Vegetables and melons are an important part of the Arizona agricultural economy. While a common way of assessing the size of an industry is the value of its cash receipts, receipts do not fully capture the economic contributions of vegetables and melons to the state economy. There is a cluster of other industries that perform post-harvest activities, ensuring high-quality produce reaches consumers. The perishable nature of these products requires coordination between industries and logistical efficiency. Estimating vegetable and melon’s contribution to the Arizona economy warrants an examination of the whole value chain—the vegetable and melon industry cluster. This cluster includes farming, packing, cooling, storing, processing, trucking, and wholesaling operations.
In addition to the industry cluster’s direct effects on the Arizona economy, a “ripple” of economic activity is stimulated in other Arizona industries to meet the demand for inputs by producers and the demand for consumer goods and services by households. Economists call these the indirect and induced multiplier effects.
- Indirect effects measure the economic activity generated by the vegetable and melon industry cluster’s demand for inputs. These effects occur in industries such as the agricultural support, fertilizer, electric- ity, banking, and farm machinery industries.
- Induced effects measure the economic activity generated by house- holds employed by the vegetable and melon industry cluster spending their earnings at Arizona businesses. These effects occur in industries that provide goods and services to households, such as the real estate, healthcare, retail, and restaurant industries.
This study conducts an economic contribution analysis for the 2014 production year that estimates the direct, indirect, and induced effects of this larger vegetable and melon industry cluster on the Arizona economy.
The study also estimates the cluster’s labor requirements. Labor costs and availability are of great concern to vegetable and melon producers. Labor costs as a share of total production expenses are nearly double those in the rest of Arizona agriculture. Operators must recruit a labor force that is largely immigrant, mobile, and seasonal, with sharp peaks in labor demand. The number of workers employed on vegetable and melon operations is of interest because of fears that farm labor shortages could reduce the state’s production of these high-value crops.
Several challenges arise in attempting to measure the Arizona vegetable and melon work force.
- There is no one single source of data on U.S. hired farm labor and there are no sources that report comprehensive data on labor employed in vegetable and melon production.
- While agencies report the number of farm jobs, they do not report the number of individual workers filling those jobs. This presents a problem of defining what constitutes “a job.” For example, if one per- son works at three jobs lasting three months each and is unemployed for three months, is this three jobs or ¾ of a job? Some previous labor studies have estimated the number of full-time equivalent jobs (FTEs) based on hours worked.
- This FTE approach has its own problems, though. Studies from California have found that there were an average of two unique workers employed for every full-time equivalent job. Measuring labor in FTEs also obscures sharp monthly fluctuations in labor demands. To better account for these fluctuations, this study estimated the number of hours of work employed on-farm per month in Arizona vegetable and melon production.
Findings
Economic contribution
- In 2014, the vegetable and melon industry cluster contributed to nearly $1.9 billion in sales to the Arizona economy. This is considerably larger than the $727 million in direct revenues from on-farm production activities. The industry cluster’s total contribution to Arizona’s gross state product (GSP) was $946 million. This included approximately $745 million in wages, salaries, and proprietor income. The total state/ local tax contribution attributable to the vegetable and melon industry cluster (including multiplier effects) was $59.2 million in 2014.
- In 2015, the vegetable and melon industry cluster contributed to more than $2.5 billion in sales to the Arizona economy and contributed $1.4 billion to state GSP. This included nearly $1.2 billion in wages, salaries, and proprietor income.
Employment
- In 2014, Arizona vegetable and melon production required more than 26.7 million hours of hired on-farm labor. This included directly hired, contract, and other agricultural support service workers employed on- farm. Monthly labor demand fluctuated from lows of less than 1.5 mil- lion hours in slack months to highs above 3.5 million hours per month in peak winter months.
- There were more than 17,700 full- and part-time jobs directly and indirectly supported by the vegetable and melon industry cluster in Arizona on an annualized basis. Nearly 70% of these jobs were direct, on-farm jobs, which included farm proprietor jobs, directly hired farm labor, and agricultural support service workers (usually hired through farm labor contractors). Other jobs supported were in post-harvest industries, in industries that provide inputs to the cluster, and in industries that provide consumer goods and services to workers and proprietors in the cluster.
