Sainsbury’s, the number 3 British supermarket chain, apparently decided it best to take its Public Relations pain all in one swoop as it dropped two suppliers, both on one day, both without notice. A supermarket chain dropping suppliers isn’t normally a big deal, but when both are organic, and one is Prince Charles, heir to the throne and the other the head of the Soil Association, the leading advocacy group for organics, you have a PR mess.
The Guardian ran several pieces on the issue. First it ran Prince Charles Sacked by Sainsbury’s, which explained the basics:
Sainsbury’s has dropped the Prince of Wales and the head of the Soil Association as vegetable suppliers because it says their produce did not meet the right standards, the Guardian can reveal.
The move has prompted the director of the organic food and farming charity, Patrick Holden, to accuse leading supermarkets of being so centralised and industrialised that they cannot deliver the local, organic food their customers want.
Mr Holden told the Guardian he believes that he and Prince Charles have become victims of the supermarket system’s industrial processes and imposed food miles. They were sacked as suppliers of carrots to Sainsbury’s at the end of January.
He and the prince had been forced to truck their vegetables hundreds of miles from their farms to a centralised packhouse in East Anglia before they were sent back to be sold in Sainsbury’s stores local to their area.
Mr Holden believes his vegetables were of the highest quality when harvested, but the combined effects of long-distance transport, handling to create large enough batches for the machines that wash and polish the vegetables and further storing after processing to create large enough batches for packing left the vegetables damaged and prone to rot.
The system also resulted in a crop that had been grown for low environmental impact acquiring a greater carbon footprint than conventional carrots grown on an industrial scale, according to Mr Holden. Up to half the crop from the two farms was being rejected in the grading for cosmetic appearance and quality.
Mr Holden said he had decided to speak out because his case was typical. "Everyone who has supplied a supermarket owned label will have a story similar to mine to tell but most daren’t tell it for fear of being delisted. This is not confined to one supermarket. It is the unintentional consequence of the centralised supermarket distribution system."
Sainsbury’s acknowledges that dealing with small suppliers is difficult for big supermarkets, but says it works successfully with others and is willing to try to find a solution to the problems of its highest profile organic farmers. It said its overriding concern had to be the quality of the food it sold.
Put another way, Mr. Holden acknowledges his carrots were not suitable for sale to consumers — at least under Sainsbury’s present system. He is arguing that if supermarkets want to sell locally grown, organic produce, they need to develop new systems that are suitable for the more delicate nature of this product.
He also points out that for all their talk about food miles, very often a supermarket’s internal systems can impose more food miles than if something was imported from hundreds of miles away direct to the area that wants it.
Normally the Pundit would not have too much sympathy for Mr. Holden. As an importer of product from around the world, we remember sitting in our office and, almost daily, having some grower in some corner of the globe crying on the phone about our report of poor condition upon arrival or of low returns due to poor condition. Inevitably these growers would object that the product was perfect when shipped. They would offer a first class airplane ticket and plead with us to fly and see the product in its perfection in the field.
We never accepted those tickets but, instead, urged the grower to use the money to come see the product in New York. We explained the hard news: It didn’t matter how beautiful the product was in Peru or the Ivory Coast; it mattered how it looked when the consumer got to see it.
So, in our assessment Mr. Holden is simply being irrelevant when he talks about how great the carrots were upon harvesting. People buy product looking for suitability for the purpose intended. It is Mr. Holden’s job to know that his carrots are not suitable and not to sell them for that purpose.
Of course, we said “normally” we would have little sympathy for Mr. Holden. What changes our thoughts on the matter is the sanctimonious rantings of executives at British multiples about setting an example for the world on local, organics and what not. If you listen to them and believe them, one would assume that they would set up in East Anglia a local packing facility, lest they add to the carbon footprint of the product. In a sense the British chain store executives are being hoisted by their own petard.
