The comprehensive immigration bill is still alive as the Senate voted to resume debate on the matter:
The vote suggested that key senators and White House officials had succeeded — at least for now — in bargaining with skeptical lawmakers for a second chance to pass the bill. Several senators who have been promised votes on their amendments, including Sens. Kit Bond, R-Mo., Barbara Boxer, D-Calif., Norm Coleman, R-Minn., Pete Domenici, R-N.M., John Ensign, R-Nev., and Jim Webb, D-Va., switched their votes to support moving ahead with the measure.
Still, after a chaotic several weeks in which the legislation survived several near-death experiences, it remained buffeted by intraparty squabbles.
Even if the bill makes it through the Senate, its prospects are uncertain in the House:
Other Republicans meanwhile warned that they would use every weapon in their arsenal to stop the Senate bill making it out of the House of Representatives.
”It is dead on arrival in the House, a comprehensive bill will not pass the House, there is significant Democratic opposition, and overwhelming Republican opposition.” Mark Souder, an Indiana representative, told reporters.
Top Democrats in the House of Representatives have told Bush he must cajole up to 70 Republicans to back the deal in the House, as it is likely to be spurned by Democratic lawmakers from conservative districts.
But senior Republicans said Tuesday that a test-vote among the party conference indicated overwhelming opposition to the Senate bill.
We raised the question yesterday as to whether the current bill, of which AgJOBS is now a teeny part, would actually increase the labor supply available to the produce industry:
Although AgJOBS itself is a big plus for the produce industry, one wonders if in the end the bill will actually help the trade’s labor situation. After all, the profile of the typical legal immigrant will change with the shift to an education and achievement point system counting for more than family unification, and immigrants that fit the new criteria may have less interest in produce jobs than current legal immigrants.
The bill’s border security efforts to reduce illegal immigration may work and thus reduce the supply of illegal immigrants.
plus the legalization of the estimated 12 million illegals will allow many illegals presently employed in the industry to shift to other, more stable, more lucrative or less physically taxing professions. AgJOBS will offset some of this but one wonders if net-net-net the bill will actually produce more or less labor for the produce industry?
Obviously the immigration issue is very complex and goes far beyond the question of produce harvesting. That is why, here at the Pundit, we hear a full range of opinions on this issue from across all sectors of the industry.
Yet even the harvesting issue raises troubling questions. We mentioned yesterday a letter we ran from an important industry figure pushing investment in mechanical harvesting and arguing that the costs of immigrant labor was underestimated as many of the costs had been absorbed by the general public.
The asparagus growers of Washington got some publicity for their labor problems in an AP story:
A labor shortage that hurt asparagus growers will likely continue as the agriculture industry moves into its busiest months.
Workers who were harvesting asparagus spears recently moved on to the cherry harvest, leaving some asparagus growers to plow up their remaining crop.
“If we don’t solve the labor issue soon, asparagus won’t be anything but a very rare specialty in Washington,” said Mike Miller, owner of Airport Ranch in Sunnyside.
Jim Middleton, chairman of the state’s asparagus commission, is pulling out 45 of his 180 asparagus acres north of Pasco.
“It’s strictly due to the lack of labor, and it’s gotten worse every year,” he said. “This year I had some fields I could only cut until the middle of May. You can’t stay in business without labor.”
Alan Schreiber, administrator for the Washington Asparagus Commission, said on average, growers ended harvest 10 days earlier than usual.
“That means we lost about 9 percent — 7.5 million pounds,” he said, or about $11 million worth of asparagus on the fresh market alone.
A month ago, Gourmet Trading Co. in Pasco had 600 workers banding fresh asparagus stalks together and packing them on 16 production lines.
Last week, a single line of about 20 workers was packing whatever fresh asparagus was delivered.
“We probably have four to five days left,” said Allan Nerell, vice president of Gourmet’s packing operations….
“Every day we are getting calls looking for workers,” said Nina Pyle of Atkinson Staffing, which opened in Pasco in March.
