Tariffs, Aging Farmers and This Year’s Farm Bill: Local growers weigh in

Between an escalating trade war with China, new farm bill legislation, and the ever-present challenge of automation, the agriculture industry is currently in a state of flux. To get a better sense of how pronounced these challenges are – and what they mean for agriculture on both a local and national scale – TCBN spoke with three local farmers: Mark Santucci of Santucci Farm; Isaiah Wunsch of Wunsch Farms; and Don Gregory of Cherry Bay Orchards.

The tariffs recently imposed on China are a big deal for a lot of industries, especially with the increasing costs of steel and aluminum. What impact do you see these tariffs having on your farming operations and on the United States farming industry as a whole?

Santucci: The first year, there’s going to be very little impact. The crop in the southern hemisphere is just being harvested, so they’re not even going to have anything to harvest until next spring, which is fall their time. The crop in the northern hemisphere … I don’t think you’re going to see a big change in what people are planting. The only impact it’s going to have in the first year is on the margins. After that, it’s a different story.

The one thing I’ve come to realize over the years is that we as a world can grow a lot more than we’re growing. We always think about famine and not having enough, but that’s not really true. It’s all about price. If you can grow it and be profitable, there’s a lot more land to grow a lot more crops. But people aren’t going to do it if they’re not going to make money doing it.

So we’ll just have to wait to see what these tariffs do. The tariffs we’re putting on the Chinese don’t even go into effect for another five or six months, and their tariffs aren’t going to go into effect with us for a period of time either.

Wunsch: We’ll have a direct impact. We import deer fencing material directly from a manufacturer in China, so we’re facing a straight 25 percent increase in raw material costs for controlling the deer population.

We are somewhat unique for this area in that most of what we grow are fresh cherries and fresh apples. About a third of the national crop of cherries and 15 percent of the national crop of apples are exported to China. China is the country’s biggest export market for fresh cherries, and one of our top five export destinations for apples.

In both of those categories, trade with China has been an increasing focus in recent years. So, while Wunsch Farms doesn’t directly export products to China, the other folks in our industry who are primarily located in China and Washington do. And with the loss or reduction of some of those markets, we’re worried that we will see some of the West Coast product moving back east rather than across the Pacific, which would negatively impact our markets.

A lot of this trade war thing is political saber-rattling. But even if this is part of a trade negotiation, the challenge is that for a lot of our crops there’s not an easy off button. Even if you have uncertainty for a few months and slow down the exports, it’s going to create a big crop surplus problem that is going to take a long time to resolve itself.

Gregory: In terms of the retaliatory tariffs, I would say that, as an apple grower, we’re going to feel an indirect effect. We in Michigan don’t export many apples to China, but they do off the West Coast. If those apples that usually get exported to China don’t have a home in China, one of the places they’ll come is back to the Midwest.

In terms of our other fruit, there hasn’t been nearly that level of impact. As of right now, dry cherries are not affected by the retaliatory tariffs. That doesn’t mean they won’t be, long term. But dry cherries going into China is not a very big market today. We view it as a potential growing market.

As a Montmorency cherry grower, I actually have more concerns with Turkey than with China. When we put a military base in Turkey, we provided them with some real opportunities. They used a lot of dollars to expand their agriculture, and then we gave them a free trade “favored nation” status. And so their cherries and cherry concentrate come into this country with no tariffs at all.

In the last 10 years, we’ve experienced almost a tenfold increase in cherry concentrate and cherry juice products coming in from Turkey. Cherry concentrate in the United States is selling in the $30 per gallon range, which returns growers a fair value for their cherries. You can buy concentrate coming in from Turkey at $13 a gallon. At that price, there are zero dollars left for U.S. growers. And if I wanted to sell product into Turkey, we have a 58 percent tariff on our cherries going into Turkey, and they have a zero percent tariff on their stuff coming our way. So we’re working very hard to try to get some tariffs established on products coming out of Turkey.

Stats and studies show that the agriculture industry is facing an aging farming population, as well as lower entry rates for young or beginning farmers. What does the next generation of farmers look like?

Santucci: In the cherry industry, there are fewer younger farmers getting into it, even amongst families. They’re doing other things. So I think the industry will change in the sense that you’ll probably have people who come from non-farm families – the millennials, for instance, who grew up in cities and suburbs and now want to be farmers. I think they’ll take some role, but I think it will be small.