- The number of unique farm workers employed in vegetable and melon production is far greater than the number of full-time equivalent jobs. There are more than 2,900 unpaid (family) workers on vegetable and melon farms. Recent research from California found an average of two unique farm workers reported for each year-round equivalent farm job. Assuming this relationship holds for Arizona—with similar production systems—and including unpaid family workers, this suggests there are more than 31,400 individuals working in jobs directly or indirectly supported by the Arizona vegetable and melon industry cluster.
Industry structure
- The vegetable and melon industry cluster is a highly integrated system comprised of industries working in tandem to get fresh and processed products to consumers—vegetable and melon farming, refrigerated warehousing, processing, wholesaling, and trucking. Businesses involved in this process can operate independently, conducting only one activity in the value chain, or they can be vertically integrated, serving many roles along the value chain.
- Vegetables and melons consistently rank in the top three agricultural commodities produced in the state. Arizona ranked second in the nation among states in vegetable and melon production by weight, third by value of production, and third by area harvested in 2014. Arizona ranked second in the nation for production of broccoli, cantaloupe, honeydew, spinach, and head, leaf, and Romaine lettuce in 2014.
- Arizona vegetable and melon production has a dual structure, with many small-scale and hobby producers and a small number of large producers. In Arizona, 96% of vegetable and melon sales come from 4% of farms.
- A majority of the state’s production of vegetables and melons occurs in Yuma and Maricopa Counties, accounting for 76% and 13% of state vegetable and melon sales, respectively. While most production occurs in western and central Arizona, most of Arizona’s farms with sales of vegetables and melons are located in northeast Arizona. These are primarily small-scale producers.
- Also, according to the Census, Yuma County was in the top 0.1% of vegetable and melon sales among all counties growing these crops, while Maricopa County was in the top 1%.
- The dominant forms of organization of Arizona vegetable and melon farms are family-based operations and partnerships. Family/individual operations and partnerships accounted for 55% of sales, while family held corporations accounted for another 34% of sales. Non-family held corporations accounted for just 10% of Arizona vegetable and melons sales.
Methods
The economic contribution analysis was conducted using input-output modeling and the premiere software for this types of analysis, IMPLAN Version 3.1. IMPLAN is a modeling system of a regional economy that is based on national averages of production conditions. This model is a snapshot of economic activity in 2014. It was refined based on best available, recent data to more accurately reflect economic conditions and agricultural practices in Arizona. • Additional model customizations were conducted to parse out the estimated economic activity in cluster industries that is attributable to Arizona-produced vegetables and melons.
The contributions of the vegetable and melon industry cluster to the Ari- zona economy in 2014 were modeled in IMPLAN and measured through the following metrics: sales, value added (also known as gross state product—GSP), labor income, and state and local taxes. Finally, the study also presents improved estimates of the industry’s demand for labor and its overall contribution to state employment.
Estimates of directly hired farm labor employed in vegetable and melon production were obtained from the U.S. Labor Department’s Quarterly Census of Employment and Wages (QCEW). Most on-farm labor employed on Arizona vegetable and melon operations, however, are hired through farm labor contractors. Estimates of contract (and other agricultural support service) jobs do not provide separate estimates for jobs in vegetable and melon production. Research findings on per acre labor requirements and data on acreage by crop were used to estimate the percentage of total agricultural service jobs in vegetable and melon production. Data on wages paid to agricultural workers from the QCEW and average wage rates paid from the Department of Agriculture were combined to develop estimates of hours of work in vegetable production by month.
Year-to-year changes in vegetable and melon prices and production can be quite large. This can lead to estimates of economic contributions that vary significantly from one year to the next. When this project was initiated, 2014 was the most recent year of data available for Arizona economy-wide modeling. Vegetable and melon revenues in 2014, however, were at their lowest level in 20 years in 2014. Vegetable and melon sales in 2015 more closely matched the long-term trend line for sales. Price increases between the two years was by far the biggest contributor to the increase in sales revenue. Applying newly available 2015 vegetable and melon sales data to the 2014 IMPLAN model, simulations were conducted to measure the direct, indirect, and induced effect contributions of these higher prices (see Addendum).