the City. Other indicators of the importance of agricultural related activity to the City of Escondido are presented in the recently adopted CEDS. In this study the authors provide an estimated breakdown for Escondido s agricultural contributions to the employment relative to the State, County and North County areas. In this case jobs are associated with the cluster of activities referred to as Agribusiness and Ag-Tech. Within the CEDS context the Agribusiness and Ag-Tech cluster has been identified as the one of those areas to be targeted for retention and expansion, indicating is part the importance the community places on agriculture. The agriculture cluster is reported to account for 941 jobs in the City, around 12% of the total for the county as a whole (Table 4). 8

12 Table 4. Employment and Earnings Attributable to the Agribusiness and Ag-Tech Cluster Insight regarding the importance of agricultural production and related activities to the City of Escondido economy are evident from the information provided. To fully understand the economic benefits derived from agricultural activities would require a more complete study of the local economy which exceeds the scope of this report. However the importance and magnitude of agriculture to the City in both its contribution to business activity, employment and tax revenues are revealed to be clearly positive and significant. Eco-System Benefits In addition to the impact of agricultural on the economy of Escondido, agriculture also produces a bundle of eco-system services that contribute to a desirable environment and enhanced quality of life. Like the economic benefits associated with agriculture it is difficult to place an exact dollar value on the value of these services. However examples of some measures of those benefits associated with avocado production can contribute to a better understanding of the components the eco-system services that the City enjoys as a result of areas agricultural activity. Of particular importance is the contribution of agricultural green space to air quality. Avocado and other fruit trees such as citrus absorb CO 2 from the atmosphere helping to improve air quality. In one year a single adult avocado tree can absorb the amount of carbon produced by a car driven 13,000 miles. 11 Those same trees also produce oxygen and help to reduce air pollution from ozone, particulate matter, sulfur dioxide and nitrogen dioxide. 12 For example an average avocado tree absorbs ten pounds of pollutants each year including four pounds of ozone and three pounds of particulates McPherson, G Urban Tree Planting and Greenhouse Gas Reductions, Arborist News; International Society of Arboriculture, June 2007, P Norwak, D.J., D.E. Crane and J.C. Stevens, Air Pollution removal by urban trees and shrubs in the United States. Urban Forestry and Urban Greening 4: Cambridge, M.A. 13 Taha, H Modeling impacts of increased urban vegetation on ozone air quality in the South Coast Air Basin. Atmospheric Environment 30: & Nowak, D. J. and J.F. Dwyer, Understanding the benfits and costs of urban forest ecosystems, pp In Urban and Community Forestry in the Northeast. Kuser J. ed. Springer Science and Business Media, New York, N.Y. 9

13 Other environmental benefits associated with local tree fruit production like avocados include contribution to the prevention of soil erosion, and enhanced recharge of groundwater supplies. Tree groves also play a role as substantial noise buffers. Enhanced habitat for wildlife is another benefit associated with the production areas. In addition those same groves are important buffers in helping to control and prevent the spreading of wildfires. 14 In the following section we will demonstrate how the economic benefits described earlier along with local agriculture s ability to continue to provide eco-system services will be affected by impending decisions regarding water resource allocations to agriculture. IV. Challenges A key component in the sustainability of all commercial agriculture operations is the ability of those enterprises to maintain a positive return on their investment. Agriculture in the Escondido region is no exception. Market prices for fruits and other locally grown commodities vary from season to season depending on many factors often beyond the control of individual producers (Figure 5). Variable production yields due to natural crop cycles and unpredictable weather conditions also increase uncertainty in annual revenue streams. At the same time the cost of purchased inputs continue to increase (Figure 6). With limited private water resources available, most producers in the area rely on water supplied by the City of Escondido. For most producers in the area the cost of water is among the most critical factors, if not the most critical factor, in the difference between profitability and economic loss. A detailed example of the costs and Figure Billespie, I.G. and E.B. Allen/ Fire and competition in a southern California grassland; impacts on the rare forb Erodium macrophyllum. Journal of Applied Ecology 41:

