This epoch witnessed an eroding shift from a heavy reliance on production of undifferentiated commodities toward a more diverse, more specialized agriculture that responded more directly to consumer demands for food, fiber, and horticultural products. Beginning with an expanding production base in the San Joaquin Valley that was initially heavily devoted to field-crop production, California agriculture aggressively shifted over time toward higher-valued, more capital-intensive crops as markets permitted. The mass of production for many products shifted into the San Joaquin Valley from both the south and the north as markets expanded. Producers throughout the state scrambled to find opportunities that yielded acceptable economic returns to factors of production. The large shares marketed through cooperatives declined as producers apparently lost confidence that co-ops could make the transition to consumer-demand-driven marketing as efficiently as newer players focusing on more diversified market outlets for their products. Contractual arrangements and supply coordination increasingly replaced open or spot markets even for undifferentiated commodities.Some producers invested heavily to better integrate their operations vertically and horizontally to achieve economies of size and scope. The introduction to the state’s agricultural statistical summary for 1970 noted that “some 200 crops are grown in California, including seeds, flowers, and ornamentals” . The statistical report for the 2000 crop year reported a significant numerical revision, noting that “some 350 crops are grown in California,big plastic pots including seeds, flowers, and ornamentals” , nearly doubling crop numbers over the three decades.
The crops currently on the market reflect a much wider array of processed forms to better satisfy consumer and food-service institution demands. The increased number of commodities and product forms available reflected changes in the composition of both domestic and export demand. Domestic population increased substantially. Higher income, dual-income households demanded new product forms, and the growth of ethnic populations brought new crop demands, particularly from growing numbers of Hispanic and Asian consumers. Many consumers preferred and demanded convenience over even the most basic food preparation for many of their meals. Per-capita consumption shifts included changes in livestock demands and in the demand for more fresh, rather than processed, forms of many vegetables and fruits. Export markets also required different product forms than did domestic markets. By the end of the 20th Century, there were nearly 35 million people residing in California . One out of eight persons in the United States now resided in California, making the state’s diverse population an important, primary market for food and nursery products. The epoch began and ended with two contrasting water-resource scenarios that were also greatly influenced by population growth. Agriculture, which foresaw prospective ample quantities in the 1970s, now, in the face of resource competition from urban and environmental demands, was confronted with increasing water-resource scarcity and uncertainty at the turn of the century. Increased surface-water deliveries occurred following completion of Oroville Dam and San Luis Reservoir in 1967 and 1968, respectively, and with extensions of the California Aqueduct serving west-side and southern San Joaquin agriculture in the early 1970s. The Kern County Intertie Canal, which connected the east side of the valley with the aqueduct, was completed in 1977, signaling the state’s completion of major surface-water delivery systems. Even though there was a pronounced shift from field crops to higher-valued commodities in major areas of the San Joaquin Valley, the large increment in newly developed, better-irrigated lands served a total of 4.25 million acres of major field crops in 1970—a level even higher than that reported for 1950.
Later in the epoch, extensive crop acreage fell with the addition of more higher-valued crops. A second significant increment in surface-water availability was extension of the CVP’s Tehama-Colusa Canal, enabling intensification of production on the west side of the Sacramento Valley . Thus, California agriculture was flush with new surface-water supplies at the outset of this epoch. However, two of the century’s more severe droughts occurred during this period—the first in 1976–77 and the second over the period 1987–1992. The former was more severe, but the latter, longer drought had a far greater impact on agriculture. Both droughts sharply reduced water deliveries from the north to meet the growing needs of San Joaquin Valley agriculture. Average runoff in the Sacramento and San Joaquin hydrological areas fell to half of normal levels in the 1987–1992 drought. As a consequence, groundwater extractions in the San Joaquin Valley exceeded recharge by 11 million acre-feet during the 1987–1992 drought . At the end of the epoch, agricultural water supplies were reduced by new CVPIA requirements on CVP deliveries plus an inability to transfer supplies through the Delta due to environmental and physical system concerns even if surface water was available. The imminent reduction of Colorado River water supplies to the Metropolitan Water District of Los Angeles could also reduce surplus water supplies and create additional competition for moveable water. Water markets were developed during this period to facilitate the transfer of water among individuals and agencies in both annual and longer-term arrangements. But surplus water to serve future agricultural uses had evaporated from the system. Astute water management, including water transfers and water banking, was required in most agricultural regions by the end of the epoch.The early 1970s can be characterized as a period of aggressive expansion fueled by improving world markets and concern about “feeding a hungry world.” Product prices were strong for food commodities. U.S. producers were cheered on by Secretary of Agriculture Butz “to plant fence row to fence row,” promising the end of supply controls, long an integral piece of U.S. farm policy. With strong prices came a rapid run-up in U.S. farm asset values. The resulting increase in the value of farm assets fulfilled lenders’ security requirements for an increasingly capital-intensive, expanding California agriculture. Worldwide market demands collapsed later in the 1970s, but U.S. farmland values continued to rise into the early 1980s, in part due to negative real interest rates. Farmland appreciation, adjusted for inflation, over the period 1958–1978 was nearly 80 percent while common stocks lost 20 percent and cash lost nearly 50 percent .
