The mean values of the all-year deviations indicated that vegetable yields fluctuated less than fruits/nuts in aggregate . This was consistent with our intuition. Unlike many perennial crops, vegetables have short growing seasons. In California, they are planted and harvested continuously throughout the year, which results in relatively smooth yield fluctuations on an annual basis. Crop-specific deviations are also presented in Table D1 . Except for tropical and V5 crops , the deviations tended to be around the mean. We also investigated the deviation at the regional level. No particular regional pattern was observed for fruits/nuts. For vegetables, less variation was observed in all of the coastal areas except the north coastal region .5Respondents were asked to indicate the range of the highest fluctuation in yield, price, and profit experienced in the past five years. Figure D1 reports the resulting distributions of farms by fluctuation range. The yield distribution was consistent with the information in Table D1. Vegetables showed higher densities at lower fluctuation ranges than fruits/nuts. As was true for yields, vegetables fluctuated less than fruits/nuts with regard to prices and profits. However, profits in general tended to fluctuate more than yields or prices,vertical rack system as demonstrated by the fact that more farms were associated with higher fluctuations and fewer farms with lower fluctuations.
Given that profit is a function of yield and price, some relationship between these three variables was expected. To investigate this relationship, we estimated the level of correlation between them. Estimated correlation coefficients were 0.38 between yield and price, 0.41 between yield and profits, and 0.64 between price and profits, with all p-values below 0.0001. The fluctuation of profits had a stronger correlation with the price fluctuation than with the yield fluctuation, indicating that profits are more sensitive to price fluctuations than to yield variations. Producers were asked to indicate what they thought was the main cause for their lowest profits by selecting from one of seven causes listed. Table D2 reports the distribution of those responses. Poor yields, low market price due to high domestic production, and low market price due to imports were the three most cited causes for low profits for both fruits/nuts and vegetables. The primary importance of those factors, however, differed by crop category. For fruits/nuts, poor yield was the most frequently cited reason, indicating the importance of risk related to natural conditions. For vegetables, low market prices due to high production was the most cited cause, followed by low market prices due to imports, indicating the relative importance of market conditions in vegetable industries.The crop-specific distributions rein forced the general patterns just described. Two groups of crops represented the extremes: 44 percent of tropical crop growers chose “poor yields” as the cause for their lowest profits, and 51 percent of V2 farmers chose “low price due to high production” as the cause . It is worth pointing out that the primary concern of V2 vegetable growers was “the good year’s large harvest,” not the bad year’s poor harvest.
Table D2 also presents the distributions of farmers’ main causes for their lowest profits by use and by grower/ shipper status. Two interesting observations stand out from those distributions. Even though quality was not generally a dominant concern, it was considerably more important for fresh-use crops than for processed-use crops. Second, responses to the two causes of low market prices seemed to differ by crop use. Growers supplying mainly processing crops were more concerned about price declines from high domestic production than from in creased imports , but no such distinction was found for fresh-crop growers . Next, the information was sorted by grower/shipper status because grower/shippers’ vertically integrated, large-scale operations likely entail risk implications that are different from those of the majority of farmers, who engage only in crop production. Sixty percent of grower/shippers chose low market prices as a main cause of low profits compared to 43 percent of grower-only farmers , indicating that low market prices are a larger concern for grower/shippers. Finally, we evaluated the issue of whether there was any pattern in processor pricing methods . This question, which was included in the survey under marketing channels, dealt with growers producing only processing crops. As expected, for both fruit/nut and vegetable farmers, low market prices were chosen as a main cause for the lowest profit less often among growers who received a predetermined price than among those did not . The regional distribution was also examined and indicated that in the Far North, North Coast, and Sierra Nevada regions, particularly high proportions of respondents listed poor yields as a main cause for low profits.This section includes mainly a discussion of ranking questions related to risk management.
