Project at a Glance

Title: A framework for assessing the economic impacts of agricultural equipment emission reduction strategies on the agricultural economy in the San Joaquin Valley

Principal Investigator / Author(s): McCullough, Michael and Lynn Hamilton

Contractor: California Polytechnic University

Contract Number: 13-331

Research Program Area: Emissions Monitoring & Control, Economic Analysis

Topic Areas: Agriculture, Mobile Sources & Fuels


This study is the first phase of a two-part study that develops a framework that can be used to assess the economic impact of regulations on San Joaquin Valley agriculture from the farm-level through all ancillary industries. The data-driven modeling framework developed for this study began with a discussion of the regulatory environment faced by San Joaquin Valley farmers in 2012, a set of case study interviews, and interviews with farm equipment dealers or manufacturer representatives. Following that, the 2012 baseline data was then built into a suite of three flexible tools:
(i) farm simulation models,
(ii) a calibrated regional agricultural production optimization model, and
(iii) a regional input-output (or "multiplier") model that can be updated to reflect current cost and return information.

General insights about the regulatory environment faced by farms in 2012 in the San Joaquin Valley based upon the case study interviews include:
1. Air quality regulations accounted for 36% of total regulatory costs across farms, with dust control measures and tree waste comprising the largest components.
2. Large variations are apparent in water quality requirements depending on farm location in the San Joaquin Valley and water coalition membership, with anticipation of higher costs in the future as groundwater nitrogen monitoring is implemented in 2017 (to be determined in the second phase of the study).
3. Pesticide costs were largely underreported because of the difficult nature of discerning regulatory costs embedded in pest control adviser (PCA) fees and pesticide prices. Pesticide applications were the most commonly contracted work and regulatory costs were hidden within application contracts.
4. Larger farms tend to have lower average costs per acre largely based on the lower fixed average cost of employment and training costs.

The findings of the regional analysis using the Statewide Agricultural Production Model (SWAP), an economic model covering 97 percent of irrigated agriculture in California, include:
1. Default publicly available crop cost-of-production budgets do not include a full accounting of all regulatory costs.
2. There are important differences in production costs between small and large farms for many crops produced in the San Joaquin Valley. Prior to this study, this information was not included in the SWAP model input data. In general, larger farms are able to capitalize on economies of scale, by spreading capital costs over a larger operation.
3. Current regulatory compliance costs vary significantly by farm size. Many small operators will use owner-operator time to manage regulatory requirements, whereas many large operators will have full-time staff.
4. Small increases in regulatory compliance costs generally have a small effect on the regional agricultural economy. However, when these costs are considered concurrently with drought, market risk, and other production pressures, the regional economic impact increases.

The findings of the regional economic analysis using the Impact for Analysis and Planning Model (IMPLAN) include:
1. Higher regulatory compliance costs cause growers to reduce output (fallow), switch crop mix, and adjust inputs used on a per-acre basis. These changes affect input purchases and output sales to related industries.
2. The San Joaquin Valley economy is heavily dependent on agriculture-related industries. As such, changes in agriculture in the San Joaquin Valley have a potentially higher proportional impacts relative to changes in another part of the state (such as Southern California) or other parts of the world.
3. The San Joaquin Valley economic multipliers range from 1.3 - 2, meaning that a dollar increase in primary farm production can cause an additional 30 cents to 1 dollar in additional losses in related industries. Multipliers vary by crop, region, and industry.

The second project phase will assess the change in regulatory environment between Census years 2012-2017, through a series of follow-up interviews with the original growers. By revisiting the case study participants and focusing on the 2017 production year, we will be able to accurately examine the current state of agriculture in the San Joaquin Valley. The models will all be updated with 2017 data, both primary and secondary, allowing for a more current and detailed analysis.

For questions regarding this research project, including available data and progress status, contact: Research Division staff at (916) 445-0753

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