A common acceptable system of land classification would do much to facilitate communication among participants involved in future agricultural land-use decisions, including that of conserving prime farmlands . A longer-term concern may well be the increasing irritation between farming and urban life at the rural fringe of urban neighborhoods—“rururbia” —in terms of air quality , noise, and incompatible activities, such as crop dusting at 4:30 a.m. or 24-hour operation of a tractor. “Freedom to Farm” ordinances have increased community understanding of issues, and so far both sides have learned to adjust and will likely continue to do so. However, if, as projected, California’s population approaches 60 million by 2040, resource competition can only increase and rural-urban conflicts may need to be further mediated by public policy. Land-conversion pressures, once thought to apply only to lands in the two major urban areas, the Los Angeles basin and the San Francisco Bay Area, now confront Central Valley inhabitants in interior cities and smaller towns alike.Some journalists argue that the water issue will soon be moot because global competition will wipe out California agriculture, leaving the state swimming in water surpluses. There is no doubt that further liberalization of trade, coupled with free flows of capital and technology, will continue to change competitive conditions in markets where California agriculture competes. And yes, no doubt there will be commodities that California agriculture will no longer be able to afford to produce even though it once had a comparative advantage in their production. But, as before, there will also be new, emerging market opportunities where California will out-compete and dominate. Much is heard of slogans like “prices are global, costs are local,” “cheap labor will kill us,”plastic planting pots and “we can’t compete with unregulated foreign agriculture.” Surely our historical analysis strongly suggests that California has always faced “low-cost” competition in distant markets and has, in general, made appropriate adjustments to remain economically viable.

Successful California producers have delivered quality and reliability of supply as well as quantity of product. These are additional arguments for production and marketing success, especially in markets where a few larger buyers dominate. Success is less achievable for producers of standardized, homogeneous commodities and more attainable for demand-driven production of specialized, designer, or niche products. Focusing on and isolating the cost of a particular factor of production is not particularly useful. Factor substitution, constantly improving productivity, differentiable products, product quality, and supply reliability also merit attention when discussing comparative market opportunity. Otherwise, this history would be that of a less profitable, land-based field crop and extensive livestock “commodity-oriented” agricultural industry more akin to that of the U.S. heartland. While it is true that reducing trade barriers gives others better access to California markets, it also gives California better access to theirs, and some of those markets, such as China and India, are huge. Retreating behind U.S. and/or California trade barriers is an even worse alternative. In 2000 California exported more than a quarter of the value of its output, and the share has generally been growing. So far, at least, for every foreign market where we have lost share, there have been others where we have gained. The most powerful, positive argument in favor of the value of freely functioning global product and financial markets is that it levels the playing field and lets California agriculture compete in a rapidly growing global market. The potential magnitude of international markets is addressed in the next section.California agriculture prospered in the 1920s because California population and income were growing rapidly and California agriculture was shifting to produce commodities in which consumption increased as incomes rose. The same story, on a national scale, played out in the 1950s and 1960s as both California and U.S. populations and incomes grew. International demand resulting from rising incomes in developed industrialized countries had positive impacts in the last third of the 20th Century. But, argue the doomsayers, population growth has slowed or is even reversing in some regions , and this population stagnation has been paralleled by slower economic growth rates. Finally, increases in demand for fruit and vegetables begin to slow as incomes continue to rise. Thus, a gloomy scenario can be easily painted, describing a “sky is falling” fear of collapsing market growth for California’s high-valued crops and animal products.

But every coin has a flip side. All of the above, of course, are true but only in regard to potentially diminishing parts of future global-market opportunities. Population growth in developing countries, while declining, is still substantial. The world’s population, now slightly more than 6 billion, will approach 9 billion by 2050 .Whereas in 1975, when 75 percent of the world’s population lived in developing countries, it will have reached 86 percent by 2025. Further, in a significant sample of developing countries, economic growth rates consistently exceeded those of rich countries . Finally, these emerging middle-income countries are just approaching income levels where the demand for livestock products, fruit, nuts, and vegetables will increase rapidly. The growth in demand for the products California agriculture produces could be spectacular. Think what the potential could be of just a small share of the food purchases of 1.3 billion Chinese and 1.6 billion Indians approaching middle-income levels. While we may see China as a competitive threat today, it is also likely that Chinese agriculture will not, simultaneously, be able to meet their growing demand for grains, livestock products, and horticultural products. It is even possible that, in another 50 years, Africa, with a population exceeding 1.2 billion, will be a commercial market. Thus, relative to U.S. agriculture, California agriculture is well placed and should be able to compete in growing markets in developing countries. On balance, the “threat” may well be an “opportunity.” Finally, we should note that, despite a pattern of slow growth in population in other developed countries, population in the United States is projected to increase 38 percent by 2040 and California is projected to grow by 70 percent. So, domestic demand growth will not die; one in six U.S. residents will be a nearby California resident.Many of the historical drivers for development of U.S. agriculture stemmed from early federal and state support of research, education, and cooperative extension through land-grant universities. Three times over the past 50 years there have been substantial reductions in state support for agricultural research and extension—the early 1970s, early 1990s, and early 2000s. Agricultural technologies were relatively unencumbered by proprietary claim and freely available to all until the 1980s . Public research and development funding exceeded private R&D funding in the United States until 1980. From 1980 to 1998, public funding increased nominally by only 13 percent while private R&D funding increased at a significantly faster rate, by 43 percent. Shares of total U.S. funding in 1998 were 57 percent from private sources and 43 percent from public sources . Despite the fact that nominal public expenditures in California for agricultural research and extension increased through the late 1990s, real total expenditures peaked a decade earlier and have since fallen . Recent state cuts to funding for research and extension may never be restored and certainly will not return in the near future.

