A Perspective from the California Agricultural Industry - Stuart Woolf
[MUSIC] I'm just going to walk through a little bit about our company, our farming operation, when it was started, what we're up to and race through just some of the opportunities that we see on the farm. Here we started in '74. This is my father who recently passed away, but I would just say one thing that's unique about this, I'm standing here with one of my sons and my dad. When my dad started in '74, if you just look at a crop like tomatoes, he was budgeting 22 ton per acre furrow irrigating and he was using more water, producing less tons. In his day, he was considered to be a pretty progressive grower and what have you.
My generation, today we're averaging about 60 tons under drip irrigation, making fewer passes, producing more with less. Briefly, we have about 25,000 acres around the Huron area, all of which my family, we own. This is the same ground that these generations continue to improve yield at lower costs and what have you.
We also were involved in tomato and almond processing. Los Gatos we'll run about a million tons there. Harris Woolf were currently handling about 80 million pounds of almonds, and we're investing in the best available technology on the farm and these operations to drive costs and efficiency. Next. One thing about our company and our management team; we think it's really strategic to be early adopters on technology and so we're very oriented to figuring out, this is a great time to be a farmer with all these startups and with the work that's being done like the work you guys are doing and so we still operate in this very optimistic lots of opportunity mindset.
But again, we think it's strategic to be on the front end of the adoption curve. Next. Again, we've just basically switched from going from row crop operations, growing a lot of lower value commodity crops like grains, melons, cotton, and what have you, where we did a lot of groundwork, lot of land leveling to basically the adoption of all of our property now is under either buried drip irrigation, micro-sprinklers, what have you, and then we shifted crop profiles to crops where we enjoyed better returns per acre foot and where California had strategic advantage.
Lastly, I would just say the adoption of drip by itself, we dramatically reduced the number of passes in our fields, we drove productivity. Early on when we first started today's session and we were setting goals or our goals of saving 50 percent energy and water and what have you. I think it's key from my mindset, you have the right metrics, we likely won't be able to make those savings per acre, but my goal is to make the savings per pound or per ton, meaning we're going to be driving yields with fewer inputs. Next. So far, from again, my dad starting in '74, we're producing three times the number of tons per acre on the same land.
We vertically integrated. Prior to us building our own facility, we were trucking tomatoes up to Tracy and Stockton and what have you, and now it's a much shorter haul and we're saving over a million gallons of diesel per year. I think these are just things that a lot of people forget like, wow, there have been these achievements. We've reduced our diesel burn out in our fields using again the buried drip. Just one thing, when we built our tomato facility in 1990, there were no emission standards for our boilers.
Today, we have to operate at about five percent of what we were allowed to emit back in 1990. It's a pretty impressive track record, I believe. Next. Our challenges right now with drip by concentrating the water and having to rely more on our wells or concentrating the salts. When my father was farming, he was distributing the salts evenly through his fields. Now we just put them right in the seed row.
Distribution uniformity with all these drip systems, it's amazing how many farmers put in a drip system then assume that they have distribution uniformity throughout that field over the life of the system and we all know that that changes and you have to constantly monitor them and what have you. I'm one that thinks there's still opportunities to get more out of our crops whether it's CRISPR or actually crossbreeding stuff and using genetically modified organisms, what have you, we still think there are opportunities there. Labor costs are going up, our availability stuff, and water, materials regulations. Opportunities, again, keep in mind, I'm looking at this from a vertically integrated farming and food processing perspective. Imagery in our processing plants, I think there's great opportunities there and a lot of the data that we're able to look down on our fields, FW stands for Fixed Wings, just getting imagery of our fields, figuring out where the stress is and what have you. One area that I think there's great opportunity that we haven't quite nailed down is with yield monitors.
Like in our tomato fields, as I mentioned, we're averaging 60 ton to the acre. Yet, we know in those fields they can vary from 80-40 tones in any given field. I want to have yield maps and this is tough to do in the tomato business; that would overlay with our maps that are showing stress in the fields. All of our soils are very uniform out there. Anyway, I think there's opportunities there. More analytics clearly.
