Eight years ago, I started digging out a sub-mainline in a walnut orchard. It was my first day in agriculture. I did not grow up in ag. I knew nothing about it. I had no knowledge about the many complexities agricultural industries face at every turn.
We have water problems, regulation problems, pest problems, market problems, shipping problems, retail problems, commodity board problems, and the list can continue. Each challenge gave me anxiety about the future of farming. This manifested itself in anger, which was only a mask for the real problem, my fear. I thrust myself into the diminishing cacophony of thinking I was losing control. Control was an illusion and I shoved the responsibility onto the next person.
Then a powerful thought struck me: It is not “their” fault.
It’s mine.
The California walnut industry faces an unprecedented supply challenge. To rectify course, we should admit the fault is ours alone. All of us — growers, handlers, the board of directors (BOD) of the California Walnut Board and Commission — played a role in the situation we now face and the herculean task of its recovery. The problems, and their solutions, lie at our feet. We should change tactics, mobilize, think outside the box, and get involved in this process.
What follows are 12 steps for a walnut recovery program. It is a call to action.
Step 1: Admit Inaction is the Main Cause of the Problem and the Only Viable Solution Forward is Our Collective Participation and Unity
We have asked others to fix the problems of the day without participating in the solutions of tomorrow. We have abdicated responsibility to demand better from handlers, from the BOD of the board and commission, and from ourselves. If this step is not taken, none of the other steps matter. We must band together and solve the problem together.
Step 2: Create a New, Large-scale, Grower-centric, Grower-governed Walnut Cooperative
What is needed to balance the walnut industry in the free market is a large-scale cooperative run by growers, investing around the world on behalf of growers, and returning profits to growers. As one person said recently, for a co-op to have success it must have market dominance. We should not avoid the conversation because of the failures to create or maintain such a model in the past. There is a proven cooperative in the almond industry that innovates, opens new markets, enhances grower production and quality, and forces the hand of other privately owned industry members to do better for growers at home and customers in the marketplace abroad.
Step 3: Oversupply, not Market Expansion, Should Come First; Short-term Solutions with Focus and Assistance to Save Family Farms is Paramount
Forceful, persuasive, and passion-filled appeals were made at one of the last meetings for and against a tree pull program. My simple observation and perception of what took place was this: Those for the program were next-generation, grower-only, smaller family farms who need relief now. Those against the program were vertically integrated, diversified, highly capitalized operations who can weather the storm.
“Let the free market take its course,” those against the program said repeatedly. If we do, many will be forced out of business, while the others directly benefit from family farms going under. A strong and concentrated focus on small growers who are struggling must be primary.
Step 4: Ensuring Quality Reaches Our Customers and Consumers is Vital
When I was at the meeting recently where the tree pull program was nixed, a grower stood up and said something profound: “We don’t need a tree pull program, we need a handler pull program.” Quality is king. But it must get to our customers and consumers. There are too many middlemen buyers, sellers, and brokers in the marketplace who have dominated our supply chain, destroyed our ability to maintain quality to our end consumers, and who take grower and handler margin in the process.
At bottom, growers should ensure all who touch their product:
- Have proper handling and storage requirements, especially capacity for cold storage or access to cold storage
- Have robust international marketing programs and presence that ensure quality is being controlled and tracked as far as possible to end users
- Somehow support their handlers to exclude and/or disincentivize middleman transactions to buyers, sellers, and brokers who year after year depress market pricing and quality
Those who market product should be willing to provide growers a list of buyers they are selling to, how they maintained grower quality, why that transaction took place, and if it was in the best interest of the grower and the industry. Producers should be willing to grow the best product possible or leave it lay. If growers are not asking those who market their product to show such results and have such simple checks and balances, it may be time to return to Step 1.
Step 5: Grower-only Members Should Hold Grower-only Seats
Because a handler also maintains a status as a grower, that individual may innately have a conflicted and vested interest which does not meet the spirit or intent of the walnut Federal Marketing Order. This should be challenged by our vote primarily, and if necessary, by lobbying the USDA for a clarification, ruling, and enforcement.
Step 6: Seat Board and Commission Members Who Do Not Have Conflicted Interests
This is happening now more than ever, and it must continue. If we are still under the illusion the BOD of the board and commission have failed us, we need to return to Step 1. To move forward we should involve ourselves at a deeper level with running for seats. We should cast our vote to seat members who are truly representative of the industry and primarily have the best interests of this industry at heart. We should seat members who, even in the face of losing their own share, will vote to do what is best for everyone. To be sure, some seated members now have a strong resolve to do this, and they cast their votes accordingly.
Step 7: Decrease Supply, Save Money, and Increase Returns by Not Harvesting
“Harvest the 2023 crop,” we heard repeatedly. “You’ll get 65 cents.”
Like many growers, I sometimes fail to realize the real problem. We are producing an 823-thousand-ton crop with conservatively only 500-600 thousand tons of demand (at cost of production or higher). Growers should remember many handlers have made large capital investments in facilities and are challenged to move large quantities of product. These facilities require huge throughput to make the bank payment. As a result, many have a vested interest for volume just to stay afloat in these conditions.
This is only one example of what influences are guiding and directing the votes being cast. The implications are clear, and the decision is ours whether we fully harvest the 2024 crop or do it all over again.
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Step 7 Expanded
It must be stated clearly that we are moving the right direction with our current board and commission staff and leadership. Robert Verloop and his growing team of staff are undoubtedly creating the context and conversation that is needed to impact lasting change in the industry. Robert rightly confirmed publicly that recovery back to healthy returns could take 3-5 years.