The same day the Guardian ran a second story entitled, Sainsbury’s giant carrot washer, and the rejected royal roots, which was mostly more of the same ilk:
The saga of Mr Holden’s vegetables and the rejected royal roots involves thousands of food miles, tons of carbon emissions, enormous waste and a giant washing machine, designed to wash and polish carrots so that “when displayed on the supermarket shelf, even weeks after washing, they still look like wet, fresh carrots.”
According to Mr Holden, who has spoken exclusively to the Guardian, it is a saga that shows that the supermarkets’ current structures cannot deliver sustainable food, whatever they may claim. Sainsbury’s says its customers and quality are the final arbiters….
But Mr. Holden gets right to the system:
Mr Holden claims that in fact the supermarkets are unintentionally making it impossible for the kind of small family farms their customers imagine are behind their organic labels to supply them. “Supermarkets are preaching localism but it’s just tokenism. Their systems are still going in the opposite direction, and it’s disastrous,” he said.
The truth is that Mr. Holden was already in trouble and had made some changes to try and make the business a success:
The carrots were packed in bags that told the story of his family farm Bwlchwernen Fawr. He had switched to marketing them as his special own brand after the price paid by the supermarkets for organic carrots fell below the cost of production. “They were more expensive, but people were prepared to pay for something they trusted was local,” he said.
The Guardian did some investigative reporting of its own to look for conflicts between what the chains say and what they do:
The Guardian has found other examples of supermarkets claiming to support local organic production while falling back on centralised distribution and imports.
Organic carrots bought recently at Waitrose carry a picture of Peter Cornish, one of its “carefully selected growers,” on the back of the pack, but in small print on the front the carrots’ country of origin is listed as Italy. A bag of parsnips with the story on the back of organic English parsnips as grown by Andrew Nottage, who has won community awards for biodiversity, is sourced in Scotland. The story of watercress grown by the sparkling chalk streams of Hampshire accompanies a product imported from Portugal.
Tim Lang, professor of food policy at City University, London, agrees that the current structure of supermarket systems makes it impossible to deliver on their rhetoric of local food. “They are locked in to a trucking and packing system that they have invested millions in over the last 30 years. They would have to reinvest dramatically — moving from a few regional distribution centres to hundreds of more local ones for example — to become really local.”
Commenting on its packaging, Waitrose said: “The purpose of these images was to give customers a flavour of the people who grow our fruit and vegetables rather than to show the country of origin. Waitrose is genuinely committed to British, local and regional produce.” Following our call the company said that in future the pictures of growers on its packs would be consistent with the products’ country of origin.
Note that even when caught, the only concession Waitrose is willing to make is that the pictures of growers on the packages will be from the same country as the produce. Yet, clearly, the whole point is to make consumers feel safe and comfortable that the nice farmer on the package grew this produce.
It is so much easier to talk the talk than to walk the walk. We wonder precisely how “green” Tesco in America is going to be?
When the Pundit ran a piece announcing the availability of mangos from India, we received numerous calls and letters looking for a source of supply.
Now The New York Times published a piece pointing out that mangosteens and mangos will soon be available from Thailand:
FRESH mangosteens and mangoes from Thailand will soon be available in the United States, the Agriculture Department has decided. Those fruits — as well as fresh pineapples, rambutans, litchis and longans — had been barred as imports from Thailand because they could harbor harmful insects, but will be allowed in when irradiated at low doses to kill or sterilize the pests.
The new rule, published by the department last Wednesday, is effective July 23. But it will take longer for department inspectors to approve the irradiation and packing facilities and procedures. The first fruit should arrive around September, said Rapibhat Chandarasrivongs, the agricultural minister-counselor at the Thai Embassy in Washington.
Thailand is the world’s largest producer of various tropical fruits, including pineapples, rambutans and mangosteens, but it’s unclear whether American shoppers will pay enough for them to cover the cost of shipping them by air, the best way to ensure freshness. The legendary taste of the mangosteen, so far virtually unavailable fresh in the United States, makes it the one most likely to be eagerly sought here despite the cost.
Canada, which is too cold to worry about tropical pests, imports small amounts of Thai fruit by air, but Thai exporters are hoping to send larger quantities to the United States by sea, Mr. Chandarasrivongs said. Most of the mangoes will probably be green, to be eaten firm like a vegetable, he added.
