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Produce Business

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December 27, 2006 —
Perishable Pundit Overview:

Between Christmas and New Year’s, we are presenting “Pundit Classics,” pieces that ran previously that deserve a second look.

Today we are reviewing some of our work on public policy issues such as Immigration and the WIC program.

Doubtful Immigration Policy

Pundit’s Mailbag — Immigration

Straight Talk On Immigration

Immigration And The Poultry Industry

Reducing Labor With Technology

WIC Juggling Act

Pundit’s Mailbag — The WIC Program




Doubtful Immigration Policy

Immigration is a crucial issue to business in general and the food industry in particular. The big growth in foodservice probably wouldn’t be possible without substantial immigration to provide staffing for all those restaurants. And it is said that no industry is as dependent on illegal immigrants as the business of harvesting produce.

There are important philosophical issues at play about what kind of country we want to be and what our obligations are to people who are not part of our country.

There are economic divides between those who focus on building the overall strength of our economy and those who focus on raising wages for specific sub-groups.

There also is a real struggle over how we make immigration compatible with our national security interests in an age of terrorism.

Yet I would say the biggest obstacle to actually passing legislation is the total breakdown of trust that the government will enforce any law that is passed.

Look at how this just stops discussion in its tracks: The produce industry has been pushing for a guest worker program. It is an attempt at compromise between those who want to restrict immigration severely and those who want more open borders.

Guest worker programs have been proven to have many issues. But it is only a compromise at all if those who favor restricting immigration perceive that the guest workers will, in fact, leave the country when the program is done.

And here, our current policies leave more than reasonable doubt on that fact.

A lot of attention has been paid to “protecting our borders” and, indeed, there is a big problem with illegal immigration from Mexico.

But that is not the half of it; you don’t have to be an expert in immigration to know that we have tremendous issue in terms of legal immigrants that overstay their visas.

Many a person could name ten housekeepers or nannies who have overstayed their visas and, in fact, the Department of Homeland Security estimates that people who have overstayed their visas account for one-third of the seven million illegal aliens in the U.S. as of January 2000. And surely if they ever actually secured the border with Mexico so people couldn’t enter illegally, that number of overstays would zoom.

The bottom line is that, right now, nothing happens when an individual overstays his or her visa. No “All Points Bulletin” is issued because someone had a six-month tourist or educational visa and doesn’t show up to leave the country.

What possible reason is there to think that if someone working on a guest worker program doesn’t show up to leave the country that the FBI will hunt him down?

And as long as that trust is not there, it is very hard to get anything enacted.




Pundit’s Mailbag — Immigration

Some very incisive thoughts in response to our piece on immigration:

On immigration, much to the dismay of my shippers, I’ve long contended that the agricultural community is hooked on the drug of cheap labor. In the 60’s, people were mechanically harvesting certain vegetables for Campbell’s Soup. They had to quit doing it because labor was so cheap — they couldn’t beat the cheap labor rates — and the machine wasn’t efficient enough to overcome it. The point is, it was being contemplated 40 years ago, and it should have been an industry-wide effort ever since.

We haven’t worked on mechanization and automation in this industry because we have had no motivation to do so. Now, with fear of labor shortages, we see a frenetic pace of R&D on mechanical harvesters. I’m already hearing tales of at least four companies that will be mechanically harvesting lettuce in Yuma with less than 50% of the labor previously needed, and they also claim better quality! And this is only the start of an industry revolution.

And we haven’t attributed the correct cost to our cheap labor. Thirty percent of California prison inmates are in the country illegally. There are 20 murders per year in Salinas, a city of 150,000 people. The city spends almost $1 million on a gang task force every year. These are social costs that are borne by all the citizens of the city and state, and aren’t accounted for in the cost of the produce.

Where there’s a will, there is a way. We haven’t had the will because there was no need to abandon our reliance on cheap labor and find a better way of doing things.

This reader, who has extensive experience at the highest levels in our industry, makes the point that often gets lost in all the political battles, namely, that the industry of today is shaped based on the incentives in place today. Only a fool would extrapolate from the current situation and assume in some kind of linear fashion that if we were short 10% of the produce harvesting work force, then ultimately production must decline 10%.

Wages can go up, mechanization can change both the amount and the nature of the labor needed, consumer product preference can shift as higher wage rates lead to differential price changes on various products depending on the difficulty with growing, harvesting and packing.

