Estate and Succession Planning
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Florida growers are justifiably proud that their products fill the fresh fruit and vegetable bins of supermarkets across the country during the winter months. I’d like to propose that if we had the infrastructure, more of Florida’s agricultural products that are wasted or never grown could also go into natural fruit and vegetable drinks and food products that are processed!
Historically, Florida’s agricultural production (other than citrus) has focused primarily on the fresh fruit and vegetable markets for limited time periods when high value returns can be obtained for being counter-cyclical (able to produce when other parts of the country are not) and to take advantage of its close proximity to urbanized Northeastern population centers. Other states and countries have been the primary supplier to fruit and vegetable processors, but a perfect storm of new markets, crop disease, adverse weather and consumer preferences suggests that building a processing industry could be the next big expansion opportunity for Florida growers. We have a substantial amount of unused field capacity that could serve more processors, as well as 20 million year-round resident consumers and 100 million-plus visitors within our state. As the population in Florida and the rest of the Southeast continues to boom, we have the advantage of huge nearby markets for processed juices and vegetables, particularly in the popular natural juice segment. This is known as “value-added” agriculture. The jobs generated by value-added agriculture can create five times the economic impact as compared to the value of field production.
Drought in the West is a catalyst for change
The adverse weather I refer to is almost 3,000 miles away in California, where long-term drought is leading to fierce competition for water. Growers in California reportedly have paid in excess of $4 per 1,000 gallons for irrigation water, about the same price as desalinated sea water. Meanwhile, Florida has abundant rainfall, and policymakers appear to be willing to embrace solutions that will help us to preserve that water rather than let it flow to the coasts. Payment for environmental services to landowners who store water is one example of that enlightened thinking, and we can do a lot more in this area if our cities, industries, environmental advocates and landowners realize they have a common interest in protecting the economy and quality of life in Florida.
Disease, unfortunately, also is a driver of change. Our citrus industry is still struggling with citrus greening, as well as the devastating effects of the citrus canker eradication program after canker was spread across the state by the hurricanes of 2004. Citrus is now grown on about one-third of the acreage dedicated to citrus at its peak 20 years ago. Citrus likely won’t return to its historical levels of production until scientists find a silver bullet to eradicate the greening disease, and in the meantime, we have a lot of underutilized land that could serve the processing industry. As much as 500,000 acres of tillable land that once grew citrus is now available for other crops.
California has set the example
You might be surprised to know that California, even with its severe drought and reduced production, continues to post big gains in agriculture revenue. The state’s 2014 crop was valued at $37.4 billion, up 42 percent compared to 2010.
Florida, hit so hard by citrus disease, has not been so fortunate. Our $5.8 billion 2014 crop was down 8 percent from 2010.
The numbers are even more lopsided when we compare the impact of value-added production and processing in the two states. In Florida, agriculture production and processing added $225,000 per employee in 2013. The comparable number in California in 2009 – the closest date we have for comparison – was $500,000/employee.
What has to happen to take advantage of this opportunity?
Mainly, we have to embrace the need to diversify our agriculture economy like we see in California. Citrus once was king in Florida – and it may be again – but in the meantime we have to diversify our crops and growing seasons, and look for markets beyond the produce aisles of grocery stores. More importantly, we need to develop a value-added processing capacity to meet this new demand. This takes capital and entrepreneurs willing to take risk!
The agriculture industry doesn’t need government handouts, but it does need for the government to move forward with a comprehensive water policy that does more to preserve the average of 50 to 60 inches of water that falls on the state each year. That will require more investment in an array of solutions that benefit everyone. A stable supply of water is as essential to condo dwellers in South Beach as it is to citrus growers in Polk County. Local tax abatements for processors also wouldn’t hurt. Many counties are willing to offer such incentives to northern factories looking for a new home; why not compete for processors in the same manner?
We have been presented with a great business opportunity that has the potential to create the next great wave of expansion in Florida agriculture. Let’s step up and seize the moment.
About the Author:
Michael D. Minton is a shareholder and chair of Dean Mead’s Agribusiness Industry Team. He represents family businesses with an emphasis on generationally-owned agricultural businesses. He assists with their organizational structure, federal income, estate and gift tax planning, and business succession planning. He is vice-chair of the Harbor Branch Oceanographic Institute Foundation, a member of the Solutions Committee of the Central Florida Water Initiative and a past vice-chair of the Governing Board of the South Florida Water Management District. He may be reached at (772) 464-7700 or by email at mminton@www.deanmead.com.