The effects of the sea voyage, which takes some 20 days, remain to be seen. Irradiated rambutans, longans and litchis flown from Hawaii to the United States mainland have been of high quality, but irradiation may affect the fruits from Thailand in different ways….
These items, successful or not, are unlikely to dramatically alter the shape of the produce department.
The broader significance is that more and more tropicals are now being treated with irradiation.
We are not certain the general public has much concern in this area. The irradiated hamburger at Wegmans, which we mentioned here and here, seems to sell fine. And we can say that no trade buyer who called the Pundit about the Indian mangos showed any concern when we pointed out the product was irradiated.
Whatever residual concerns may exist, a few years of eating these irradiated tropicals without incident is likely to raise consumer comfort levels considerably.
Which raises two points:
First, we really need to push for approval on irradiation for fresh-cut products. This is where the industry has had big food safety problems, and this is where we need a kill step. Whether the whole industry will switch is a question mark that will be determined over a long period of time, but there is little reason to doubt that there is going to be a sufficient market for someone to produce a line of irradiated bagged salads and spinach and sell it to a niche market, just as organic or kosher have markets.
Second, as irradiation becomes more common, it is bound to be applied to more popular commodities. This means the U.S. produce market of the future will be more like that of Canada than what we have been used to as America has had so many phytosanitary restrictions. Now, the only issue will be the cost of irradiation. With steady volume, that won’t be much of a barrier to entry.
China has been top-of-mind lately in the U.S. produce industry, and we’ve been thinking hard on the subject with several important pieces:
China Plays Down Food Safety Problems and Chinese Garlic and Food Safety both dealt with the implications of food safety problems in China for the broader industry.
With Chinese Apples Pose Threat To U.S. Apple Industry, we explored the future of the apple industry in the United States in light of the rapidly increasing Chinese production.
In Pundit’s Mailbag — China, COOL And International Opportunities, Professor Thomas Reardon of Michigan State University opined on the reality of Asia and the opportunity for America.
China still remains a question mark on the world food scene. CNN reports that China Shuts 180 Food Factories For Using Illegal Chemicals, which implies that China is serious about enforcing its laws and food safety standards:
BEIJING, China (AP) — China has closed 180 food factories after inspectors found industrial chemicals being used in products from candy to seafood, state media said Wednesday.
The closures came amid a nationwide crackdown on shoddy and dangerous products launched in December that also uncovered use of recycled or expired food, the China Daily said.
Formaldehyde, illegal dyes, and industrial wax were found being used to make candy, pickles, crackers and seafood, it said, citing Han Yi, an official with the General Administration of Quality Supervision, Inspection and Quarantine, which is responsible for food safety.
“These are not isolated cases,” Han, director of the administration’s quality control and inspection department, was quoted as saying.
Han’s admission was significant because the administration has said in the past that safety violations were the work of a few rogue operators, a claim which is likely part of a strategy to protect China’s billions of dollars (euros) of food exports….
Han said most of the offending manufacturers were small, unlicensed food plants with fewer than 10 employees, and all had been shut down. China Daily said 75 percent of China’s estimated 1 million food processing plants are small and privately owned.
According to Han, the ongoing inspections are focusing on commonly consumed food, such as meat, milk, beverages, soy sauce and cooking oil. Rural areas and the suburbs — where standards are likely less strict — are still considered key areas for inspectors, he said.
China Daily, a government-owned newspaper, also pushed the story, indicating the government wants publicity for its enforcement efforts:
A nationwide inspection of the food-production industry has uncovered the use of a wide range of illegal ingredients in the processing of foodstuffs, the top quality watchdog said Tuesday.
Industrial raw materials, such as dyes, mineral oils, paraffin wax, formaldehyde and the carcinogenic malachite green, have been used in the production of flour, candy, pickles, biscuits, black fungus, melon seeds, bean curd and seafood.
Some processors also use recycled or expired food in their operations, according to the General Administration of Quality Supervision, Inspection and Quarantine.
