The wage differentials with traditional producing countries in the Mediterranean Basin were much larger, with California farmers paying roughly 4 to 8 times more. Moreover, most fruit and nut crops were characterized by high labor-to-land ratios. For example, the U.S. Department of Agriculture estimated that in 1939 producing almonds on the Pacific Coast required 96 hours per bearing acre, dates 275, figs 155, grapes 200, prunes 130, and walnuts 81 hours; this compared with only 6.6 hours of labor per acre of wheat.Underlying the Hechsher-Ohlin analysis is the notion that wheat farmers competed directly with fruit and nut growers for the labor and land. But this notion needs to be qualified in ways that help explain the success of California fruit producers. On the Pacific Coast, the labor requirements of both activities were highly seasonal and their peak harvest demands did not fully overlap. In California, for example, the wheat harvest was typically completed by early July whereas the raisin and wine grape harvest did not commence until September and continued through late October. Hence, a worker could, in principle, participate fully both in the grain and grape harvests. Rather than conceiving of the different crops as being competitive in labor, we might be better served by considering them as complimentary. As an example, in the lush Santa Clara Valley harvest workers would migrate from cherries to apricots to prunes to walnuts and almonds over a roughly six month season. Adding other semi-tropical crops, such as cotton and navel oranges, stretched the harvest season in large sections of California into the winter months. By filling out the work year and reducing seasonal underemployment, the cultivation of a range of crops in close proximity increased the attractiveness to labor of working in Pacific Coast agriculture. The succession of peak-load, high-wage periods allowed California workers more days of high-intensity and high-pay work in a year than was possible in most other regions.It is also important to recognize that the land used for grain and fruit crops was largely “non-competing.” Prime quality fruit lands,led grow lights with the accompanying climatic conditions, were so different from the lands that remained in grain production that they constituted a “specific input.”
Differences in the land values help bring these points home. According to R. L. Adams’ 1921 California farm manual, the market value of “good” wheat land in the state was approximately $100 per acre in the period immediately before the First World War.“Good” land for prune production was worth $350 even before planting and valued at $800 when bearing. The “best” land for prunes had a market value of $500 not planted and $1000 in bearing trees. Similarly, “good” land for raisin grape production was worth $150 raw and $300 in bearing vines; the “best” sold for $250 not planted and $400 bearing. Focusing on physical labor-to-land ratios in comparing wheat and fruit production can be seriously misleading because the acreage used for fruit cultivation was of a different quality than that used for grains.A further reason why horticultural crops could compete was that, unlike the key agricultural staples, many fruit and nut products enjoyed effective tariff protection during the late-19th and early-20th centuries. Tariffs almost surely sped up the growth of Mediterranean agriculture in the United States and were strongly supported by domestic producers, railroads, and packers.One of the recurrent justifications for tariffs offered by domestic growers was to help offset high transportation differentials. Almost across the board, Mediterranean producers enjoyed lower freight rates to the key markets of the northeastern United States than their American rivals did. For example, circa 1909, shipping currants from Greece to New York cost 17 cents per hundred weight while the freight on an equivalent quantity of California dried fruit averaged about one dollar.For the Pacific Coast fruit industry, the cost of transportation remained an important factor, shaping production and processing practices. This is reflected in an observation that has entered textbook economics, that the best apples are exported because they can bear the cost of shipping. It also helps explain one of the defining characteristics of the region’s fruit industry, its emphasis on quality. Local producers and packers devoted exceptional efforts to improving grading and quality control, removing culls, stems and dirt, reducing spoilage in shipment, and developing brand names and high quality reputations. This focus makes sense given the high transportation cost that western producers faced in reaching the markets of the U.S. Atlantic Coast and Europe. To a large extent, the ability of Californians to compete with the growers in southern Europe depended on capturing the higher end of the market.With only a few exceptions, California dried fruits earned higher prices than their European competition because the state’s growers gained a reputation for quality and consistency.
As an example, the U.S. produced far higher quality prunes than Serbia and Bosnia, the major competitors, and as a result American prunes sold for roughly twice the price of the Balkan product in European markets. Not only were California prunes larger, they also enjoyed other significant quality advantages stemming from the state’s better dehydrating, packing, and shipping methods.Similar quality advantages applied virtually across the board for California’s horticultural crops. It is interesting to note that at least some of California’s current problems with foreign competition stem directly from the ability of others to copy the state’s methods. After the California horticultural industry established its strong market presence, the message eventually got through to other producers. The extensive efforts that producers in other New Areas and in Europe made to copy the California model provides another indicator of the importance of superior technology and organization in establishing California’s comparative advantage.California agriculture was uncommonly successful with collective action. By the 1930s, the state’s farmers supported a powerful Farm Bureau, organized labor recruitment programs, numerous water cooperatives and irrigation districts,vertical grow system and a vast agricultural research establishment. Here we will focus on the state’s experience with cooperatives designated to provide farmers with an element of control over the increasingly important marketing, middleman, and input supply functions. One of the most notable was the California Fruit Growers Exchange organized in 1905. By 1910 it marketed 60 percent of the citrus shipped from California and Arizona under its Sunkist label; in 1918 it marketed 76 percent of all shipments, and for most years between 1918 and 1960 Sunkist accounted for over 70 percent of citrus shipments.The Exchange also entered the farm supply business through its subsidiary, the Fruit Growers Supply Company. In the late 1920s it was purchasing for its members $10,000,000 a year worth of nails, tissue wraps, fertilizer, orchard heaters, box labels, orchard stock and the like. The company also controlled 70,000 acres of California timber land and manufactured huge quantities of boxes.Other co-ops emerged catering to California’s specialized producers. After more than 20 years of unsuccessful experiments, raisin growers banded together in the California Associated Raisin Company in 1911. Between 1913 and 1922 the CARC handled between 87 percent and 92 percent of the California raisin crop, successfully driving up prices and members’ incomes. But success brought Federal Trade Commission investigations and an anti-trust suit, which the CARC lost in 1922. In 1923 CARC was reorganized into Sun Maid Raisin Growers of California.