The company, which has operated in Hermiston, Ore., for 15 years, provides temporary labor for farms, food processors and light industrial jobs; transports workers; and makes sure workers have proper documentation.
Christin Esquivel, owner of Jobs R Us, which connects field workers with farmers and orchardists, said people are needed to top onions and thin orchards. In addition, more hop fields are being planted, vineyards need pruning, and there are raspberries and blueberries to pick.
“We are having a lot of trouble finding people,” she said. “We have about 250 workers right now and need more.”
As the cherry season swings into full gear, orchardists say they are squeaking by.
“I was nervous at one point and had a day I thought nothing was going to happen, but we are getting through,” said Don Olmstead, a Grandview cherry grower.
It is no small thing for the Washington state asparagus industry to lose 9% of a crop — if that statistic holds up it could lead to bankruptcy for some growers.
We’ve always been told that asparagus is among the most difficult and labor-intensive crops to harvest and, of course, we would like to see the growers get the labor they need.
Still, every time we read an article like this, though our hearts go out to the growers hurt by lack of labor and it pains us that in a world awash with poor people we can’t somehow hook them together to get the job done, we confess that it seems to us that the growers must be saying something more than that there are no workers available.
After all, when the Pundit was trading produce and the market for something was hot but we had obligations to deliver the product, we didn’t give up. Even though every supplier told us there was none available, we found a unique way of making more available — we raised our offer. Not once, not twice, but a hundred times we found that if the market was $18 and not a cantaloupe could be had, offer $25 and, mirabile dictu, they become available.
In the produce industry, there were many reasons for this: In the short term, the vendors were probably cutting other cheaper sales and giving us the produce. But our raising the market also meant that demand went down and nobody needed as many cantaloupes as they had thought they would. And the superior returns provided to growers encouraged increased production.
The labor market is not dissimilar. Higher wages both decrease demand for labor and increase supply. So when a grower explains that there is not enough labor, what he is really saying is that there is not enough labor at a price he would like to pay.
But is that the right price?
In a capitalist economy, an imbalance in supply and demand is resolved by changing the price. This is as true of labor as it is of cantaloupes.
Yet it seems like there may be room for a significant increase in farm wages:
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.
The data is a little old but the point is the same. Is it true that we have a shortage of labor? Or is it true that we need to pay up to attract people to do this work?
Paying up doesn’t necessarily mean increasing cash wages. People may value guarantees of steady work or health insurance more than they do another dollar an hour.
A department store in the greater New York City area began running a complimentary express bus service from an inner store in downtown Brooklyn, where labor was available, to suburban locations where labor was scarce.
We, as an industry, have to explore in great detail what, precisely our challenge is. Is it that if we raise the cost of farm labor by 40% we can’t compete with overseas producers? Is it that there is no wage or change in working conditions at all that will attract Americans to do this work? How do we know these things to be true?
Much of the opposition to the immigration bill has come from the right, with conservatives focused on issues of law and order, terrorism and cultural change that immigration can bring. But if we have to bring up some variant of AgJOBS as an independent measure, the opposition will come from the left, which sees guest worker programs as a mechanism for suppressing wages of low education people.
Are they right? And to what extent? What are the alternatives? At some point in time merely pointing out our problem of labor shortages will be challenged with the obvious question: What did you do to make your job more attractive to workers?
Are we really ready to answer that question?
We’ve lately paid much attention to China with our pieces, China Plays Down Food Safety Problems and Chinese Garlic and Food Safety, both dealing with the implications of food safety problems in China.
Our piece, Chinese Apples Pose Threat To U.S. Apple Industry, dealt with the broader issue of whether the popular image of an invasion of Chinese-grown apples bankrupting U.S. producers was a future that must be or a future that merely could be, and we explored some steps that can be taken regarding the future of the apple industry in the United States.