“These are not isolated cases,” Han Yi, director of the administration’s quality control and inspection department, said at a press conference.
He said most of the cases involved small, unlicensed food-processing plants employing less than 10 people. All plants caught engaging in illegal practices have been shut down, he added.
Administration figures show that about 75 percent of the 1 million food-processing plants in the country are small and privately owned.
preliminary figures released yesterday show that since December, when the nationwide inspection was launched, quality inspectors have seized 200 million yuan ($26 million) worth of contaminated or substandard foodstuffs.
At least 180 food plants have been shut down, and 37 had their licenses revoked. Eleven cases have been handed over to judicial organs.
Han said the inspection, which has been focusing on widely consumed foodstuffs, like wine, meat, milk, beverages, soy sauce and cooking oil, is not finished. Rural areas and the suburbs are still considered key areas for inspectors.
Scandals involving substandard food were the subject of many media reports last year. Red-yolk salted duck eggs contaminated with an industrial dye and turbot fish containing carcinogenic residue were two of the more high-profile incidents.
The issue burst into the international spotlight this year after melamine-contaminated wheat gluten and rice protein exported from China tainted pet food in North America.
Han said the administration always puts food safety first and had shown no mercy to violators.
Both the Food Hygiene Law and the Criminal Law ban the use of chemical ingredients or harmful substance in food production. Violators who cause serious poisoning or death face sentences of at least 10 years in jail or even death.
However, Ye Zhihua, a senior researcher of quality standards and testing technology with the Chinese Academy of Agricultural Sciences, worried that the country’s many small food plants and inadequate number of enforcement officers could hamper the inspection.
Ye said such small businesses, which usually have poor management and sanitary conditions, are scattered across the country, making supervision difficult.
So the good thing is that Chinese officials are acknowledging a systemic problem. The bad news is that the small, scattered nature of Chinese production will make enforcement of standards very difficult.
We take this to mean the obvious: China, for all its advances, is not uniformly safe. One can’t just buy from anyone and assume the product meets legal standards or food safety standards. You have to only buy from people you know who are in a position to supervise production to world-class standards.
For all the earnestness with which China seems to be addressing its food safety issues, we sense a bit of push-back as in this article about China seizing U.S. food:
BEIJING (Reuters) — China has seized two fruit shipments from the United States and warned it would apply greater scrutiny to U.S. cargoes, even as it tightens the screws on manufacturers of unsafe food at home.
The country’s quarantine bureau said in a statement on its Web site (www.aqsiq.gov.cn) that quality inspectors had detained U.S. shipments of orange pulp, produced by Modern Skill Co. Ltd, and of preserved apricot from Mariani Packing because they contained high levels of bacteria, mildew and sulfur dioxide.
“When dealing with food from America, local quarantine bureaus should tighten their procedures,” said the statement seen by Reuters on Wednesday.
“The bureau reminds importers that the food safety standards should be specified in contracts to reduce transaction risk.”
China’s food safety record has drawn international attention since mislabeled chemical exports were mixed into cough syrup in Panama and pet food in the United States.
In apparent response, China has also announced the seizure of substandard food shipments at its ports.
Although it is possible that some sub-standard product was being shipped to China or that there was deterioration in transit, it smells to us like China warning the U.S. not to push too hard against Chinese food exports, perhaps reminding U.S. Congressmen that U.S. companies have something to lose.
When we announced that U.S. Foodservice was going to be sold to some high-flying financiers, it bode well for U.S. Foodservice. Now the leveraged buy out may wind up not being as leveraged as U.S. Foodservice was unable to sell the bonds it was planning to as part of its acquisition by Clayton, Dublier & Rice and Kohlberg, Kravis & Roberts.
An initial financing plan that included PIK or payment-in-kind bonds, that would have allowed U.S. Foodservice to pay its interest in additional bonds if need be, was first scaled back in size and made less aggressive in terms, before being cancelled all together. It was not clear if the deal itself was at any risk.