Then I think your ethic groups, like the Mexican-American population, may take a larger role. That will depend on the banks giving them financing, because in most cases, they’re coming from families that don’t have deep pockets.

But I think a lot will depend, too, on whether farming is viewed as a profitable activity. There are some real questions there, with respect to cherry farming and other fruit farming, that it may not be as profitable as it has been in the past. That’s because other countries – mainly Turkey and parts of China –are able to grow things that we traditionally have had a pretty good market share on, and do it at a much lower price than what we’re able to do.

Automation has always played a role. For example, on my farm, we have a shaker that shakes the tree and it takes 30 seconds to get all the cherries. Fifty years ago all that was done by handpicking. And I think as labor becomes scarcer, you’re going to find more and more automation being developed to take that into account.

Wunsch: In a lot of sectors of agriculture, the margins aren’t high enough at any scale of production right now to entice younger producers to get in. And at the same time, automation is big. We’ve adopted quite a bit of automation on our farm in the past few years, so we’re able to do a lot more with fewer people than we were even 10 years ago.

For instance, this spring we will be planting roughly as many acres of orchards as my grandfather farmed during his entire career, just in a single year of planting. And we’re not worried about the scale of that planting. It’s something that we should be able to handle with relative ease. So, the younger generation is definitely able to figure out how to do things in a more streamlined way.

I also think the skill set that the younger generation of farmers brings to the table is often different than the skill set the older generation had. I think a lot of younger farmers are trained in doing the local marketing thing and being really good with people, which wasn’t necessarily a job requirement in agriculture, historically. The challenge there is that younger farmers often have career skills that are readily marketable in a non-agricultural footing. So I think what will be interesting to see is whether young farmers are willing to stick it out through some of the leaner times going forward, because they do have perhaps a higher degree of career versatility or portability than older generations. I think that’s where agriculture in the United States could run into a problem. If there’s a sustained period of low commodity prices, you might lose a lot of the most skilled young farmers in the industry.

Gregory: We were fortunate when I got involved in the cherry industry back in the early 1970s, where a few of us were able to work together. None of us could have afforded to farm on our own, but by working together, we were able to get ourselves established in the farming business.

As important as it was to work together back then, to afford the equipment you needed to farm and pull together a critical enough mass for operation, it’s even more important today. In our Cherry Bay operation, one of the biggest challenges as we transition to the next generation is trying to find people who want to have the lifestyle of a farmer and are willing to work together as part of a larger farming operation. In all segments of agriculture, farms have increased in size in order to be competitive. So I see that as one of the answers.

We had some friends that raised their family on a 30-acre cherry farm. And they lived off 30 acres of cherries, raised two daughters, and had an acceptable income level to do it. You could never do that today. I’m not sure if you could do it on your own if you had 200 acres of orchards. So that’s changed.
In terms of an aging population, as long as I’ve been involved in farming, that’s been a concern: whether you’re going to have the young people around to stay in farming. But as farm sizes change, you don’t need as many young people in the farming operation. And as farms get more and more specialized, you need people with specialty skills, so some kids who wouldn’t have been in agriculture before might get involved.

The new farm bill has been in the news a lot recently. What are farmers are saying about this legislation? What elements do you think the bill should or should not contain? Simplified, what kind of farm bill could really help the agriculture industry right now?

Santucci: I haven’t been following it, but I know, traditionally, the types of things they come up with. For example, insurance. The government subsidizes our insurance costs, and each time the farm bill comes up, it’s, “Should there be more insurance? Should there be less? Should we cover additional crops? Should we not?” I honestly think that, in terms of the farmers’ perspectives, the farm bills in the past have done a pretty good job at helping the farmer meet whatever new problems come to the fore.
I’d say one of our biggest problems now is that there’s been so many new pests introduced to the United States, so it’s a challenge to spray in a way that is effective. The EPA keeps eliminating different sprays and spreading out the time between when you spray and when you can harvest. Those regulations are making it more and more difficult to grow a good crop that the processors are going to be happy with.

The problem with a crop like cherries is that, as much as they’re big in Michigan, they’re not big in the rest of the country. So, for example, one spray that we use on cherries, we have to wait 10 days before they can be harvested. That same exact spray on blueberries, you only have to wait two days. And the reason for the difference is not that blueberries are different than cherries. It’s that the blueberry industry is a bigger industry, so the chemical companies have done all the testing that’s required to prove that only two days are required. The EPA, rather than say “Okay, well if it works for blueberries, it works for cherries,” says, “No, you need to have the same thing done for cherries.” And we’re just not big enough for that chemical company to do the work and make it worth their while.

