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September 17, 2020

Monterey County agriculture sets off ripples through local economy, report shows

MONTEREY COUNTY — The role of agriculture and the resulting monetary ripples through the economy was the subject of a recent analysis conducted by the Monterey County Agricultural Commissioner’s Office.

Titled “Economic Contributions of Monterey County Agriculture,” the report was published in June 2020 based on 2018 data.

The data presented went further than the $4.3 billion reported in Monterey County’s annual Crop Report, also published in June, which evaluated the value of crops produced in the county during 2019. While total crop sales amounted to a few billion, there were more, further-reaching ripples caused by the generation of those agricultural products.

“In 2018, agriculture contributed a total of $11.7 billion to the county economy,” said Henry Gonzales, Monterey County’s agricultural commissioner, in the opening of the report. “This far exceeded the $4.3 billion figure from our 2018 Crop Report.”

Gonzales noted the 2018 data marks a 43.6% increase from the $8.1 billion from a similar report published in 2015.

By taking into account agriculture’s total economic contributions, the report documented “agriculture’s broader role in sustaining a thriving local economy,” according to Gonzales. The report evaluated production, local processing, employment and economic multiplier effects.

One opening figure was the 57,503 direct employees in Monterey County agriculture, which represents 22.8% of the county’s employment, or more than one out of every five jobs. Those workers earn money and tend to spend their money within the county, which is the first consideration how agriculture sends ripples to surrounding businesses.

In total, agriculture’s contribution of $11.7 billion in Monterey County is composed of $7.4 billion in direct economic output and $4.3 billion in multiplier effects. There was also an added $4.7 billion to $10.9 billion per year in ecosystem services, which were explained in the latter portion of the report as they were more difficult to quantify.

Agriculture represented a contribution of 63,921 total jobs, with 57,503 of those being direct employees and an additional 6,417 jobs from multiplier effects, such as expenditures by agricultural companies and their employees.

Direct effects were described as being from production and employment of agriculture employees. From there, measuring the ripples in the local economy took two forms: indirect effects and induced effects. Indirect effects are business-to-business supplier purchases, such as when a grower buys farm equipment, fertilizer, seed, insurance or banking services. Induced effects are the result of consumption spending by owners and employees, such as when they buy groceries, housing, healthcare or leisure activities.

“All of this spending creates ripples in the local economy,” the report said.

The evaluation of how agriculture employees spend their money was broken down as: “Each dollar’s worth of direct output generated an extra 40 cents in supplier purchases, plus 26 cents more in consumption spending by owners and employees of agricultural businesses and their suppliers.”

The report added, “Despite many long-distance commuters, most agricultural employees live in Monterey County and spend their money there.”

Food processing was also evaluated as one of the ripples of agriculture. Monterey County is home to several food processors that play a key role in the local economy. Many processing facilities would not operate in Monterey County were it not for the abundant supply of fruits, vegetables and other raw agricultural products.

The report did not include the $516.4 million in spices, bread, tortillas, pastries, ice, soft drinks, tea, coffee and related food items that supported an estimated 1,747 jobs, as it explained adding these sectors could overstate the value of local agriculture, including its employment and multipliers.

Nor did the report factor in wine grape production because it is included in Farm Production, and only calculated the dollar value that wineries add to wine grapes by producing wine. The same applied to leafy greens and other vegetables that undergo light processing into value-added products.

Processing accounted for $3.821 billion in total economic output, which consisted of $2.545 billion and 30,210 jobs in direct output and $1.276 billion and 1,229 jobs in multiplier effects. Processing includes making local produce into frozen products, canning, jarring, dried packages, roasted nuts, brewing, dairy processing, packaged products and a small amount of meat processing.

“The overwhelming majority of the county’s cattle go to auction, then leave the county for finishing and processing at Harris Ranch and other locations outside the county,” the report said. “California’s only USDA-inspected mobile harvest unit is based 10 miles outside the county, in Paso Robles, and can serve local ranchers.”

The report acknowledged that the county’s many farmers’ markets offer a direct outlet for niche agricultural products.

The total effect of the evaluated totals amounted to more than $31 million per day injected into the county economy during 2018.

Downward trends in multiplier employment were attributed partially to “century-long trends toward increased globalization and mechanization.”

The county’s resilience toward economic shock, usually caused by risks such as droughts, floods, pests, diseases and food safety-related outbreaks, was attributed to the diversification of the county’s production.

“The more diversified a local economy is, the better it protects economic growth and employment during economic shocks,” the report continued. “Over the past decade, Monterey County has consistently produced 35 major commodities.”

The report also went over ecosystem services from agricultural lands. Beyond producing crops to be sold, growers provide open space and wildlife habitat, as well as the land becoming carbon storage and wildfire buffers. It acknowledged they are hard to quantify, but that the effects do exist and benefit the economy. One obvious way this can be seen is tourists who come to the area not only for parks, but also agricultural landscapes.

Estimation ranges were explained and with those in place with a per-acre estimate, the county’s agricultural land was evaluated to contribute a benefit of between $4.7 billion and $10.9 billion in ecosystem services.

“Agriculture is an important pillar of the Monterey County economy and represents a vital link to both the county’s cultural past and competitive future,” the report concluded.

Sean Roney
Sean Roney
Sean Roney is the reporter for King City Rustler and Salinas Valley Tribune, a unified publication of Greenfield News, Soledad Bee and Gonzales Tribune. He covers education, government and general news for the Salinas Valley communities in South Monterey County.

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