Whatever happens with the financing, U.S. Foodservice has quite a hill to climb if it hopes to be competitive nationally with Sysco.
Back at the end of May, Sysco gave a presentation at the Sanford Bernstein Annual Strategic Decisions Conference. The slide below, excerpted from the presentation, shows how overwhelming is Sysco’s position among broadline foodservice distributors:
It is a great presentation because it shows how exceptional is Sysco’s reach. This is a company that did 40,000 business reviews — intensive 3 to 4 hour meetings with customers — in Fiscal 2006 and did 32,000 more in the first three quarters of fiscal 2007.
Even better Sysco reports a mid-teen sales improvement with the average customer after going through the process.
You can see the slideshow here.
We’ve had several occasions to mention Billy Heller, CEO of Sunripe Produce. For example, it was a great exchange between Tom Holbert of Wal-Mart and Billy that led us to write a piece entitled, Wal-Mart Continues To Change Its Buying Practices, which kicked off a major discussion regarding Wal-Mart and its place in the produce trade.
Then Billy participated in a panel discussion at United that led us to write ‘Take-Aways’ From United’s Short Course On Organics, a piece that included Billy’s frank assessment of the issues regarding organics.
Now, our article, As Immigration Bill Comes To A Vote, Questions Surface On Farm Wages, led Billy to send this missive:
I am generally not inclined to engage in discussions that amount, in my opinion, to speculation on what the immigration package in Congress will look like when it is finally born. In fact, I doubt we can accurately predict how any such animal will be given regulatory teeth, since that is really what we have to live with.
To the point, I would like to suggest to you that ‘farm worker’ is not a term, used by those of us vertically integrated companies, restricted to those who labor in growing and harvesting our crops. According to the Fair Labor Standards Act, the term ‘farm worker’ applies to those who labor in the field and in the packinghouse. That is how we think of the farming labor pool and our cost structure.
That said, I am sure you know that with rare exception the farmer is a price taker, regardless of the labor cost. In fact what generally determines the price bottom, again for the vertically integrated firm, has no bearing on farm cost but the covering of the variable costs associated with harvesting, hauling to the packing shed and packing (including the cost of cartons).
Since farm cost is a sunk cost that we hope to recover (from the gross revenue less pick, haul and pack) to generate a competitive rate of return (remember we are price takers), the concept of passing on our labor cost increases is novel at best. The cost increases are another factor to be applied to our decision tree.
What will happen, I believe, is that farm acreage will continue to contract, reducing supply, and therefore commensurately increasing the bid play in the market, increasing the returns to those few who have deep enough pockets to be survivors. Consumers will pay more, until overseas markets, who do not have to abide by the same rules (social, environmental, labor to name a few) under which we operate, find a way to fill the supply void and drive down the returns of the few survivors.
I personally appreciate the time and thought you put into your commentaries. Will Rogers would respect your work as a social observer, I think?
Thank you for the opportunity to provide additional input for your consideration.
— Billy Heller
We appreciate the comparison to Will Rogers, who among much else advised something apropos to the issue of immigration and farm labor: “The more that I learn to read the less I learn how to make a living. That’s one thing about a little education. It spoils you for actual work. The more you know, the more you think somebody owes you a living.”
Which pretty much sums up the great dilemma of the produce industry: We can’t want to block immigration because the affluent — if not always well educated — Americans are unwilling to do the work at a price that would keep us competitive in the world market, if they are willing to do it at all.
Yet we can’t simply urge increased immigration because there are loads of people with PhDs, engineering degrees and medical degrees who want to come to the U.S. Most are as unlikely to pick the fruit as Americans. In fact, even people without education will typically prefer other jobs.
So we wind up looking for special guest worker programs whose primary purpose is to bring people to the United States who are blocked from doing any work other than these special categories we have selected.
One of the big issues in the immigration debate is that high-tech and pharmaceutical companies cannot fulfill their needs for highly educated and specially trained employees. There simply are not enough U.S. citizens with specialized degrees, especially in math and science, to meet the need.
