February 11, 2004 - "The First Year in Review"
Greetings and thank you for inviting me to be with you. I always enjoy being with people associated with the agricultural industry and hearing about your efforts, successes, and concerns.
I’ve now been at the job for nearly one year and it’s been a challenging but wonderful experience to participate with you in this dynamic and innovative agriculture industry.
I want to give you a little bit of my perspective about this industry, the department, and the state of the agricultural economy.
Everywhere I go I speak about the economic and ecological importance of this industry.
- Agriculture is Oregon’s number two industry, accounting for more than 150,000 jobs in Oregon (8% of total jobs, 1 in 12) that are related to production, input industries, services, processing, transportation, storage, and marketing. The overall industry payroll tops $2.8 billion.
- The agriculture industry contributes nearly 9% of gross state product when all of these related segments are counted. Agriculture is more than production- but production is the central component that keeps the machine going.
Land is the critical infrastructure anchor to maintaining and expanding production and economic development. It is vitally important that we protect this base and help growers be profitable on their farmland, or economic and political pressures will turn it into something else.
Land pressures on the West side are clearly more intense than here in Eastern Oregon. So the challenge here is to identify new opportunities that can effectively be used on our farms and ranches that may be different from how we’ve done things in the past.
I’ll talk about a few of my thoughts and ideas on this a bit later.
It is worth noting that in the next 20 years 75% of farmland in Oregon will change hands as Oregon’s aging farmers retire. The average age of Oregon farm operators is now nearly 55 years old. Tax laws, development pressures, and the general economic climate will influence how many young farmers enter agriculture in Oregon and the characteristics of these farms – will they be family owned (currently 98% are), non-family corporations, or paved over with urban sprawl?
We all need to be engaged in economic development efforts, educational efforts (like FFA, 4-H, Ag in the Classroom), and supporting this industry so there are opportunities for future farmers and related jobs in this industry.
I want to mention that Governor Kulongoski spoke extensively last week about his commitment to the agriculture, food processing, and renewable energy industries and initiatives he is undertaking.
ODA is working closely with the governor and his staff on these efforts, which will range from addressing taxation issues and wastewater concerns for food processors, to the farm labor collective bargaining situation, and efforts to diversity grower’s income through opportunities in renewable energy development and various voluntary certification programs.
We have a governor who is interested in the industry, committed to working with us and addressing critical issues. All three trade missions the governor has taken thus far have been agriculture related. While not an expert about the industry, he understands the economic significance and has been very accessible and attentive to concerns we have raised.
Our message about the economic impacts and importance of this industry is recognized by the governor, and it is also being more widely acknowledged than it has in the past several years. These are important accomplishments for the industry.
The state of the industry:
There is no doubt that world events are affecting our industry in ways unknown even five years ago. We are seeing how interlinked trade and movement of capital have made us. As example, the discovery of BSE in a Canadian cow that ended up in Washington State has had impacts on frozen french fry exports from the Pacific Northwest to Asian countries because of the use of beef tallow in making the fries.
Consolidation in the food industry and sourcing of goods worldwide means our growers and processors here in Oregon face fewer outlets, increased costs, changing consumer preferences, and increased demands related to food safety, natural resource management, and product quality.
Yet there are many positive things afoot:
- A declining value of the dollar has boosted exports and made Oregon products more competitive in the world market. Our exports are up. This is significant for our wheat industry. While still not at levels we would like, wheat prices are up nearly $2.00 over what they were 3-4 years ago due to a high dollar and excess world supply.
- Many other commodity prices are higher than they’ve been in the past five years. Until recently, cattle were experiencing the highest prices in years. That was moderated by the BSE incident, but demand has remained strong and prices have stabilized and are starting to regain some of the lost ground.
- Net income is up.
- Producers are finding ways to add value to, or direct market their products and gain more return for their efforts.
- Others are getting involved with renewable energy projects, including wind towers, bio-fuels, solar, anaerobic digesters on dairies, and others.
- The efforts of producers to manage their land and water resources in a sustainable way is being recognized and more federal funding and incentives will be available to reward these efforts.
Every day I hear of interesting and innovative efforts by growers as they adapt, make new products, or form new partnerships, Limited Liability Company (LLC) arrangements, or other ways of pooling resources, buying power or marketing efforts.
But can our producers and processors really survive in this global economy and the changes it is bringing? What lies ahead?
It is increasingly apparent that in most cases Oregon cannot compete on cost or volume for our crops and products. Margins are very tight and there is little room for error. Federal programs will continue to be critical for some crops, although we hope that other opportunities will develop which will lessen that reliance.