Wunsch: I actually participated in a farm bill task force with the Michigan Farm Bureau and had the opportunity to go to Washington, D.C. this spring and talk to some members of Congress about the farm bill. I think farmers are generally pretty satisfied with the current approach to agricultural policy in the farm bill. There were some slight issues with cotton policy and dairy policy that we’re working to fix. But for the fruit industry, locally, the most important part of the farm bill to us is funding for academic research on better production methods for fruits and vegetables, as well as crop insurance for fruits and vegetables. Both of those programs are basically being kept intact.

Gregory: I’ve followed it, but mainly as it relates to specialty crops. With the previous farm bill, specialty farmers probably fared better than they ever have in the past, all the way from a crop insurance program that brought some of the specialty crops under it for the first time, to dollars we’ve been able to utilize in research.

One of the major issues specialty crops have is that the companies that develop crop protectants don’t really work with our industry to develop those compounds. They’ll work with the grain industry, the corn industry, the cotton industry, where there’s a huge amount of acreage and they can make some money selling those products. In specialty crops, most of our crop protectant development comes from trying to adapt some of those new compounds into the fruit industry, which is a different kind of research. So my thought right now is that, if we can keep the things we had for specialty crops in the last farm bill and get them in the next one, that would be positive for the fruit industry.

What do you see as the future of agriculture in northern Michigan?

Santucci: I don’t think it’s cherries. Not unless automation helps us even more than it’s helped us already. There are just too many competitors. To the extent that it’s cherries, it’s got to be combined with agritourism. There have to be more people doing fresh fruit rather than just selling their fruit to a processor, because I just don’t think we’re as competitive in that area as we used to be. We’ve got a great growing area, but we’re not the only place in the world with a great growing area.

So, agritourism I think has a real future. But the townships around northern Michigan have to accept the fact that agritourism is a major form of employment. Because you have townships now that try to keep tourists out rather than welcoming them in, through things like rules against Airbnb. It’s a never-ending battle. You have Leelanau County, which is pretty open and has a positive view toward these types of things, and then you have Grand Traverse County, which doesn’t have nearly as positive a view. At the state level, if they really want agritourism, they’re going to have to get more involved making sure the townships don’t keep it out.

Wunsch: Farmers up here have a lot of great partners, like the Grand Traverse Regional Land Conservancy. The conservancies of this county and Leelanau County have protected 1,000 acres of prime farmland in the region, so I think there’s a future for agriculture and production agriculture on a pretty large scale in northwest Michigan.

I would say that the future of agriculture up here is probably going to be a mix of multiple things, primarily driven by whether the next generation of farmers have access to value-added amenities. Good examples would be tart cherry growers who own their own processing facilities and have access to their own markets. We grow a lot of fresh cherries and we size them, sort them, put them into bags, and deliver them to grocery stores all over the state, so that has worked very well for us. I also think the winery business still has some opportunities for growth up here.

But I think the biggest opportunities are for more integration of agriculture with the tech and tourism sectors up here. Farmers do well when they are able to integrate new technologies and do things more efficiently, and they do well when they are able to tap into either tourism markets directly or into the perception of northwest Michigan as this beautiful scenic area. They can market products more broadly by tying those products back to the region.

Gregory: It’s going to evolve over time. You go back to the turn of the 20th century, after the timber time, and there were a lot of potatoes that were exported out of northern Michigan. Those farmers probably had their own dairy cattle and their own chickens and everything else, but the cash crop was potatoes. Since then it’s evolved into fruit. Today, we don’t keep cattle on our farm anymore. We’re the fruit growers. We grow primarily cherries and apples.

We’ve also watched as some of the wineries have been established and some of the hard cideries. And in Leelanau and Grand Traverse County, agritourism has become big. I expect those parts of the business will continue to grow.

The other thing is the economy, and in northern Michigan, as the housing market heats up, a lot of the same land that we need to grow orchards on – it’s high up, it doesn’t get frosted easily, and you probably have some pretty good views – those properties have become some of the most valuable real estate for development. Conservancies are helping to keep agriculture alive in this area, and I think that’s working, but I don’t think 30 years from now that agriculture in northern Michigan is going to look the way it does today.