I talked to Olivier in the past about we have an irrigation business that puts in irrigation systems and drill wells. I think one of the opportunities is for companies that basically sell plastic pipe to actually be selling water use efficiency to their customers and put the sensors and provide a framework where they're delivering a service that ensures that system is really functionally, efficiently, and they have good distribution uniformity. Again, we're going to continue to invest in mechanization and in regards to the materials we're using, we're using more biologicals instead of just synthetic fertilizers and what have you. Next. One thing that I just think is interesting, we are inundated with people with great ideas that not all of them have ever been on a farm or where there are these great ideas that don't have the practical experience of how to actually get them used on the farm and so we're swamped with all these choices. It's difficult for our team to figure out, who do we align with and who do we work with.
Most farmers, we're swamped, we tend to have a lot of assets, not necessarily a lot of cash. I think that generally makes farmers a little skeptical about where they're going to invest their next dollar when it comes to new technology. Lot of snake oil salesmen out there and I think most guys do feel a little bit like guinea pigs and I think a lot of the people that bring technology to us, a lot of them are focused on their product and how they go to market and how they raise their next round. Typically, we run into a lot of people that seem stressed, overworked, strapped for funds and are usually overly optimistic about the impact their technology can have.
It's just a funny dance that I point out. If you're a farmer with all these folks coming to you with great ideas and you're known to be an early adopter or interested, it's still a tough thing to figure out who to go with. Next. On our team, so how we do this. I actually get our team together, all my farm managers, I ask them where they think what technologies, what areas could we really move the needle most on the farm? In an area that's water deficient, you would think all of them would turn to water.
Most of them do not. They think we can move the needle with just better analytics and when I say not with water, just like when I ask them, "Do you think we can move the needle from if we're already in the low 90s or mid 90s and water use efficiency on the ranch. Do you think we can get higher than that?" These guys tend to want to think about, we just need better information systems, yield monitors, that kind of thing.
But we allow them to dictate where are the areas in the technologies that interests you the most? We allow them to go out and talk to the people approaching us and make recommendations and then we reward them when they make the right choices, we share some of the savings with them. I always tell them if you guys perpetually are picking the wrong vendors and the wrong technology, then we'll have to make other decisions. But so far they are pretty good about dialing that in.
But I think it's part of our culture, it's part of our DNA to be early adopters. Next. This, just as it relates to nut processing, we just spent about $6.5 million on the latest and greatest in electronics, and what's really startling to me is how good this equipment is, and how we're able to run right now about 40,000 pounds an hour, and once it goes through a bank of these high-end electronics and goes through the sizer, the product is basically market ready. I point to this a little bit because one thing that occurs to me as we go out and develop key relationships with buyers, I think the buyers are getting more and more focused on the type of technology and the equipment we're using, and if you have a choice to buy from 100 different processors of almonds in the state, why not align with those that have the best equipment to really deliver the highest quality and what have you. I look at it, this is an instance where technology is driving consolidation. To put in a $6.5 million line,
you've got to have the volume to actually make the economics work, and then once you have it, we look at it that we're probably one of maybe 5-10 processors that can actually do this. So we think this will make us more attractive to larger customers, but ultimately it is leading to some level of consolidation. Next. The technology just again,
in sorting and what have you is getting so much better. An issue for us in the almond trade, clearly are things like aflatoxin and salmonella and what have you, and if we can do a better job figuring out how to sort this stuff out or detect it, it makes a huge, huge difference, and so we're watching improvements here, I'm very excited about it. Next. In California, just being a farmer here, not going into great depth, but we really have lost a lot of our surface water, SGMA is going to reduce our acreage down further.
We do have issues with trade and what have you, our labor sources are fewer and more expensive. Even things like truckers, trying to find truckers during harvest season is becoming more and more difficult, and clearly energy is one of our ever growing issues and problems in cost categories and regulatory issues. Next. A lot of these opportunities and things that we see, we still need to have the policies in the state that allow us actually to end up with our optimal outcomes. We were talking about groundwater recharge.
Groundwater recharge right now is not considered a beneficial use in the state and what that means is if you're a federal water contractor, you have to demonstrate beneficial use really to keep your contract and be eligible to receive water. Surprisingly, in a state that really does need to do more groundwater banking, we haven't changed the definition of that and there's some some as to whether or not, it's an accepted use of surface water in regions of the state that are either federal or state districts. As I mentioned earlier, we don't have a statewide plan for flood flows when they arrive, and we do need additional infrastructure if we hope to move this resource around throughout the valley and the water banking and water marketing all sounds great, but you still have to deliver it.