The Oregon Department of Agriculture is doing all we can to address the challenges facing the industry.
My staff and I are constantly involved with meetings and conferences and discussions where decisions are being made that affect the industry. These range from local land use issues, such as expansion of urban growth boundaries, to legislative issues that affect the priority lien rights of growers, to food safety, environmental concerns, and a variety of issues I will talk more about.
We work to ensure the impacts on agriculture are understood and that agriculture is represented and heard. We consult with agricultural groups on policy issues and critical legislative issues. I take this role very seriously, and believe that the department constantly – day in and day out – is telling agriculture’s story and working to ensure it remains a viable part of our state.
Second, we do everything within our power and resources to further the economic development of the industry. We are always on the lookout for resources that may be of assistance to producers and processors. We have gathered many of these resources on our internet site and I invite you to look there if you haven’t lately.
We have a marketing and economic development division with the specific charge of working with producers and agribusinesses on business plan development, product development (at the Food Innovation Center), and expanding markets for our agricultural products. We connect potential buyers with Oregon producers and processors. We profile agricultural products overseas and domestically, and work with our suppliers to open new markets through trade shows and on-site tours with in-bound buyers.
Exports are critical to Oregon agriculture. Nearly 80% of ag production and processed food products leave the state; half of that leaves the country, much of it to Japan. In any given year, the Japanese consume as much Oregon product as do the citizens of Oregon.
One example of our cooperative marketing efforts includes the introduction of grass seed to China. Over the past several years this has culminated into $15 million in seed sold last year. Grass straw sales to Japan and other Asian countries is now valued at over $55 million. ODA staff have also been involved in marketing efforts for fresh fruits (cherries, blueberries, pears) and meat products to Asian and European markets. We work closely with all major commodity groups and their marketing efforts, including wheat and other grains.
The department assists in the development of farmers’ markets and related direct marketing opportunities, including the administration of senior nutrition coupons that assist low-income seniors in obtaining fresh fruits and vegetables directly from growers. The senior coupon program resulted in nearly $1 million in sales last year. Overall direct marketing in Oregon is estimated at over $20 million per year.
The department provides the integral certification of products that is necessary for them to move in interstate commerce and out of the country. Oregon’s nursery industry is reliant on the pest and disease certification that the department’s nursery inspectors provide. This $750 million industry pays directly for this service, which provides the assurance that their products are free of unwanted critters and plant problems before shipment. Without this critical third-party verification, product would not be accepted in other states or foreign markets.
In the past year the department has worked with the industry and the USDA to develop the nation’s first “good handling practices” certificate program, and a Klamath Basin potato packer was the first to receive this voluntary certification that enables access to new markets. ODA is now issuing good agricultural practices certification for over 30 growers and the good handling practices certification for 6 packers of fresh produce. These programs assist in product integrity, traceback, and microbial/food safety assurances to buyers.
I believe these types of voluntary, third-party certification programs will become increasingly important in the years ahead to gain market access. ODA is working with the industry to evaluate whether there is merit to a program that certifies “Oregon sustainable” products that meet specific market demands.
ODA also provides inspection of over 2.7 billion pounds of produce for processing – of which about 2.4 billion lbs. are potatoes -- and 1.4 billion pounds of fresh fruits, vegetables, and nuts annually. These programs assure quality and uniformity of product to meet market specifications. The department staff samples more than 7,000 lots of seed for phytosanitary certification and testing. These certifications are used as marketing tools to increase the value of Oregon seed. The department’s certification programs also issued phytosanitary certificates on more than 715,000 tones of alfalfa hay and grass seed straw and sampled more than 44,000 bales of hops for quality grading. These programs are critical certifications that keep Oregon’s products moving through interstate and international markets.
As you know the department has an oversight role of Oregon’s 28 Commodity Commissions. ODA has long supported these grower-supported organizations that conduct research, product promotion, and marketing efforts. We have partnered with them on many projects and will continue to do so in the future.
Many of you are aware of the department’s efforts in pest and disease control. For years the department has conducted annual trapping of gypsy moths and Japanese beetles – two pests that could cause millions in damage to Oregon agriculture and natural resources if left unchecked. We monitor regulatory for other exotic pests and local problems, such as grasshoppers, cereal leaf beetle, sudden oak death, fruit moths and diseases. These are critical concerns which can affect not only production, but can shut down markets that will not accept our products if pests or disease are found.
The department also leads the nation in bio-control methods of noxious weeds. In all, ODA has released 70 different species of bio-control agents to control 26 specific weeds.