This piece brought a response from one of the most knowledgeable and thoughtful academics researching the produce industry. Thomas Reardon is a professor at Michigan State, which means apples are top-of-mind.
Professor Reardon also is deeply involved in international matters, including both studying international retailing and, via a joint program between the International Food Policy Research Institute and Michigan State University studying markets in Asia and working hard to integrate the poor in India and China into the world’s trading system.
Tom was the keynote speaker at PMA’s program to broaden its reach in Chile, which he delivered in excellent Spanish. His ideas regarding the competitive situation vis-à-vis China are well thought out and deserve the trade’s careful attention:
The Perishable Pundit article of June 26, 2007 on Chinese apples was absolutely brilliant. I was so happy that you laid out those points to the industry, and I am convinced the strategies you note are the … only … ways. Here are a few thoughts from what I hear from retailers in the US and in Asia.
First, an Indian retailer (a major one, I had been in India for four months and interviewed … everyone!) said (paraphrased) “Both China and US apples that we import are supremely tasteless; I call them ‘water in an apple shaped bag’. The reason we are shifting to Chinese apples is not because they are good; they are as bad as American apples; it is just because they now look the same in terms of cosmetic quality, and they are cheaper.
But the Indian apples from the north (Tom’s note: the origin of Indian apple industry was in the 1920’s; an American brought them in.) are far tastier and if we could get good Indian apples all year we would be happy and eat only those and never eat the insipid US and Chinese apples again."
That got me thinking Jim, and then I see it in your article today: the US HAS great varieties, but they do not export them. Those varieties and tastes could be the competitive edge — the only competitive edge. This will be more and more true in the next decade as Indian apples come on line (everyone is watching China’s apple industry and doesn’t see the Indian ones coming!!).
Second, you are spot on regarding the issue of COOL on apples. To paraphrase a major retailer (fruit/veg buyer) that speaks in my class every year said (to my class which is from apple growing areas…), “Folks, the COOL label can come. Sure it is a hassle for all of us, but if they pass it, it will just add some costs to our apples and other fruit and thus to the consumers. But don’t hold your breath about its effects on American fruit producers; don’t count on this helping them.
I have thought a lot about this and talked to my customers and looked at the demographics. The ONLY group that seems to have the slightest feeling about “buy American" are the older males, particularly from rural areas and small towns. I very often already label fruit country of origin voluntarily (Tom notes: I checked this and found indeed that a huge number of imported SKUs in their stores have country origin already on the labels or on the signage, and I know exactly what he is importing because I spend long hours interviewing him.), and this tiny group is the only one that even notices and a few complain. The extreme majority neither notice nor if they do, care.”
He estimates that 1-2% might be the shift to American fruit should there be labeling. He notes that the demographic changes will erase that 1-2% in about 10 years, at most.
Third, I believe it is a mistake to think the Chinese (or the Indians), or for that matter, the French, Italians, and Central Europeans, will not compete very hard for the growing tasty-varieties market, as the competition swings that way and China and a few others totally take the commodity market. The Chinese (always imagined as some sort of faceless group thinking like robots) are thinking hard and fast about variety differentiation, and much of it in joint ventures with smart fast moving folks like the New Zealanders.
Fourth, I did think you would mention joint ventures, and Americans investing in China. I recall a major fruit company president in Michigan, who just invested a lot in China, saying, “Well Tom, I thought it over a lot. I figured, can’t beat ‘em, so better join ‘em. And I will never regret that decision. When garlic companies, after lambasting the Chinese on garlic, suddenly showed up on the Sacramento Bee grinning with their new Chinese joint venture partners, the future suddenly became clear.”
The big and smart move early and fast, and will gobble up the opportunities. The Australians and New Zealanders are highly aware of this. I think there will be a brief and massive stampede for joint ventures in China, and then India, just as there was to Chile.
