The Real Economic Value of California Agriculture

California is experiencing one of its worst droughts. This year marks the fourth year of the drought, and people all over the state are talking about water conservation. One industry is vilified over and over. It’s the industry that uses 80 percent of the state’s water supply. It is also the industry that supplies the nation with food. 

A number of articles have mentioned that agriculture is only two percent of California’s economic activity. What that figure does not take into account is the multiplier effect of California’s agricultural sector. The state produces almost half of domestically grown fruit, nuts and vegetables. California leads the nation in value of agricultural products.

If one only considers agriculture in a narrow definition, then the value is lower. However, when related industries are included in the definition of agricultural, such as food processing, the value increases. Or as California State University, Fresno professor Mechel Paggi, Ph.D. stated in a 2011 paper, agriculture is an industry that has a “significant effect on the state’s economy.”

California has the largest agricultural sector in the U.S. Three California counties (Fresno, Tulare, and Monterey) are the top three counties in the country for agricultural products sold. Nearly all of the domestically grown grapes and almonds are grown in California, and over three-quarters of the strawberries and lettuce hail from the golden state.

California’s agriculture industry has a global impact. The value of California’s exports accounted for $21.24 billion in value in 2013. California’s agriculture ranks between fifth and ninth globally, and is ahead of Canada and Mexico, making it one of the top 10 global economies. 

The regional impact of California’s agriculture industry

Agriculture plays a much greater role in the eight counties of the San Joaquin Valley than it does in the rest of the state. Considering all of the multiplier effects of agricultural production and processing industries in the region, agriculture in the San Joaquin Valley accounts for 34.7 percent of regional employment, nearly 31 percent of regional labor income, and 31 percent of regional total value added. 

Southern California is a region not known for agriculture, but the area does have an agriculture industry. A 2012 paper by University of California, Davis puts the area’s gross regional product is about $1 trillion while its farm gross revenue is over $9 billion. However, Southern California’s agriculture industry, which includes food processing, produced $48 billion in sales in 2010.  

Considering the multiplier effect, Southern California’s agriculture industry generates about 450,000 jobs, $25 billion in labor income and $42 billion in value added to the local economy. Every job created within the area’s agricultural industry creates 2.7 jobs and each dollar of value added creates $2.3 of economy value. If Southern California’s agricultural industry is reduced by 10 percent, it would reduce state and local tax revenues by nearly $400 million, mainly from the food processing industry.

Photo: Ivan Sohrakoff