ODA oversees livestock identification efforts, better known as the brand program, to deter theft of livestock. The agency works with FDA and USDA to perform BSE feeding ban inspections at every feed ingredient manufacturer in the state. Our state veterinarian works with livestock producers and veterinarians statewide to ensure Oregon remains free of animal diseases and is prepared to deal with any outbreaks. These programs ensure that our dairy, beef, sheep, and other animal industries can be shipped across state borders in interstate and world commerce.
Food safety is critical to the integrity of our food system, movement of food into the marketplace and consumer confidence. In 2002-03, ODA performed nearly 11,800 inspections on over 6,300 licensed food establishments, including retail stores, food processors, bakeries, warehouses, and lockers. More than 1,100 inspections were conducted at dairies and milk processing plants.
In another area of consumer protection, the department inspects all weighing and measuring devices in the state used in commerce to ensure they are accurate. This includes livestock scales, elevator scales, gasoline pumps, meters, grocery store checkout scales, and many other devices. ODA is also responsible for ensuring that the quality of gasoline meets specific standards, and that goods sold by mass, volume or length are what they claim to be.
Those of you involved with restricted-use pesticides are familiar with the department’s role in testing and licensing of all users or applicators and ensuring the proper use of product. The department registers all pesticide products that can be used in the state – more than 10,000, and works with industry on special need situations. We investigate potential misuse of product. We ensure fertilizer products meet standards for heavy metals and declarations as to micronutrients and other components. And, as you all know, the department was charged with implementing a pesticide use reporting system that has had many starts and stops with the present budget situation and other issues.
Finally, ODA has many responsibilities related to natural resource management. We work with operators of Confined Animal Feeding Operations, mostly dairies and some feedlots, to ensure they have appropriate manure handling capabilities. Nearly 500 operations in the state qualify as CAFOs and require inspections and technical assistance.
The department administers the smoke management program for field burning of grass seed fields. You are very familiar with this program and it’s changes over the years.
Agricultural Water Quality Management Plans are now in place in nearly all areas of the state. These plans provide direction to producers on water quality management for their operations to minimize impacts on streams and other water bodies. Oregon’s 45 Soil and Water Conservation Districts work with growers and provide technical assistance. ODA provides funding and oversight to the SWCDs.
These are just the major areas of the department’s activities that I have touched on very briefly. As you can see, our involvement with the industry is broad and requires significant effort and resources. I think it is important for producers and all aspects of our industry to understand the many activities and efforts that their State Department of Agriculture is charged with implementing and how our programs can assist their efforts.
Like you, I am facing the challenge of running an operation with fewer resources, rising costs, and increasing expectations. We are examining all options to maintain critical services and streamlining operations. These are difficult choices and challenges. But they are not unfamiliar to you in industry.
Today’s challenges require both of this department and the industry at large, a new approach to doing business.
Success in today’s farming and food processing industries will require:
- flexibility in cropping (where possible) decision making, and marketing;
- quick thinking and adaptation to external forces;
- innovation in products and strategies, focusing on quality and niche markets;
- new partnerships and business formations;
- a commitment to research and development;
- adoption of new technologies and perhaps more mechanization;
- a keen eye on consumer trends and adjusting products to consumer demand;
- and attention to natural resource conditions.
What do I see ahead?
- I see new opportunities in renewable energy and bio-based products.
- I see new meat and other processing facilities in the not-too-distant future.
- I see new certification programs tailored to niche markets that assist growers in serving specific consumers.
- I see new food products developed for ethnic demands and tastes as consumer purchasing power changes. It is interesting to note that in 30 of our nation’s largest 100 cities the “minority” population is now the majority, mostly Hispanic.
- I see new ways of using our resource base to generate additional income for producers.
- I see new partnerships between growers and conservation interests that benefit both.
- I see more opportunities in direct marketing.
- I see more opportunities in farm-based recreation and agri-tourism.
- I see more emphasis on sustainability and development of marketing programs that highlight Oregon’s leadership in this area.
- I see adoption of technologies that streamline production and processing.
- I see the introduction of new crops, and perhaps even the shifting away from some commodities we have traditionally produced in our state.
- I see biologically engineered crops that provide specific benefits to consumers in the areas of health, medicine, and nutrition.
- I see a vibrant, but somewhat different agricultural industry than exists today.
These and other developments are already underway. Change is accelerating. These are exciting times that require quick thinking and acute judgment.
I commend all of you for your daily efforts as producers or those supporting this industry in managing the natural resource base and bringing food, fiber, and plant materials to the world.
I am extremely proud of the role ODA staff provide in assisting you in this process.
Thank you for the opportunity to meet with you and I am always interested in your input and feedback about ODA and our services and your needs.
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