The principle reason for increased total investments in agricultural research is developments in molecular biology that, coupled with intellectual property protection for agricultural products, have given powerful incentives for increased private-sector investment in agricultural research. Thus, while we identified public sector R&D as an important driver in the past, it is likely that private investment,plastic grow pots plus the enormous potential of biotechnology to reduce costs, stabilize yields, and increase quality, will mitigate to a considerable extent the negative impact of declining public support. The one dark cloud on the horizon is the strong public reaction against genetically modified organisms in important European and Japanese export markets. On the other hand, rapid adoption of GMOs in a growing number of countries, plus a lack of substantive evidence so far about increased risk resulting from their use, may render some of the negative concerns less important with the passage of time.We now speculate on how important the identified drivers might be in the 21st Century relative to their influence in the last half of the 20th Century . Post WWII agricultural development was associated with the generally positive alignment of dominant drivers. Our assessment—our possible prognosis of 21st Century California agriculture—contains some deterioration in factors supporting the industry relative to the recent past. Our evaluations are summarized in the “Future” column of Table 14. We posit that the mix of drivers continues to be important to the future of the industry. But changes in the quantity or quality of ingredients in the mix will also be an important influence on future structure and performance. The overall mix determining 21st Century outcomes will trigger change and adjustment to emerging realities. We evaluate changes in the impact of most of the drivers in the first five major categories to future outcomes, taken as a whole, to be relatively small. We indicate that most drivers will continue to make significant contributions to California agriculture similar to those most recently occurring in the late 20th Century. However, we also regard seven of the 20 drivers as having critical, adverse impacts because of an expected deterioration in their contributions to California’s agriculture. Four of the first 16 drivers in the major categories were downgraded relative to our previous assessment through the 20th Century. Less favorable environments are likely due to an absence of water-development initiatives , heightened concerns about access to capital and labor , and lessening importance of cooperatives and marketing boards . Adverse effects of changes in drivers are identified in the final two categories , reflecting likely changes in public investments. A decline in public investments in infrastructure and in public research, education, and extension , expanding impacts of regulation , and intense competition for resources will continue at currently heightened levels. We next discuss each of the seven major categories of drivers in turn.Competition for a finite and often highly variable supply of water will increase from urban and environmental demands. The three historical periods were characterized by significant water developments—by gravity systems of surface-water irrigation after the Gold Rush , growing groundwater extraction made possible by the invention of the centrifugal irrigation pump , and public investments in multipurpose reservoirs and irrigation systems, including the CVP and the SVP . We are unable to visualize water-supply developments of comparable significance in the 21st Century, save for the possibility of a breakthrough in ocean-water desalinization, which might contribute to meeting rising urban demands in southern coastal areas and thus lessen the degree of competition for water currently applied in agricultural uses. In the absence of such advances, water-market transfers, water banks, institutional sharing arrangements for variable water-supply conditions, and conjunctive management of groundwater basins will likely be the hallmarks of efficient management of the state’s limited yield from existent ground and surface water sources.Early growth and development was fostered by adapting imported biological materials to California production conditions. Major industries developed throughout the 20th Century based on imported germ plasms and animals, augmented by varietal selection and genetic improvements, to match local growing environs. The flow of new products continues, meeting the many economic demands of growing ethnic populations in the United States and consumers worldwide. New biotechnological advances have already provided improvements for field crops, reducing chemical inputs and increasing custom characteristics of feed and industrial products. Coequal application to food products has not received strong approval by domestic and foreign consumers. Nonetheless, biological technological advance is seen as a continuing strong driver of California agriculture in the 21st Century, particularly if improvements move from the current focus on field crops to advances for specialty crops, where the introduction of bio-engineered resistance could be important in offsetting the current lack of approved materials for smaller acreages of horticultural crops.California agriculture has a strong history of both adapting and developing new, innovative mechanical technologies to meet the requirements of Mediterranean type agriculture .