A new report by the University of California Division of Agriculture and Natural Resources (ANR) adds new dimensions to the “massive economic juggernaut” of the California agricultural industry. The findings reveal that agriculture contributed more than $263 billion to the economy in 2018 through direct sales and employed more than 1.2 million people, while benefiting urban and rural regions alike.

The report examines the entire “working landscape,” which also includes fishing, forestry, mining, outdoor recreation and renewable energy, in addition to agricultural distribution, production, processing and support. Together, the sectors represent $333 billion in sales, 1.5 million jobs and 6.4% of the total California economy, outranking the healthcare, real estate, construction and retail sectors. Agriculture accounted for 85% of the working landscape businesses and 79% of the sales income. According to ANR Vice President Glenda Humiston, the working landscape likely surpasses the finance sector as well.

Humiston explained to Agri-Pulse the estimate is conservative when it comes to interpreting industry classification codes. Veterinary services, for example, were not included in the report, since the researchers could not separate livestock from pets. When ANR published a similar report about seven years ago, it faced criticism over being too liberal with the codes. This time, Humiston personally reviewed the codes herself. The report also excludes ecosystem benefits for this reason.

“Ecosystems services is unbelievably large and important, and it probably dwarfs this,” she said.

Regardless, the direct sales for agriculture are five times the value of what has been the benchmark for calculating the ag economy. CDFA’s most recent annual reporting of cash receipts totaled about $50 billion. Humiston said this why ANR decided more than a year ago to commission the report, which was in partnership with the California Community Colleges Centers of Excellence.

“I keep hearing this unbelievably ridiculous statement from a wide range of people that agriculture is less than 2% of the state's (gross domestic product),” she said. “You really can't use GDP to look at the economy anyway. It's just not an apples-to-apples comparison.”

Glenda Humiston

UC ANR Vice President Glenda Humiston

Humiston explained that GDP is a good indicator for products like cellphones and laptops, when inventory moves quickly. “But if you're doing trees or livestock, you're managing inventory for years or even decades,” she said.

UC Davis Professor Dan Sumner emphasized to Agri-Pulse the study counts sales all the way through the value chain. An example of farm sales would be a farmer selling a peach for $1. Direct sales associated with that peach, meanwhile, would include the distributor selling it for $1.50 to a fruit stand, which then sells it to a customer for $3, totaling $5.50. Adding in labor contractors and trucking costs, it could factor out to $6.30 for that peach. 

"That is how we get the big sales number," Sumner explained in an email. 

The report also reveals the geographic reach of agriculture. Agricultural processing, which topped the sales income category, at $113 billion, also generated $30 billion in sales and 63,000 jobs in the Los Angeles and Orange County region, while the Bay Area accounted for $25 billion and 58,000 jobs from processing.

“We wouldn't want (processors) on farmland,” explained Humiston. “We want them in cities, near highways and railroads and where there's water treatment and sewers. That's where they belong.”

She said the report could help in creating urban-rural partnerships and policymaking for agriculture. Humiston timed the release of the report to coincide with the California Economic Summit on Nov. 7, in order to get it “in front of the economic development professionals, the finance world, the elected officials, the urban public – a lot of interest groups who don't always see this kind of message,” she said. Humiston and ANR were active in several work groups ahead of the summit as well.

CDFA Secretary Karen Ross has also been seeking out such economic studies on agriculture.

“It is gratifying to see such a comprehensive study,” she said in a prepared statement. “It’s much more than just agricultural production – it’s the full range of products, services and jobs, and it all starts with dedicated stewardship of lands that sustain us.”

Earlier this year, Ross worked with state legislators on a bill that would have enabled CDFA to study and report on the role of agriculture in rural economies. That would have included calculating the economic impact of the Sustainable Groundwater Management Act as agencies begin to implement plans next year. Already, agricultural land values have changed dramatically in anticipation of the regulation. Yet in October, Governor Gavin Newsom vetoed the bill, suggesting in his veto message he may instead include a position for an economist with these responsibilities in the next budget.

The report also falls on the heels of another economic study Ross helped bring to fruition, which sheds light on how the industry will fare over the next three decades.

For Humiston, ANR’s Working Landscape report is also a valuable messaging tool for farmers to use with their contacts outside of agriculture.

“If people start understanding the importance of working landscapes to the state's economy,” she said, “I have to hope we're going to get folks willing to invest in it much more than they have in the past.”