In the piece we ran last week, I linked to an article by Professor Philip Martin from U.C. Davis, and I’m going link to it again for those who missed it. It is a fascinating piece that talks about what impact guest workers really have on an economy. His basic point is this:

Guest worker programs tend to increase legal and illegal immigration for two major reasons: distortion and dependence. Distortion refers to the fact that economies and labor markets are flexible: They adjust to the presence or absence of foreign workers. If foreign workers are readily available, employers can plant apple and orange trees in remote areas and assume that migrant workers will be available when needed for harvesting. Dependence refers to the fact that individuals, families, and communities abroad need earnings from foreign jobs to sustain themselves, so that a policy decision to stop guest worker recruitment can increase legal and illegal immigration.

In talking about the failure to pursue mechanization, our reader is basically referring to the distortion effect that Professor Martin refers to in his report.

In addition, our reader points to something economists call externalities. Basically this is a cost not paid by the parties in the transaction. Pollution is the classic example. In the absence of regulation or taxation, a seller of product could have a factory that bellows pollution in the air and neither the seller nor the buyer of the goods made in that factory has to suffer the effects of the damage caused by the pollution. That price — bad health, increased medical expenses, closed fisheries, etc. — is paid by an external party, typically the general public.

This reader is pointing out in his note that there are many costs to farm labor and not all of it is reflected in the price of the goods. If there are external costs to hiring the current classification of farm labor and we restrict that classification from entering, from a societal standpoint it means that there will be more resources available to deal with any problems that come about if labor does become constrained due to restrictions on immigration.

The reader’s two points together are astute and point to something problematic about both trade associations and governmental bodies: Both tend to be responsive to the industry only as it is today. The people who are going to work in factories that will produce automated harvesting equipment don’t know it yet, so they can’t lobby for their interests. The only voice that typically gets heard is from those who have something to lose from a change in the status quo.

We are glad to serve as a forum for such unheard voices here at the Pundit.




Straight Talk On Immigration

First we welcomed the new United Fresh Produce Association here. Then we discussed the challenges related to conducting government relations for an association that is both vertically integrated and horizontally diverse here.

We have dealt with immigration reform before, both here and here, but the situation is now coming to a head. We would be remiss if we didn’t discuss today’s legislative situation with regard to immigration, which was the real focus of United’s Washington Public Policy Conference.

The Pundit’s reading of the political tea leaves, though, is that United and others in its coalition are very possibly going to lose and that there will be either no law or none with a guest worker program included.

Most of this is unavoidable. Here is Prevor’s Law on the matter: To the extent an issue becomes a matter of general public interest and concern, the ability of special interests to influence the legislative outcome on that issue is constrained.

Put another way, as long as something is “inside baseball” — meaning the produce industry cares about it but nobody else does — the industry can usually carry the day. Even if it is produce versus some other trade group, it is a situation where we can have a lot of influence.

But immigration reform is on the front page of every newspaper. It strikes at the very essence of our nationhood, the kind of country we wish to have, our national security.

In this kind of context, regardless of the strength of our arguments or the quality of our lobbying effort, it is very hard to have a big impact on the outcome of the final vote. If the majority of the population feels that what is at stake is the security of the nation or the type of country we are going to be, the impact on the produce industry unfortunately isn’t likely to play a big factor in the debate.

This particular issue is especially difficult because normal compromises won’t likely be reached because the government has no credibility on this matter. Typically you would have people on one side in favor of very limited immigration, and on the other side you would have those who say economic growth requires workers.

The perfect compromise would normally be a guest worker program. One side achieves its goals of keeping the citizenry as is; the other achieves its goal of getting workers. But it doesn’t work in this situation. Why?

Pick any affluent community in America and you can find thousands of housekeepers, nannies, etc., who are all illegal. Not one of them arrived in the country illegally. All came on a legal visa and didn’t leave when they were supposed to.

The US government does nothing about this flaunting of the law. As much as anything else, it is this fact that makes many unwilling to vote for a guest-worker program, since they have no reason to believe that these guest workers won’t overstay their visas and no reason to think that the government will do anything about it when they do.

If we really want to pass a guest-worker program, I think we need to add two elements to the current proposals:

  1. We have to break this credibility gap. The only way to do this would be to assess a fee per guest worker to be used to set up a special force within the Department of Homeland Security, whose only two purposes are A) To maintain a registry of exactly where all these guest workers are living at any time, and B) To act immediately if someone fails to exit the country on schedule. If a guest worker is scheduled to leave on September 18th and doesn’t show up at a border checkpoint; then at 12:01 AM on the 19th, there needs to be an APB out looking for that person.
  2. We have to make any guest-worker program temporary. There are many problems with guest-worker programs, and we’ve pointed them out here. It is not clear that everyone understands how extraordinary the produce industry request really is. After all, merely increasing the amount of legal immigration, for example, would not satisfy the produce industry. Why? Because legal immigrants could work in any chosen field and would, likely, find other opportunities than harvesting produce. What we are asking for is a class of immigrant whose opportunities are constricted so they won’t go open a produce retail operation or work in a produce wholesaling operation, much less be a lawyer, doctor or engineer. Instead, the only thing that these people are to be allowed to do is harvest produce.