In addition, brilliance is not solely a matter of education. So it is not clear that any amount of education will solve this problem. Yet High-tech titans strike out on immigration bill was the title of an article in the New York Times about how the Senate has rejected their entreaties to allow them to bring in more of the “best and the brightest.” In fact, after a phase-out period the law as currently drafted eliminates the ability of companies to bring in any employer-sponsored immigrants.
So we wind up arguing that it is more important for the country to bring in a worker to harvest produce than to let a pharmaceutical company bring in a PhD/MD doing fantastic cutting edge research on drugs to cure cancer. There are arguments that can be made: security of food supply in war time, the environmental advantages of keeping farms active, expanding the stock of civic virtue by maintaining a class of yeoman farmers. These are all arguments, but they are not an easy sell — particularly with produce. After all, are kiwifruits really essential to the national security?
It stands as testimony to the hard work and shrewdness of United Fresh and other produce organizations that working along with the plant and nursery people, our industry leaders have miraculously kept produce industry interests in the forefront of this compromise immigration bill.
Yet, long term, we still don’t know the actual effect of the total compromise. The problem is that it is believed a large percentage, probably a majority, of the existing produce industry workforce is illegal. The compromise bill would provide a path to legalize the status of these people. Once legalized, how many will continue to work in produce?
Will this be more or fewer people than are brought in through a Guest Worker program? Nobody knows.
Billy makes two points that are crucial to remember as we discuss this issue.
- That until the law passes the Senate, in what will probably be a highly amended state, and gets through the House, which doubtless will have its own amendments and go through a joint committee to reconcile differences in the Senate and House bills. is approved in its revised state by both houses of Congress and finally signed by the President, we don’t know what the law will actually say.
- Even if we did know, the devil is often in the regulations drafted to enforce the bill and that won’t be clear for months, sometimes years.
So it is, of course, hypothetical, at best to know the actual impact of this immigration law since we neither know how it will ultimately be drafted nor how it will ultimately be enforced.
Billy also makes a trenchant commentary regarding a quote we gave from a U.C. Davis study:
In order to determine how much raising farm worker wages would affect food prices, we have to know: (1) the farmer’s share of retail food prices, as well as; (2) what share farm worker wages and benefits are of farmer revenue or costs. For most fruits and vegetables, wages and benefits paid to farm workers are about one-third of a farmer’s costs. Thus, farmers who get about $0.16 for a $1 pound of apples, and $0.19 for a $1 head of lettuce, have farm-worker costs of 5-6 cents on a typical $1 retail item of produce.
How much would farm worker wages increase if some of these immigrant workers were not available? In 1966, one year after the end of the bracero program, the fledgling United Farm Workers union won a 40 percent wage increase for table grape harvesters. Average hourly farm-worker earnings were about $7.56 for US field and livestock workers in 2000, according to a USDA survey of farm employers, and another 40 percent increase would raise them to $10.58.
If a 40 percent farm-worker wage increase were fully passed on to consumers, and if there were no farm productivity improvements in response to higher farm wages, the 5-6 cent farm labor cost of a pound of apples or a head of lettuce would rise to 7-8 cents, and the retail price would rise from $1 to $1.02-$1.03.
A large increase in farm wages translates into a small retail cost increase because: (1) farm labor is a third of farmers’ costs; and (2) farmers receive only a fraction of the retail price of food. For a typical 2.5-person consumer unit, a 40 percent increase in farm worker wages that led to a three percent increase in retail fresh fruit and vegetable costs would increase the spending of a typical consumer unit by $9 a year, raising expenditures from $301 to $310.
But Billy points out:
“…I am sure you know that with rare exception the farmer is a price taker, regardless of the labor cost. In fact what generally determines the price bottom, again for the vertically integrated firm, has no bearing on farm cost but the covering of the variable costs associated with harvesting, hauling to the packing shed, and packing (including the cost of cartons). Since farm cost is a sunk cost which we hope to recover (from the gross revenue less pick, haul and pack) to generate a competitive rate of return (remember we are price takers), the concept of passing on our labor cost increases is novel at best. The cost increases are another factor to be applied to our decision tree.”
