Unit One – Characteristics of Horticultural Industries AEC 317 Fall 2014

Horticulture Industries Horticulture and

The Horticulture Industry Nursery Greenhouse Floriculture Landscaping and services Sod Fruits and nuts Vegetables Grapes and wine

Characteristics of Horticulture Production and Marketing 1. High input – high value 2. Labor intensive 3. Management intensive 4. Capital intensive – including land 5. Perishable products – fast moving supply chains determine quality 6. Large number of horticultural “commodities” – specialty crops 7. Annual and perennial cropping systems 8. Relatively little contracting – cash markets dominate – fewer risk management tools 9. Production consolidation and specialization 10. Market segmentation

Trellised grapesNetted apple trees

Comparative Labor Costs CommodityAnnual labor $ per acre Lettuce (iceberg)$5,200 Raspberries$4,900 Peaches$4,100 Broccoli$3,300 Blueberries$2,000 Wine grapes$1,600 Sweet potatoes$970 Alfalfa$47 Corn$35 Sources: UC Davis (CA), U Georgia, and Iowa St Univ budgets

The Specialty Crop Problem IR-4 designation 600 minor crops with a collective huge economic impact Production supply chains Pest management tools and scale economies Commodity-specific R&D and scale economies

The Perennial Crop Problem Capital budgeting Market response vs supply glut Industry coordination Production cycles (in nuts and some fruit) More on marketing orders later Sweet cherries and olives

Where’s the futures market for watermelons? Risk management limits for perishable crops Smaller volume of specialty products Difficult to forward contract – high number of production and quality variables Significant direct contracting for processed products Still mostly cash transactions and spot market Increasing contracting for fresh

Watermelon vs #2 Yellow Corn Perishable Seasonal Many varieties Small volume End consumer product Small volume buyers Storable Year around supplies Recognized uniform product Large volume Input to other products (feed, fuel, corn syrup) Large volume buyers Loading watermelons at Asheville NC Market

Increases in vegetable consumption Source: Vegetable & Melons Situation and Outlook, ERS, 2012

U.S. Vegetable Farm Cash Receipts Source: U.S. and State Farm Income and Wealth Statistics: Cash receipts, by commodity groups and selected commodities, ; ERS Veg & Pulses Outlook Sept 2014

Per Capita Fruit Consumption Source: USDA-ERS Fruit & Tree Nuts Outlook Sept 2014

U.S. Fruit Farm Gate Cash Receipts Source: USDA-ERS Fruit & Tree Nuts Outlook Sept 2014

Produce Acres in U.S.

Fruits and Nuts (2012)Vegetables and Pulses (2011) Share of Farm Cash receipts CA63%CA36.6% WA12%FL9.4% FL10%WA6.4% AK6.4% ID5.4% Source: Selected ERS Commodity Yearbooks

Market Segmentation Produce adapting to segmented U.S. consumer Organics and sustainable production systems Value-added products General growth in credence attributes Fair trade, local, eco-labels