14 Figure 6. Index of Prices Paid for Inputs = 100 Source: USDA, National Agricultural Statistics Service, Agricultural Prices, October, 2012 returns of avocado production provides a clear picture of the precarious economic situation faced by local producers and the direct linkage to the price of water. The input cost categories necessary to produce an avocado crop include weed control, rodent control, fertilizer, pest control, irrigation activities, water, overhead, and depreciation on equipment. In addition there is cost associated with picking the crop and marketing fees associated with contributions for grower organization services (Figure 7). Together a representative farm in the Escondido area incurs a cost of around $8,798 per acre. 15 This is the cost of growing the crop and getting it to market, return to management, or profit is what is left over after all cultural costs are deducted from crop revenue. For purposes of our analysis the sum of the cultural costs is considered our breakeven point. As illustrated in Figure 4, the cost of water is the single most expensive input for local growers. More than double the expense for any other input category. The cost of water to all residents in the Escondido area has increased significantly over the past several years. In 2005 the cost of water provided to agricultural users was $1.95 per 1000 gals. 16 Today avocado growers report a cost of $3.31 per thousand gallons (kgal), for water provided by 15 Data for costs estimates were provided by a panel of owner operators and industry representatives from the Escondido area. 16 Melban, Ken Testimony to the Escondido City Council, December 14,

15 the city, an increase of almost 70%. At the current cost of water, along with other inputs, avocado growers struggle to meet the breakeven return for their production. Figure 7. Proportion of Production Costs for Avocados in Escondido Area, 2012 Non-Cash Overhead 1% Cultural Costs 21% Water 49% Cash Overhead 8% Avocado Input Costs per Acre, 2012 Harvest and Marketing 21% The sensitivity of profitability to water cost can be demonstrated by looking at two scenarios involving alternative costs for municipally supplied water. In these examples we utilize a representative model of a local avocado farm. The model is constructed based on information provided by local area producers and industry representatives. This model is based on a series of stochastic simulation models developed by the principal investigators for a number of California specialty crops. 17 The model utilized in this study is used to generate a large random sample of historic yields and prices to develop probability estimates of the important outcome, in this case profitability defined as the net present value of revenue above zero, attributable to changes in one key operating variable (KOV), in this case the price of water. The initial results reflect the probability of profitability for a local avocado farm under the current operating costs including water priced at $3.31 per kgal over the next 2 years. 17 Information on the California representative farm models and the CAB updates to the models can be found at 12

16 Figure 8. Probability of Net Present Value per Acre Greater Than Zero, The results presented in Figure 8 indicate that given the present value of inputs combined with prices and yields drawn from the distribution of their historic values, local avocado growers have a 16% probability of generating positive net revenue per acre in the near term. If we extend the analysis to look at a 5 year period the results do not improve. As illustrated in Figure 9, the probability of local growers generating positive net revenue per acre over that period falls to 10%. In each case a 10% discount rate to calculate the net present value of the revenue. 13

17 Figure 9. Probability of Net Present Value per Acre Greater Than Zero, To determine how sensitive the profitability of local avocado farming is to the price growers pay for water we examine the same farm model using a different value for the price of water. In this case the cost of water paid by growers in neighboring Riverside County is used for the alternative water price. In recent reports avocado growers in Riverside Country indicate that they are paying an average of $1.99 kgal for water. The impact of applying that same rate to the representative Escondido farm demonstrates the impact of water price on the profitability of the farm as illustrated in Figure

18 Figure 10. Probability of Net Present Value per Acre Greater Than Zero, As indicted in Figure 10, the probability of an Escondido avocado producer generating positive net revenue in the near term increases to 63% if the price of water was equal to that being paid by growers in neighboring Riverside County. As illustrated in Figure 11, the probability of generating a positive net present value in the long run also increases, in this case to 74%. The importance of these results is two-fold. First, the results suggest that, other things being equal, the present water price makes the economic sustainability of avocado farming in the Escondido a difficult goal to achieve. Second, the results demonstrate the positive impact a differential water price can have on the profitability of an individual farm enterprise, in this case avocado production in the Escondido area. 15