In time the China fruit will be Sunkist plus Chinese, Dole plus Chinese, Zespri plus Chinese, etc. It is already happening. Look at avocados in Mexico. 70% of the exports of avocados from Mexico are by … Californian firms. A lot of grapes coming out of Chile are from … California firms… The same will be true of apples from China, some US firms plus Chinese will dominate.
Fifth, and I am writing the above plus the following in a report for the PMA to be finished very soon. I spent a day in Chinese supermarkets (one of months I have spent) recently, while at the CIES meetings, and counted the fruit origins. 70-80% of the SKU’s were … imported. Chile is the big winner (as it is in imports in Mexico and Central America). Dole (exporting from the Philippines) was a huge winner. Zespri, of course, was one of the dominant (selling kiwis to the Chinese even though kiwis originated in China!). Thailand is up and coming but already huge. There were a few US apples. There were a LOT of Sunkist oranges and lemons. Sometimes Sunkist branded fruit imported from Australia or South Africa.
The Chinese LOVE new varieties of fruit. There were a number of fruits there that I had not seen only 3 years ago (mainly tropicals) and that shows the Chinese want that. There were now some avocados and blueberries! I bet that a bunch of new varieties and class acts on apples from the US would please them. Bearing down on figuring that out seems to me to be a … bit better… use of time than trying to get COOL labels. I don’t know how long it will take, and how many beatings (like happened with cars) for American industry (including ag) to figure out that protectionism is a short term strategy, and in the longer term, the free market wins out, as we preach, and someday, will have to accept as truth ourselves.
— Thomas Reardon
Professor, Agricultural Economics
Michigan State University
Co-Director IFPRI/MSU Joint Program ‘Markets in Asia’
Tom’s thoughtful and informed letter should be mandatory reading for the produce industry. This Pundit, for one, is looking forward very much to the new PMA report that Professor Reardon is authoring.
What both the good professor and this Pundit have in common is that we are both advising American growers not to give up. Like all other markets, produce markets depend on knowing your customers and delivering what they need. Bryan Silbermann of PMA has practically made the hallmark of his administration a plea to the produce industry to focus on taste.
What is clear is not that China will be bad for U.S. growers; the integration of China into the world economy may yet turn out to open new vistas of opportunity for U.S. growers. What is clear is that the world is becoming more competitive. Tesco’s decision to bring a British company to the U.S. to source its produce is a simple example of what the world holds in store.
Every grower, every shipper has to wake up every morning now thinking about a world of competitors… and potential partners.
We didn’t deal with the issue of overseas investments and joint ventures because we were writing about the impact of China trade on U.S. apple growers. But Tom is, of course, correct that if you are talking about shippers and other parts of the trade, looking to China just makes sense.
In fact when Sunkist appointed a new CEO, we greeted his appointment with one overwhelming question: Will Tim Lindgren Go To China? Sunkist, as a co-op and particularly as a federated co-op — meaning that it is really controlled by the packing house owners more than the growers — finally bent and decided to open counter-seasonal operations in the Southern Hemisphere.
China is Northern Hemisphere fruit and thus directly competitive with Sunkist’s California and Arizona growers, and THE QUESTION for the future of Sunkist is if it will build packing houses in China or joint venture there, knowing that it will be directly competitive.
If Sunkist refuses, it will surely see big drops in market share in Asia. Major markets such as Japan and Hong Kong will shrivel.
Yet Chinese production could be the perfect tool for Sunkist to reenter European markets it once held but lost to less expensive citrus from other countries.
China, India, Brazil, Eastern Europe and Russia… these are all major producers of different things and will be strong competitors both in the U.S. market and in third-party markets. However the integration of these countries into the world markets also creates opportunities: to sell to the growing middle class and affluent class and to use these countries as a production base when that makes sense.
Change has consequences and those consequences are often unpredictable. But the Law of Unintended Consequences is not the Law of Bad Consequences, and in the face of uncertainty to assume the outcome is going to be bad for the U.S. would be excessively pessimistic.
Many thanks to Professor Reardon for sharing his thoughts with the trade.