University of Arizona a dot Cooperative Extension

Yuma County Farm Notes

Agriculture and the Global Economy - In Arizona?

Barry Bequette, County Director, Yuma

Globalization is the trend toward looking at economic and financial issues from a worldwide rather than a single country viewpoint. The United States has been extremely fortunate that it has always been a major food exporter. We not only produce enough food for ourselves, we produce an abundance that allows us to export to nations that do not produce enough food for their populations. In the year 2000, one farmer produced enough food and fiber for 129 people (110 in the United States and 28 in other countries). Most people are surprised to learn that there are only a few major food exporters in the world. Sixty-five percent of the students enrolled in a plant science college class at a major university thought that the former USSR was a major food exporter (while the former USSR was just the opposite, a major food importer).

How does the global economy affect the typical Arizona citizen? While there are many effects of globalization, the one effect that everyone understands is the economy. An advertisement may read "Citrus fruit for sale at $1.00 a dozen." Sounds good! And on the surface, it is good! But look a little deeper, and it is easy to realize that out of the $1.00 paid for a dozen citrus, there are many people that depend on a share of this money.

Who gets a piece of the $1.00 you paid? All of the following get a share: the grocery (plus associated employees), the trucking company, the broker, the cooling and processing company, the farmer, the chemical company that provided protection chemicals, the fertilizer company, the equipment dealer that provided machinery, the gasoline supplier, the harvesting company that provided the labor for harvest, the box company that provided the nice boxes to hold the citrus, the county tax assessor who collected land taxes, and the federal government who taxed most of the above. We have now sliced the dollar into 14 pieces, and in various systems there may be more who share in the same dollar. In a perfect world, they would all share equally, and each would get a little over 7 cents for the product. However, we know that taxes may account for about 1/3 of each dollar, meaning 13 parties need to share about 66 cents. If the remaining parties were to share the money left equally, they would each receive about 5 cents from the dollar.

Now lets focus on the farmer, who just received 5 cents for the dozen citrus sold in the supermarket. If the farmer produces about 27,000 citrus per acre (2240 dozen), the total gross for an acre of citrus is then $112, or about 31 cents per day. In order for the producer to make more than 31 cents per day as income, additional acres of citrus are necessary.

In the evening paper, you read that Chile and Argentina have flooded the market with very inexpensive citrus, so tomorrow there will be a citrus sale, and citrus fruit will be sold for $.50 cents a dozen instead of $1.00 per dozen. At this price, the producer's cost of producing citrus now exceeds the profit made, so he and many others must retire their citrus groves or try to get though the year with a net loss and hope for better times in the future. The trucking company no longer has citrus to ship, so they lay off workers. Without citrus to cool and process, the cooling company no longer is profitable, so they lay off workers. Not being able to survive a year without profit, they eventually close the cooling plant. With fewer trucks transporting citrus, the gasoline provider loses a portion of his income, so decides to not purchase the new tanker truck he had planned to purchase, and the local dealer who was to sell the truck cancels his order. This impacts the truck manufacturing plant in another county, as several producers also cancelled orders for harvesting trucks. With fewer trucks being produced, the need for labor declines and a decision is made to postpone the hiring of three new workers that had been planned on.

The scenario described above could go on and on. From the field worker who will not purchase a new pair of gloves, to the paper mill in Kentucky that provides paper for citrus boxes. From the local to the distant, citrus and vegetables, eggs and beef, wheat and corn, brokers to futures trading on Wall Street, all are interconnected to the global economy, and all are affected by hundreds of factors, including: importation laws, pesticide regulations, labor cost and supply, taxes, the supply and demand for fuel, positive or negative media, government price supports, public perception of genetically modified foods, and yes, even the weather.

Thinking. Awareness. Globalization. "Best Buy". Unemployment. Importation. Laws. Regulations. All of these words are things you should be aware of whether considering the cost of tea in China, or the cost of citrus fruit or vegetables in the United States. The complexity of our food production system on a world basis is far reaching. The next time you consider purchasing a food product, reflect on the far reaching impact of your purchase.

Full Disclaimers




Information provided by:
Barry Bequette, Extension Agent, Urban Horticulture
Barry Tickes, Extension Agent, Yuma County
Mohammed Zerkoune, Extension Agent, Agriculture
University of Arizona, Tucson, Arizona.
Material written September 2003.


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