A guest-worker program such as this is so alien to the American way and so offensive to the way many people think about America and the opportunities it offers that it seems unlikely to last indefinitely. The industry should take the bull by the horns and propose a guest-worker program as a temporary measure while we invest in mechanized harvesting. Whatever number we want to start with, we should agree now to a 2.5% phase out in the number of guest workers each year. In other words, the industry should make a promise to America that we will reorganize our domestic agriculture over the next 40 years so that we will no longer require guest workers.

These two proposals might break the logjam caused by the lack of governmental credibility on immigration issues. Maybe, maybe, this could pass.

Of course, there are reasons why these things haven’t been proposed. Growers don’t particularly want to pay a tax to fund a police function, and they are uncertain if they can ever operate without illegal immigrants or guest workers.

But the problem is right now. We are getting many reports that the Border Control’s current “catch and release” program is significantly reducing the current availability of farm labor, so crops are not being harvested as a result but left in the fields.

From an industry perspective, fighting for a guest-worker program without these two provisions may be a case of allowing the best to stand in the way of the good.




Immigration And The Poultry Industry

Here is a piece that points out that Delaware’s poultry-processing plants depend heavily on immigrants, many of whom are suspected of being illegal. It is a useful reminder that the immigration issue, which we have dealt with here, here and here, affects more than the produce industry. But whether it is poultry or produce, the problem is the same:

The work is hard, and the poultry companies say nonimmigrants aren’t willing to take jobs that start at $8 an hour and rise to $9.70 an hour after an initial probationary period.

In Georgetown, Delaware, the focus of this story, after an initial period of upheaval, there seems to mostly be an accommodation to a massive influx of Guatemalans:

“The key is they were willing to work. People will forgive a lot if they see people are willing to work,” said Carlton Moore, a local developer and community leader who is active in building housing for the immigrants. “They have filled a need. We would have a very difficult time without them.”

And certainly the poultry industry is dependent on them:

Perdue Farms Inc. employs 1,300 workers at its Georgetown plant, and 80 percent to 85 percent are immigrants or the children of immigrants, almost all from Guatemala, said Gary Miller, regional human-relations manager for the company. At Perdue’s Milford plant, 60 percent to 65 percent of the 1,200 workers are immigrants from 15 nations.

But it is still a hot issue:

Republicans John Jaremchuck, an Elsmere councilman running for the state legislature, and Jan Ting, a Temple University law professor running for the U.S. Senate against incumbent Tom Carper, have made illegal immigration prime campaign topics.

“It’s not the job of the American government to supply a constant supply of low-wage workers for big businesses,” said Ting, whose parents emigrated from China during World War II. “Big business loves illegal immigration because it suppresses the wages of American workers, too… Do we care about the less-skilled, less-educated American workers?”

Still, you listen to a local elementary school principal talk, and it doesn’t seem like these immigrants are all that different from the past:

“The parents come in and they don’t ask, ‘How are my child’s grades?’ They ask, ‘How is my child behaving?’” The school was just named a National Blue Ribbon School by the U.S. Department of Education, one of three schools in the state and 250 in the country to be recognized for strong academic progress.

Many of the town’s Hispanic elementary students gather after school at La Casita, on the edge of Kimmeytown, for homework help. There, one of the parent leaders, Yolanda Diaz, an undocumented Guatemalan who has been here for 13 years, said it was important that her three sons, Jesus, Edward, and Manuel, do well in school.

“I don’t want them to work in a chicken plant like I do,” she said. “It’s hard there.”




Reducing Labor With Technology

Here at the Pundit, we’ve dealt several times with the issue of immigration reform, including here and here. The Pundit also made some specific suggestions on what could actually pass in Straight Talk On Immigration. One wild card in this issue is what the industry could actually do in terms of mechanizing harvesting if labor is expensive or unavailable.

At the recent California Valley Grape and Raisin Expo, Dr. Robert Wample, head of Fresno State’s viticulture and enology program, made an announcement of progress on mechanical harvesting for grapes:

The system uses near-infra-red spectroscopy (NIRS) equipment in conjunction with GPS (global positioning systems) to prepare a “quality map” of a vineyard prior to harvest using GIS (Geographic Information Systems).