19 Figure 11. Probability of Net Present Value per Acre Greater Than Zero, In the next section we summarize opportunities to the City and the agricultural community that can result from a change in the price of water to local farmers. 16

20 V. Opportunities A change in current water pricing policy provides an opportunity to increase the ability of agriculture and related businesses to continue to make significant contributions to the economy and eco-system of the Escondido area. Adjusting water prices to agricultural producers would also increase the likelihood that those users will continue to be a source of revenue to the City water agency. In addition, those same agricultural producers would be more likely to remain as potential areas for the use of reclaimed water, an estimated 2,000 acre/ft annually, as part of the City s plan to avoid the cost, an estimated $400 million, of widening the existing pipeline that carries wastewater to its ocean outfall. An adjustment of the agricultural water user rates on the order of that discussed in the avocado production examples could require the revenue foregone to be accounted for by increases in the rates charged to other customers. The City of Escondido 2010 Urban Water Management Plan, released in July, 2011, reports water deliveries to a total of customer base of 26,105 users. 18 Of those 208 were reported to be agriculture sector accounts. While agriculture users as recorded represent a small percentage of the total customer base they utilize a reported 16.8% of the total volume of water. At the current cost of $3.31 per kgal, agricultural water users contribute around $4.2 million in revenue to the City; about 14% of total revenue from water use of about $ A reduction of the current cost of water to agricultural users to the rate used in the avocado examples, $1.99 per kgal, would amount to a reduction in revenue of around $1.8 million at 2010 use levels. The cost of such an adjustment agriculture water cost spread across all other sectors users would amount to an increase of about $69 per year, or $0.19 per day in their water current water bill. A reduction in water cost provides a significant support to local agricultural producers ability to remain economically viable in the short-run. The long-run sustainability of agriculture in the Escondido area also depends on the ability of growers to adapt to new technology and cultural practices that will allow them to capture the benefits of the lower water input cost. One such opportunity that is currently under investigation in the avocado industry is high density planting of trees per acre. Another is adapting more aggressive pruning practices. In both cases expectations of higher yields would lead to increased revenue and the enhanced potential for economic viability (Figure 12). These practices must also be combined with continued attention to proper fertilization, pest control, proper irrigation scheduling and other good farming practices. 18 Brown and Caldwell, City of Escondido 2010 Urban Water Management Plan, July, 2011, p City of Escondido, Water and Wastewater Rate Study Report, December 28, 2010, p

21 Figure 12. Probability of Net Present Value per Acre Greater Than Zero, However to make such adjustments requires investments, which in turn requires a reasonable expectation that revenues from the business will be able to service the cost of such investment. The investment by the City in providing differential water rates to agricultural users would establish a necessary condition for local growers to take additional steps to act in their own behalf and undertake revenue enhancing investment opportunities. Access to affordable water combined with innovative farming practices provides the opportunity for a public policy private - sector partnership with an outcome that results in a better potential for a sustainable agriculture sector in the Escondido area and a continuation of the benefits that it provides. 18