Are growers on the financial lifeline able to wait that long?
This is a question each must answer on their own. Regardless, we must get involved in the conversation, one that is happening now. I want to return to the idea of temporarily reducing supply by saving money, not harvesting, and destroying crop.
One of the most important and powerful free market axioms to oversupply is temporarily cutting production in the short term. It’s cheaper, quicker, more important, and vastly more impactful to the whole system than building demand. If we wait 3-5 years, those who built this industry and are struggling the most will have already lost.
Here is a model I think should be considered, discussed, sharpened, improved, and implemented as soon as possible.
A program could be created now to temporarily reduce the supply by shaking and destroying crop. Here are a few examples of how such a program could function.
- Handlers willing to prove their willingness for the program below will be prioritized by growers coming to their facilities and remunerated with product throughput.
- All grower-only producers under 200 acres would be required to cut production and destroy crop by 10%.
- All grower-only producers with 200 acres or more would shake and destroy 15%.
- Grower-only operations who have other means of revenue outside of the walnut industry who do not fall under the definition of farm operator would be responsible for shaking and destroying 25% of their crop.
- If a vertically integrated handler-grower has 500+ acres of production, the handler-grower would cut 50% of their production. Hulling, drying, processing, and marketing business segments will keep the production side of these businesses afloat in the interim.
- Any non-grower handler would operate solely at the cost of handling product and return any profit straight back to the grower.
Such a program, though admittedly inadequate as written and sure to be highly controversial, could take anywhere from 100-300 thousand tons off the market immediately, depending on parameters and implementation, thereby triggering a price correction and industry profitability. It is instant relief to those in most need now. It allows operators with alternate sources of revenue to help carry the load.
How do we manage and oversee such a program? Here are a few options as a starting point for the industry to consider:
- A program of verification and enforcement could be created and implemented by the California Walnut Board and Commission.
- The board and commission could start a new working group comprised of representative groups described above to run it and be responsible for monitoring and verification.
- The committee will also sit outside, specialized economists to hone the numbers, timeline, and parameters of the endeavor.
- The program should run as long as it takes to open new and exploratory markets, likely a minimum of five years. This would incentivize the industry to do their best job fast and stop the bleeding for growers on cash flow life support.
- In the process of implementation, we meter back up the percentages each group is allowed to harvest, with a keen eye on price stability and grower profitability.
Simple, right? Hardly.
To say a program like this will be difficult in formation, implementation, and verification is an understatement. However, this is doable, only if we get involved and demand better of ourselves.
Many will surely not only balk at such a recovery program, but will also be enraged at such preposterous nonsense. This anger, in my experience, is driven by a fear of losing whatever illusion of control we think we hold.
Can we run, vote, show up, get involved, and work together? Can we think outside of the box and provide relief for those losing their farms now? I leave that to you.
Humility in admitting fault, courage to stand up and get involved, and selflessness in doing what is good, right, and needed is — as I see it — the only way forward.
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Step 8: Expose Any Organization or Individual Engaged in Price Fixing by Seeking USDA Involvement
If such activities continue, USDA involvement should be sought to investigate. If individuals are still willing to show up to these meetings prior to the 2024 harvest, they should be also willing to have USDA present. If anything should be left to the free market, it’s price.
Step 9: End Any Program Giving Our Trade Secrets to the Rest of the World
That we have enabled, taught, demonstrated, and otherwise freely offered our competitors grower-funded research and results about how to grow walnuts is crazy. It is intensely ironic that the advocates of “allowing the free market to take its course” have offered our competitive advantage to the rest of the world to use against us. Our market share diminishment is of our own making, fueled by unchecked philosophies and grower dollars, and driven by carelessness.
Step 10: Hold Accountable Big Retail for Price Gouging the U.S. Consumer and Bankrupting the American Farmer
If we think we are going to build domestic demand, not solve the Big Retail problem, and give healthy returns to growers, we are living in that profound illusion I spoke of earlier. What is needed minimally is what some have dubbed the Costco Principle: Big Retail should agree to only mark up a certain percentage beyond the cost of what they bought it for, pass on the savings to our consumers, and return healthy margins to producers and handlers in the process.
Step 11: Increasing Our Domestic Demand Must Be Undergirded by Real and Robust Environmental Principles and Practiced at Every Level of the Supply Chain, Starting Primarily on the Farm
This is fundamental for long-term growth in the marketplace and our ability to farm in California. We will not be able to build demand with the U.S. consumer and continue to operate in California without being sustainable as the U.S. consumer and the State of California understands it.
Step 12: The Next Generation Should Be Trusted, Equipped, and Incentivized to Usher Society into a New Era of American Agriculture; Those Who Came Before Should Humbly Empower Us
We need your wisdom, your experience, your trust, and even your capital. There will come a day when you must step aside. The choice is: How will you help our generation, or how will you cripple it?
The challenges we face should be met with new, powerful, innovative thoughts and adaptation. Young leaders like Ashley McKenzie, Craig Knight, Sean Sullivan, Jack Vickrey, Davin Norene, Brian Mori, and many others are leading the charge and should be empowered. By and large, these men and women hold the key to a door that you may be standing in front of.
Please know your limitations, show us ours, and teach us. Show us our blind spots, which only your experience and acumen can freely give. Come alongside us, let us unlock the door of the ag of the future as we walk though it together.
Rory Crowley has a background in California almond and walnut production in Chico, California. The views and opinions expressed in this article are his and in no way represent the publisher, allied educational institutions, past or present places of employment, their affiliates, board members, clients, customers, executive leadership, or employees.
Photos: Matt Hannon, Modern Ag Media
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