The specific topics analyzed are ranking of risk sources in order of importance, preference ranking of risk management tools, availability and utilization of risk management tools, and the history of receiving government disaster payments or loans. Figure E1 presents the mean ranking for each risk source listed in the survey. Ten risk sources were listed, and respondents were asked to rank the sources from one to ten. In general, as a risk source became less important, fewer respondents provided a ranking for it. Among the listed sources, adverse temperature and output price fluctuation were the two highest ranked sources, with average rankings of 2.0 and 2.3, respectively. The next most common sources were diseases, input price fluctuation, and pests, with the mean ranks ranging between 3.0 and 4.0. Mean ranks at more disaggregated levels were also examined . Those ranking pat terns were similar to the overall pattern, with no distinct dissimilarities among the three crop categories. Further examination of the mean ranks within the vegetable category showed a slightly pronounced pattern for the V4 class . Output price fluctuation received the mean rank of 1.6, input price fluctuation and pests both received 1.9, and adverse temperature received 2.3, indicating the relative importance of price fluctuations and pests for these growers com pared to growers of other crops. When the mean ranks by region were examined, ad verse temperature remained one of the most important risk sources in all regions. Given that risks related to irrigation water and hail can vary by region in California, the regional pattern of rankings of drought, irrigation water supply problems, and hail were examined. As expected, water-related risks varied more by region than did other risk sources,mobile grow rack ranging from 3.2 for irrigation water problems for South Coast growers to 5.8 for drought for the Sacramento Valley. Overall, water-related sources were relatively more important in regions such as the South Coast, Sierra Nevada, and Desert, where adequate supplies of irrigation water are known problems. Hail was a relatively low-priority concern everywhere except the Central San Joaquin region . Next, growers’ preferences for risk management tools and the availability and their use of those tools were examined. Table E1 presents the mean preference ranking of various risk management tools. Rankings for all crops indicated that crop insurance was most preferred, fol lowed by diversified marketing and multiple commodities. However, preferences by specific crop category showed different patterns. The difference was most obvious with regard to crop insurance and multiple commodities; fruit/nut farmers strongly preferred crop insurance, whereas vegetable and ornamental crop farmers had a strong preference for multiple commodities. One explanation for this difference may be the level of availability of these tools; i.e., farmers may feel that a tool is “less preferred” when that tool is “less available.” Given that preferences can be affected by availability, the availability of each risk management tool was investigated. Table E2 reports the rate of availability as a ratio of the number of farmers who said the tool was available to them compared to the total number of respondents for that question. Again, the largest differences across crop categories arose with the two tools previously mentioned, crop insurance and diversification across multiple crops.
Crop insurance was available to 49 percent of fruit/nut producers, 29 percent of vegetable growers, and 18 per cent of ornamental crop producers. Responses for the availability of diversification into multiple crops showed almost the reverse: 17 percent for fruits/nuts, 40 percent for vegetables, and 28 percent for ornamental crops. These responses were consistent with our casual observations that, generally, fewer crop insurance programs are avail able for vegetables than for fruits/nuts and that diversifying into new crops is naturally more difficult for perennial crop growers than for annual crop growers. Diversified marketing was available to between 16 and 26 percent of growers across the three crop categories. Forward contracts were more available for vegetable growers than for fruit/nut growers . The interpretation of availability requires some caution. While interpreting the availability of crop insurance and government programs is straightforward, evaluating the availability of other risk tools such as crop/location diversification is not clear cut. How individuals view the availability of such tools reflects, to some extent, their preferences for various tools. In this respect, the availability rates reported here are possibly downward-biased and can be understood as lower bound for the rates. The second column in Table E2 reports the utilization rate, calculated as a ratio of the number of users to the number of farmers who said the tool was available. Most utilization rates, except for a few less important tools, exceeded 60 percent. This indicated that as long as the tools were available, the majority of growers made use of them to manage risk. Utilization rates were generally higher for vegetable farmers than for fruit/nut growers. Diversification into multiple commodities deserves special attention, with its utilization rate of 87 percent being the highest reported. Crop diversification was the mostly preferred, most widely available , and most frequently used risk management tool for vegetable growers. In fact, 87 percent of utilization given 40 percent availability implies that 35 percent of vegetable farmers were practicing crop diversification as a risk reducing tool. Using only the observations that indicated the tool was available, the preference ranking was re-examined and the results are reported in the last column of Table E2. These mean rankings were positively correlated with the utilization rates and the ranks were higher than those in Table E1.The topics explored in this section include information on farmers’ crop insurance purchases, private insurance purchases, reasons for purchasing and not purchasing crop insurance, and suggestions for modifying crop insurance. Table F1 reports the percent of farmers that purchased any crop insurance within the last five years. Crop insurance here refers to government crop insurance as well as to private coverage such as frost insurance. Purchase rates varied considerably across crop categories. Table F1 shows that crop insurance was purchased most extensively by fruit/nut farmers , followed by vegetable farmers , and ornamental crop farmers . The table also presents the percent of crop insurance buyers who made purchases in all five years covered by the survey. The majority of the buyers purchased insurance all five years, indicating the high likelihood of continuous purchases by farmers once they chose to purchase. Table F2 shows the extent of peril-specific crop insurance purchases by growers across crop categories. Peril-specific insurance policies are offered mostly by private firms, while multi-peril insurance is provided by the government. Among fruit/nut growers in general, frost insurance was the most frequently purchased single-peril coverage. This was particularly the case for citrus growers; more than one-third of that group purchased frost insurance. However, rain insurance was the most popular with grape growers with about one quarter of them purchasing the coverage. Finally, hail insurance was the most common coverage purchased by stone fruit growers . In general, vegetable growers tended to purchase less single-peril crop insurance than fruit/nut growers. Crop specific information showed that, among vegetable growers, growers of V4 crops used single-peril coverage fairly frequently, especially rain insurance . It is likely that such high rates were observed for V4 growers relative to other vegetable growers because of the potential damage that late rains can do to the market acceptability of these crops.Respondents were asked to rank their reasons for purchasing crop insurance. Figure F1 presents the mean ranking for the reasons listed in the survey. No information is reported separately by crop category because no obvious distinctions were observed across crop categories. “Crop loss” still ranked first as a reason for purchasing crop insurance, in part indicating the prevalence of yield-based crop insurance.