Such information spurred substantial investments in U.S. and California farmlands by individuals, institutional investors, and even foreign investors, creating a price bubble that would collapse in the mid-1980s.Nationwide, the index of farm real estate values was 245 percent more in 1980 than in 1970. Because California agriculture had not benefited as greatly from rising basic commodity demands worldwide, the 1980 farm real estate value for California was only 110 percent higher than the 1970 value. Irrigated land increased more than non-irrigated land, and there were relatively larger increases in value in the San Joaquin Valley than in the Sacramento Valley. Some permanent plantings exhibited excessive land price escalation. Almonds and grapes were two permanent crops that attracted significant investment during the 1970s.Commodity Example – Almonds. Almonds were aggressively planted in the San Joaquin Valley beginning in the late 1960s. Non-bearing acreage amounted to more than 60,000 acres for all but two years from 1968 to 1982, and bearing acreage quadrupled from about 100,000 acres in the mid-1960s to 400,000 by the mid-1980s. Yields increased from three-quarters of a ton per acre to one ton and more. Exports expanded rapidly as supplies increased, accounting for about two-thirds of the crop by the end of the 1970s. The per-acre value of San Joaquin Valley almond orchards increased from $2,250 in 1970 to a peak of $8,570 per acre in 1983 before the investment bubble burst. Within five years, the average value for almond-orchards would fall by 40 percent to $5,200 per acre. Older marginal plantings in northern areas became uneconomical and were removed,large plastic garden pots further accentuating the shift of production to the San Joaquin Valley. Total bearing acreage stabilized in the range of 400,000 to 430,000 acres from the mid-1980s to the mid-1990s. Commodity Example – Grapes. Grapes also attracted significant investments with most of the expansion also taking place in the San Joaquin Valley. The bearing, producing acreage of wine grapes statewide was between 120,000 and 130,000 acres for a long period—from the mid-1950s through the decade of the 1960s. As consumers expressed increasing interest in California wines, non-bearing acreage skyrocketed, amounting to 25,700 acres in 1970, 54,000 in 1971, 104,200 in 1972, and 149,000 in 1973. Most of the new non-bearing acreage in 1973 was in the San Joaquin Valley and in the emerging central coast wine-growing region . The statewide bearing acreage of wine grapes rose sharply from about 132,000 in 1970 to 318,000 by 1977. Another bubble arose. The peracre value of San Joaquin Valley wine-grape vineyards increased from $1,475 in 1970 to a peak of $9,770 in 1982 before a precipitous drop to only $4,000 by 1986. The appearance of surplus wine grapes also affected the fortunes of producers of Thompson Seedless grapes . Raisin vineyards had increased in value from $1,550 in 1970 to $10,840 per acre in 1980, but by 1986 their decapitalized value was also only about $4,000 per acre. Lesser-quality San Joaquin wine grapes proved to be of little interest to the wine industry given the increased supply of superior-quality grapes emanating mainly from coastal production regions.
Central coast vineyards rose in value and, after only a modest adjustment, rose further to more than $20,000 per acre by the 1990s. Prices also escalated in premium north coast production areas. By the end of the 1970s, substantial investments in perennial crops pointed toward the first of the epoch’s “ups and downs,” concluding with a mid-1980s collapse of land prices. Readjustment would affect producers across the length and width of the state.The decade of the 1980s began with the apparent over productive capacity of U.S. and California agriculture. Both were unable to respond to the loss of newly gained export markets and general weakening of world economic conditions following the energy price run-up of the mid- 1970s. Plus, some remaining groundswell from the 1970s continued in California as investment funds sought higher returns in agriculture, further contributing to unprecedented plantings of permanent crops. Commodity prices fell, input prices and interest rates rose, export demand turned down, and farm income declined. Even though it was evident that basic commodity prices were low, some apparently thought that California specialty-crop producers might be immune to agriculture’s declining economic fortunes, but that obviously was not to be. The farm financial crisis began in the Midwest but gradually affected all of U.S. agriculture, including California’s, where the impact was delayed and of lesser magnitude. Farm incomes fell in the face of high debt loads incurred in the land-buying and investment binges of the 1970s. Highly leveraged farms and farm investments were particularly vulnerable to sharp changes in economic fortunes. Consequences included rapid and deep decapitalization of assets, bank foreclosures of farms and ranches, and secondary and social impacts that permeated much of the economy. From 1982 to 1987, land values fell by as much as 60 percent in Iowa and Minnesota and by at least 40 percent in most Midwest and Great Plains states. California land prices fell by a lesser amount—28 percent on average. They would later improve for specialty-crop land but not for widely available field-crop lands that lacked higher and better use potentials. The mid-1980s was a period in which California agriculture sought to right itself from the fallout of the financial crisis. Lenders reevaluated behavior that had resulted in overextended lines of credit that had to be “worked out” following the crisis. Some producers maintained that credit was rationed, but lenders maintained that ample credit was available for applicants with portfolios reflecting appropriate credit risk. Cooperatives came under increasing pressure to yield economic returns commensurate with those of other outlets. Growers sought more immediate economic returns, in part to satisfy lenders’ operating loan requirements. Rising environmental concerns provided additional challenges regarding rice straw burning, use of chemicals, endangered species, and more balanced water use among agricultural, municipal, industrial, and environmental-use claimants. Structural adjustment within the processing sector occurred as older plants, many of which were located in urban and urbanizing areas in Southern California, the San Francisco Bay Area, and the Sacramento region, closed. Prices gradually rose and markets strengthened by mid-decade with rising domestic demand and expanded exports to Europe and Asia.