“The quality map is used to control the mechanical harvester as it moves through the vineyard,” Wample said. “Although there have been efforts elsewhere to determine fruit quality prior to harvest, to the best of my knowledge, no one has ever created the necessary maps and subsequently used them to control a mechanical harvester,” directing it to pick only the desired grapes…

“Given the impending labor issues facing [the grape and wine industry], this could change the need for large quantities of hand labor that was used in the past,” Wample said. “It will be especially useful to those working with wineries attempting to meet the continuing higher expectations of the consumer and remain competitive.”

He said the technology can potentially be used in other crops and is aware of preliminary research regarding the use of NIRS in muskmelon, but not incorporating GPS or GIS. He has received inquiries about the possible use of this technology in strawberries.

“But I think the easiest transfer will be to table grapes,” Wample said.

Whatever the legislative outcome, guest worker programs are always going to be problematic. A focus on technology to reduce labor needs is essential if agriculture is going to thrive in high-labor-cost countries.




WIC Juggling Act

There is nothing more painful in politics than a zero-sum game. The perishable food industry finds itself creating crossfire over the Special Supplemental Nutrition Program for Women, Infants and Children, or WIC for short.

For some time now, the produce industry has lobbied to see fruits and vegetables included in the national program. Now the USDA has proposed substantial changes to the program, particularly the addition of whole grains and fruits and vegetables. The United Fresh Fruit and Vegetable Association expressed agreement, and the Produce Marketing Association expressed its praise for the decision.

However, Congress isn’t allocating any more money for WIC, so this gain for produce and whole grains, plus some for canned fish and some ethnic foods, has to come out of someone else’s federal dollars. The dairy industry will get hurt, so the International Dairy Foods Association and the National Milk Producers Federation jointly expressed their concern. The egg industry will also be cut back, so the American Egg Board responded negatively. Juice is being cut back as well, but the juice association must have not had my e-mail. You can be sure they don’t like it either.

The USDA has made the only possible call, but it is easy to understand why the dairy and egg folks and the juice folks are upset.

The proposed changes roughly follow the recommendations made by the Institute of Medicine, one of the national academies that advise the nation on science, engineering and medicine. It also brings the WIC program into closer accordance with the current dietary recommendations.

However, the WIC program gives vouchers worth about $35 per month. So it is not as if anyone was getting such an overdose of anything before the changes. And there are always arguments to be made. According to Welch’s spokesperson, Jim Callahan, “Allowing more juice would help ensure kids are getting the vitamin C they need and discourage kids from drinking soda or other sweetened drinks.”

In truth, the fight may give each association the opportunity to earn some credit with its members for fighting the good fight, and it is a triumph for good government to have whatever money is there to be allocated based on science, not politics or tradition.

But money is a fungible commodity, and most families supplement the WIC allotments for food with their own cash. So the net result of a change in the WIC program is likely to be a re-shuffling of which items are purchased with WIC funds and which are purchased with cash.

There will not likely be any substantial change in sales of any food items, only a change in how those items are paid for.

The biggest nutritional change may actually come about in the requirement for whole grain cereals. This is a category that many WIC mothers weren’t buying at all, and so the change may create substantial increases in whole grain cereal purchases.




Pundit’s Mailbag — The WIC Program

Our article on the WIC Program prompted one reader to write:

I had an opportunity to speak with Stephen Christianson who manages WIC, and I asked if there is any evidence that this actually increases the consumption of fruits and vegetables. He said that he didn’t know!

My point was: let’s say a family has $200 to spend on groceries per month. And of that $200, $35 comes from WIC. If based on their normal consumption, they spend $40 on fruits and vegetables total, who cares where the money comes from? Shifting where the money comes from doesn’t automatically increase the consumption.

All we have done is shift some of the spending on fruits and vegetables from their own cash to government money. It’s not increasing the size of the pie, it’s only changing how they pay for their slice.

I think you said it in one of your [PRODUCE BUSINESS] editorials several months ago. Our efforts have to be focused on education, not these minimally incremental changes to a government food program.

What I wrote about is the need to seek effective policies. Politicians want to do something for their constituents. Trade associations want to do something for their members. It is one reason industry members of trade association boards of directors have such a valuable role to play. They have to determine the priorities, what really matters. If they don’t seize that leadership, then lots will be done but, as they say, it is hard to get there if you don’t know where you want to go.

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