We need funding on ag research at our public universities. Solar, we think long-term solar is going to be part of our crop mix and we hope to generate some energy, use it on-site, and use the water that's associated with that land elsewhere on the lands that we are farming. As it stands right now, it's not considered an ag use and it does put into jeopardy our water rights. It sounds crazy, but that's where we are. Next. We do a lot of long-term planning here, we're hoping to pass this on to the next generation.
Our crystal ball, we think with technology and with regulation, all these challenges, there's going to be fewer farmers, the big are going to get bigger, we're going to have fewer acres in the valley. We think with SGMA we'll see 500,000-1,000,000 acres come out. We think this will push more permanent crops. As crazy as that sounds and the hardening of water demand, when you look at your return per acre foot, we're better off fallowing ground and using those water supplies to grow maybe fewer acres, but make them more profitable crops like almonds, pistachios, wine grapes, citrus.
Certainly fewer dairies. We'll have higher farm revenue, but we think our margins will continue to be squeezed. I really think that the big opportunity, for us on the farm, we continue to focus on improving yield, why? Marginally reducing in our inputs, and that's what will drive, what we believe is the right metric, it's the water per ton or the water per pound or the energy per ton or pound. Also, for the next generation, we're doing this now, I'll been in Portugal in about a month, we're looking at opportunities outside of California.
We see a lot of the crop shifting, permanent crops in particular, from the south to the north. We're not getting the Chilean hours that we used to in the south. In our own case, we're really focusing on more renewable energy as part of our mix. Just yesterday, I got a 1,600 acre solar installation approved for our property and we're going to be leasing that out for about 30 years and utilizing the water on that on our other crops, and hopefully be able to tag in for our own use on our farm. Next. The crazy ideas I think about now.
Really, my dad used to focus on all the lands that he was irrigating, I'm probably spending a little more time focusing on the lands that we'll be fallowing. We're presently fallowing about 7,000 acres a year. I mentioned the solar, we're also looking at some water banking on our property.
We'd like to be in a position that we could store water for other growers and provide it to them in dry years. This is my secret plan, I'll share with this group, I'm looking at agave to plant on ground that we'll be fallowing, and in particular like well aged tequila. I don't know why we don't have it here. Anyway, we're actually flexing around with that, we're going to continue to mechanize. I would hope one day with opportunities with solar, I would love to have a microbe grid where all of our vehicles on the ranch are electric.
I think in our future we'll likely, I hope, see more electric farm equipment. The other thing I think about is we generate a lot of biomass, but we have policies in the state that they really don't want to see burning in the valley. But I think, if we could burn it cleanly using pyrolysis and figure out a way to actually utilize some of that on the ranch, I would love to be preheating water going into my boilers at the tomato plant using the trees that I'm taking out and rotating and what have you. Again, I mentioned the need for yield maps and greater water use efficiency and how that will help drive yields. One more. Just how we look at it. We don't think we're going to see the run-up and farm productivity that my father saw from his generation to mine.
I think we're going to continue to push the curve up top, but I don't think it's going to be as great. This was what I always tell our team, most of these guys that are bringing these great innovative things to us probably won't make it. We've got to make sure that we choose the ones that we think will not only have good technology, but will make it. We're going to get by, we're going to be using less water, fewer materials, less labor, but it's going to be really incremental.
I would point out, this is one thing I tell our guys, we save an inch of water on the ranch, it's worth about 250 grand to us, and so can't you save an inch. Anyway, these incremental changes are still meaningful. I think innovation as you said will drive consolidation. We're getting much more transparent with our key customers and having the information and systems in place, what have you to provide that I think is meaningful to them, but the more information we generate, I also recognize ultimately government may very well use this to further regulate us. Food quality and safety we believe will improve.
I continue to think that we're going to have to embrace technology to improve yields and varieties. I would just make note like in our tomato business, if we can move sugar solids and tomatoes from averaging 5.2-5.3, that 1/10 is worth about six pounds of paste on a raw ton of tomatoes. It doesn't sound like a lot unless you run a million tons, so that we generate six million. That's worth about another $2.5 million to us on the revenue side, and so I look forward to seeing better varieties that are producing higher yields, producing more finished products, and I think that's how we drive the savings in energy and water.