22 Appendix 19

23 Table A 1. Avocados: Production, season-average grower price, and value, by State, 1980/81 to date Season California Florida United States 2/ 1/ Production Price Value Production Price Value Production Price Value $/short $/short $/short Short tons ton $ 1,000 Short tons ton $ 1,000 Short tons ton $ 1, /81 238, ,966 30, , , , /82 157, ,173 25, , , , /83 202, ,920 34, , , , /84 247, ,390 27, , , , /85 200, ,400 29, , , , /86 160,000 1, ,200 28, , , , /87 278, ,964 24, , , , /88 180,000 1, ,200 29, , ,000 1, , /89 165,000 1, ,900 27, , ,600 1, , /90 105,000 2, ,400 33, , ,050 1, , /91 136,000 1, ,760 19, , ,050 1, , /92 156,000 1, ,520 28, , ,720 1, , /93 284, ,600 7, , , , /94 139,000 1, ,590 4, , ,650 1, , /95 155,000 1, ,894 20, , ,250 1, , /96 171,000 1, ,831 19, , ,250 1, , /97 167,000 1, ,162 23, , ,700 1, , /98 154,000 1, ,473 24, , ,250 1, , /99 136,000 2, ,002 23, , ,250 2, , /00 161,000 2, ,594 22, , ,300 1, , /01 213,000 1, ,842 26, , ,320 1, , /02 200,000 1, ,000 23, , ,300 1, , /03 168,000 2, ,560 31, , ,350 1, , /04 216,000 1, ,160 17, , ,380 1, , /05 151,000 1, ,330 28, , ,370 1, , /06 300,000 1, ,000 12, , ,400 1, , /07 132,000 1, ,480 14, , ,510 1, , /08 165,000 1, ,350 27, , ,080 1, , /09 88,000 2, ,640 27, , ,950 1, , /10 274,800 1, ,948 23, , ,520 1, , /11 126,500 2, ,600 22, , ,330 2, ,108 1/ Season beginning November 1 to November 30 (following year) for California and June 20 to February 28 for Florida. 2/ Includes Hawaii beginning 1988/89. Source: USDA, National Agricultural Statistics Service, Noncitrus Fruits and Nuts Summary, various issues. 20

24 Table A-2a. Escondido Avocado Representative Farm Model 2012 Baseline Simulated Price ($/lb) Average Mean $0.86 $0.87 $0.88 $0.89 $0.90 $0.88 Simulated Yield (lb/acre) Average Mean 9, , , , , , Higher Yield Scenario Simulated Yield (lb/acre) Average Mean 10, , , , , , Table A-2b. Escondido Avocado Representative Farm Model 2012 Baseline, Price of Water = $3.31 per 1000 gallons Simulated NPV [Sum of Income Stream ] ($/acre) Mean -$4, Simulated NPV [Sum of Income Stream ] ($/acre) Mean -$2, Table A-2c. Escondido Representative Avocado Farm Model 2012 Baseline, Price of Water = $1.99 Simulated NPV [Sum of Income Stream ] ($/acre) Mean $1, Simulated NPV [Sum of Income Stream ] ($/acre) Mean $ Table A-2d. Escondido Representative Avocado Farm Model 2012 High Yield Scenario; Cost of Water = $1.99 per 1000 gallons Simulated NPV [Sum of Income Stream ] ($/acre) Mean $5, Simulated NPV [Sum of Income Stream ] ($/acre) Mean $2,

25 Figure A-1. Predicted California Price of Avocado 3, California Price of Avocado: Historical & Predicted ($/ton) 2, , , , Forecast (AR 1,0,10) Historical 22

26 Acknowledgments The authors thank the California Avocado Commission for funding this report and the helpful comments as well from Ken Melban, Director, Issues Management. We also thank the industry representatives and organization members who participated in roundtable discussions with the authors for their willingness to share their time and contribute valuable insights and information regarding agriculture in the Escondido area. About the Authors Mechel S. Paggi has been the Director of the Center for Agricultural Business, California State University, Fresno for the past 12 years. Prior to joining Fresno State, Dr. Paggi has served as senior economist in a number of posts including the U.S. Budget Office, the United Nations Food and Agricultural Organization and the American Farm Bureau. Dr. Paggi received his Ph.D. in Agricultural Economics from Texas A&M University. Fumiko Yamazaki is an economic consultant and currently employed as the Senior Research Economist with the Center for Agricultural Business. Dr. Yamazaki has held positions and conducted applied research for many domestic and international clients including the United Nations Food and Agricultural Organization, the International Development Bank, and the American Soybean Association. Dr. Yamazaki received her Ph.D. in Agricultural Economics from Purdue University. 23