Although that brand name still survives, the co-op was never again as successful as it was in its first decade. Co-ops potentially offered their members several services. First, they could help counteract the local monopoly power of railroads, elevators, packers, banks, fertilizer companies and the like by collectively bargaining for their members; or as in the case of the California Fruit Growers Exchange, the co-op could enter into the production of key inputs and offer its own warehouses, elevators, and marketing services. Several coops representing various specialized crops have developed very successful marketing campaigns that have significantly increased consumer awareness and consumption. While perhaps providing countervailing power and overcoming market imperfections on the output side, many co-ops strove to introduce their own imperfections by cartelizing the markets for agricultural goods. A leader in this movement was a dynamic lawyer, Aaron Sapiro, who had worked with several of California’s co-ops in the early twentieth century. His plan was to convince farmers to sign legally binding contracts to sell all of their output to the co-op for several years. If a high percentage of producers in fact signed and abided by such contracts, then the co-op could act as a monopolist limiting supply and increasing prices. Since the demand for agricultural products is generally thought to be highly inelastic, farm income would rise. The surpluses withheld from the market would either be destroyed or dumped onto the world market.The whole scheme depended on: avoiding federal anti-trust actions like that which hit the raisin growers between 1919 and 1922; preventing foreign producers from importing into the high priced American market; and overcoming the free rider problem. Even if these problems could be solved in the short-run, the longer-run problems of controlling supply in the face of technological change and increasing productivity in other countries would still exist. The first two problems were fairly easily dealt with. The cooperative movement received federal encouragement in the form of highly favorable tax treatment and considerable exemption from anti-trust prosecution with the passage of the Capper Volstead Act in 1922. Subsequently, the Cooperative Marketing Act of 1926 and the Agricultural Marketing Act of 1929 further assisted the cooperative movement by helping to gather market information , and by helping co-ops enforce production and marketing rules. In addition, the 1929 Act provided up to $500 million through the Federal Farm Board to loan to cooperatives so they could buy and store commodities to hold them off the market. The federal government also provided a shot in the arm to the cooperative movement through a series of tariff acts that separated the domestic and foreign markets. The tariffs were in large part endogenous because co-op leaders and California legislators lobbied furiously for protection. But overcoming the “free rider” problem was a harder nut to crack. Every farmer benefited from the co-op’s ability to cut output, and every farmer would maximize by selling more. There was thus a tremendous incentive to cheat on the cartel agreements or to not sign up in the first place. The early California fruit co-ops were successful in large part because they dealt with crops grown in a fairly small geo-climatic zone for which California was the major producer. Many growers were already members of cooperative irrigation districts and thus linked by a common bond. These factors made it much easier to organize and police the growers, and it reduced the chance that higher prices would immediately lead to new entrants who would, in a short time, drive the price level down. The fact that most output was exported out of the state via relatively few rail lines also made monitoring easier. If California raisin prices increased, it was not likely that Minnesota farmers would enter the grape market; but if Kansas wheat farmers banded together to limit their output, farmers in a dozen states would gladly pick up the slack. For these reasons the success of cooperatives in California was seldom matched elsewhere in the United States.California agriculture defies simple, accurate generalizations. This chapter gives the reader two of many possible cross-sectional views of the state’s agriculture to portray the diversity and complexity which make simple descriptions impossible. California’s agriculture has always been sufficiently different from farming and other related activities found elsewhere in the United States, or in the world for that matter, to befuddle visitors and the uninformed. When discussing farming with visitors from the other 49 states, and places even more afield, my father, a life-long Yolo County farmer, always proudly stated, “Anything that can grow anywhere, can grow somewhere in California!” He was right, of course. The state’s agriculture, founded on self-sufficiency goals of early Alta California missions, developed in less than two centuries from a predominantly livestock grazing economy, providing wealth to large, Rancho land holdings from the sale of hide and tallow products in the early 1800s, to today’s agriculture which includes highly capitalized, intensively managed firms as well as a large number of “small” and part-time farming operations.