We mainly visited California in the last component of our Global Focus Program so I will limit my comments on US agriculture to what I saw here.

Firstly, California has a lot of water and it is free for all intents and purposes. The water is split up into surface water allocation (which attracts charges for distribution) and then bores (or wells as they call them) which attract no charges except for the start up costs (approximately US$700,000) and pumping costs (one is pulling water from up to 1500 ft). Basically, one is paying US$85-90/acre foot in pumping costs but the water under your farm is yours (ie no allocation) and you can build as many bores as you want. Thus, it was quite common for us to see a bore every 300m or so. I think that the water is built into the land price, rather than in Australia where it can be separated. We heard that land was trading in the Eastern half of the Valley (around Fresno) for US$6,000-8,000/acre.

Currently, the surface water is moved from the north of California to the South through two schemes, one Federal and one State based. This water has to move through the Delta which is inland from San Francisco. However, they have a problem with an endangered fish called the Delta Smelt and this fish has led to no water being lifted out of the Delta and being transferred to the southern half of the San Jaoquin Valley where most of the irrigation is. Thus, most of the western half of the Valley is without surface irrigation this year and is thus relying on underground water to produce crops. It is quite a peculiar set of circumstances.

In relation to crop production, there has been a greater move away from annual crops like cotton and wheat into permanent plantations (especially almonds and to a lesser extent pistachios and walnuts) and processing tomatoes. It was interesting that when we went and saw a representative of JG Boswell (the biggest irrigator in the Valley, the owner of AusCott in Australia and the biggest producer of cotton in the USA) that if they had to plant anything, it would be tomatoes as they were the most profitable crop. These two types of crops, along with vegetable production, are driving the returns in this region of the USA. Almonds are yielding up to 2.25t/acre (average in the valley is 1t/acre) and tomatoes are 58t/acre under drip irrigation (and getting paid US$80/tonne this year from the processor). Most of the irrigation is sprinkler or check bank but there is increasing amounts of surface and sub-surface drip being installed, especially for the permanent crops and the tomatoes, where big yield advantages can be had from sub-surface watering (up to 30%).

However I feel that there is a risk down the track with these permanent crops, particularly if California has several years of low snowpack in the mountains that feed the dams, that we could see a situation in Australia where farmers will have to pay big prices for water to keep permanent crops alive rather than simply match their water use with annual crops like tomatoes, vegetables or field crops (cotton or wheat). We heard that 20% of the crops in the Valley were permanent plantations.

With respect to vegetables, we travelled towards Salinas and Monteray where the vast bulk of leafy crops and artichokes are grown. Land in this region cost up to US$45,000/acre. Some growers are forming alliances to market produce to their customers and there is an increasing amount of growers vertically integrating into harvesting, processing and sales in order to service some of the bigger accounts, such as Costco and Walmart. Thus, farmers are integrating their production zones in Mexico, Arizona, southern California and then Salinas to guarantee year round production. Thus, at certain times 90% of the salad served in the USA comes from California.

One last comment I will make concerns the labour force. The Mexicans are everywhere doing farm work as most US residents don’t want to undertake these types of roles. The labour is quite cheap but given the US need so much manual labour for their vegetables production, if they ever succeeded in shutting the border to illegal immigration, they would nearly be shooting themselves in the foot with regard to having a labour force to grow food for their national security purposes.