And he is, of course, correct. Farmers have the same problem as airlines. Airlines have enormous sunk costs in buying airplanes, gates, staff, etc. Because the marginal cost of filling an empty seat on a plane is so low, the airlines sell cheap seats, which maximizes profit short-term. Long-term, however, all the airlines’ cheap seats means no airline can earn enough to cover its fixed costs.
So a farmer, having grown a crop, picks and packs it as long as he can cover his marginal cost of doing so — though the farmer often fails to cover his fixed costs.
Yet, obviously, though true, this is not the whole truth or farmers would all be bankrupt.
It brings to mind Warren Buffet’s comment about the stock market that in the short term it is a voting machine, but in the long term it is a weighing machine.
So the vagaries of supply and demand mean farmers can lose money any day, any week, any season — but long term, if farming is not profitable, farmers will go out of business. This will reduce supply and thus re-sort supply and demand so that farmers can be profitable again.
Billy lays out one possible scenario:
“What will happen, I believe is that farm acreage will continue to contract, reducing supply, therefore commensurately increase the bid play in the market, increasing the returns to those few who have deep enough pockets to be survivors. Consumers will pay more, until overseas markets, who do not have to abide by the same rules (social, environmental, labor to name a few) under which we operate, find a way to fill the supply void and drive down the returns of the few survivors.”
In fact, Billy is hitting upon the key objection of the left to foreign trade. The political left in the U.S. would like to impose all kinds of standards — working hours, working conditions, environmental rules, etc. Many have already been imposed and many more proposals are in the works.
Inevitably, this leads to protectionism and, in fact, explains that popular opposition to “Globalization” and the political opposition to giving the President authorization to negotiate free trade agreements. After all, as Billy points out, if we have all these regulations, we won’t be able to compete with places where life and labor are cheap.
Which is why Democrats are demanding so-called “side agreements” on things like labor and the environment before they will allow any free trade agreements.
Aye, but there’s the rub. On the one hand, the political left would like to see our employment and environmental standards enforced everywhere. On the other hand they want to help underdeveloped countries to advance. Yet the comparative edge these countries have often is low wages. So to prevent them from using that advantage is to condemn them to perpetual poverty.
So all our efforts are always half-hearted to universalize standards and thus Billy’s scenario has a high likelihood of coming to pass.
Unless… The point of our piece on farm wages was to point out what a small percentage of the retail price of produce involves payments to pickers and packers. Perhaps thinking in this way could open an opportunity, particularly as there are many costs of immigrant labor — emergency rooms, jail cells, crime, etc. — that are not captured in the produce price but socialized among the general public.
The obvious opportunity is to mechanize more with efforts such as we discussed here. Investing federal and state dollars in this research might well be profitable if it reduces expenditures on health care, police, prison, etc.
We could also invest more in GMO research, as producing advanced proprietary products may be more important than having the cheapest price.
In the end, we suspect that though there may be delaying actions the industry can take, prosperity in the U.S. will not come from being the cheapest. It will come from being the best.
That is what Professor Tom Reardon of Michigan State was implying in his letter, and it is probably the only way to go.
Shrinking agricultural acreage may not mean much. More and more product is being grown in greenhouses or quasi greenhouses with yields multiplying. We can imagine a future in which Controlled Environment Agriculture combines with genetically modified produce and production expands on far less acreage than we use today.
Already massive bounty is produced in greenhouses. It is not far-fetched to imagine additional greenhouses near New York, Boston, Chicago and other major cities. When you consider that in many cases transportation costs more than the produce, and with global concern over carbon emissions, and the food safety risks of field grown produce, the future of produce may be a world apart from what we know.
It is our job in this industry to write the plan for the future that is going to happen and, inevitably, the prospect of change in the future will scare a lot of people but there is no choice. We can’t just keep doing things the way we were taught, because the world is changing. As Will Rogers said: You’ve got to go out on a limb sometimes because that is where the fruit is.
Many thanks to Billy Heller for guiding us in such a fruitful discussion.