Western Grower & Shipper 2018 03MarApr

WESTERN GROWER SHIPPER MARCH/APRIL 2018

PRODUCE TRANSPORTATION Data-Driven Predictive Models Could Aid Industry Down the Road

Strengthening Company Culture…One Mindset at a Time Innovation Summit Brings AgTech to Imperial Valley’s Backyard WATERBIT Tech to Simplify Irrigation and Make Smarter Water Decisions in Real Time

THE NEW TAX LAW Nuances Require an Expert’s Knowledge WGCIT SPONSOR Farm Credit: Ag-Specific Lending for a Century

WTL-Ad-Western-Growers.pdf 1 3/5/18 11:47 AM

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WESTERN GROWER SHIPPER MARCH/APRIL 2018 WGA.COM

8 Strengthening Company Culture…One Mindset at a Time 10 Innovation Summit Brings AgTech to Imperial Valley’s Backyard 12 PRODUCE TRANSPORTATION Data-Driven Predictive Models Could Aid Industry Down the Road 14 WATERBIT Tech to Simplify Irrigation and Make Smarter Water Decisions in Real Time 16 THE NEW TAX LAW Nuances Require an Expert’s Knowledge 19 WGCIT SPONSOR Farm Credit: Ag-Specific Lending for a Century

WESTERN GROWER & SHIPPER Published Since 1929

Volume LXXXIX Number 2

To enhance the competitiveness and profitability of Western Growers members Thomas A. Nassif President Western Growers tnassif@wga.com Editor Tim Linden Champ Publishing 925.258.0892 tlinden@wga.com Contributors Cory Lunde 949.885.2264 clunde@wga.com Production Diane Mendez 949.885.2372 dmendez@wga.com Circulation Marketing 949.885.2248 marketing@wga.com Advertising Sales Dana Davis Champ Publishing 302.750.4662 danadavis@epix.net Stephanie Thara Metzinger 949.885.2256 sthara@wga.com

DEPARTMENTS

President’s Notes

Arizona Director Profile

Government Affairs

Science & Technology

Agriculture & the Law

Insurance Corner

Western Growers Connections

Western Grower & Shipper ISSN 0043-3799, Copyright © 2018 by the Western Grower & Shipper is published bi-monthly by Western Grower & Shipper Publishing Company, a division of Western Growers Service Corp., 15525 Sand Canyon Avenue, Irvine California 92618. Business and Editorial Offices: 15525 Sand Canyon Avenue, Irvine California 92618.Accounting and Circulation Offices:Western Grower & Shipper, 15525 Sand Canyon Avenue, Irvine California 92618. Call (949) 863-1000 to subscribe. Subscription is $18 per year. Foreign subscription is $36 per year. Single copies of recent issues, $1.50. Single copies of issues more than three months old, $2. Single copies ofYearbook issue $4. Periodicals postage is paid in Irvine, California and at additional mailing offices. POSTMASTER: Send address changes to Western Grower & Shipper , PO Box 2130, Newport Beach, California 92658.

MARCH | APRIL 2018

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WESTERN GROWERS OFFICERS – 2018

CRAIG A. READE, Chairman RONALD RATTO, Senior Vice Chair RYAN TALLEY, Vice Chair STEPHEN F. DANNA, Treasurer CAROL CHANDLER, Executive Secretary THOMAS A. NASSIF, President DIRECTORS – 2018 GEORGE J. ADAM Innovative Produce, Santa Maria, California JOSEPH E. AIELLO Uesugi Farms, Inc., Gilroy, California KEVIN S. ANDREW Vanguard International, Bakersfield, California MIKE ANTLE Tanimura and Antle, Salinas, California ROBERT K. BARKLEY Barkley Ag Enterprises LLP,Yuma, Arizona STEPHEN J. BARNARD Mission Produce, Inc., Oxnard, California BRIAN BERTELSEN Cove Ranch Management, Reedley, California GEORGE BOSKOVICH III Boskovich Farms, Oxnard, California DON CAMERON Terranova Ranch, Helm, California EDWIN A. CAMP D. M. Camp & Sons, Bakersfield, California CAROL CHANDLER Chandler Farms LP, Selma, California LAWRENCEW. COX Coastline Family Farms, Salinas, California STEPHEN F. DANNA Danna Farms, Inc.,Yuba City, California JOHN C. D’ARRIGO D’Arrigo Bros. Co. of California, Salinas, California THOMAS DEARDORFF II Deardorff Family Farms, Oxnard, California SAMUEL D. DUDA Duda Farm Fresh Foods, Inc., Salinas, California CATHERINE A. FANUCCHI Tri-Fanucchi Farms Inc., Bakersfield, California DAVID L. GILL Rio Farms, King City, California A. G. KAWAMURA Orange County Produce, LLC, Irvine, California ALBERT KECK Hadley Date Gardens,Thermal, California LORRI KOSTER Mann Packing Company, Inc., Salinas, California FRED P. LOBUE, JR. LoBue Bros., Inc., Lindsay, California FRANK MACONACHY Ramsay Highlander, Inc., Gonzales, California JOHN S. MANFRE Frank Capurro and Son, Moss Landing, California STEPHEN MARTORI III Martori Farms, Scottsdale, Arizona HAROLD MCCLARTY HMC Farms, Kingsburg, California JOHN MCPIKE California Giant, Inc., Santa Maria, California TOMMULHOLLAND Mulholland Citrus, Orange Cove, California KEVIN MURPHY Driscoll’s Inc.,Watsonville, California MARK NICKERSON PrimeTime International, Coachella, California THOMAS M. NUNES The Nunes Company, Inc., Salinas, California KEVIN E. PASCOE Grimmway Enterprises Inc., Bakersfield, California GARY J. PASQUINELLI Pasquinelli Produce Company,Yuma, Arizona STEPHEN F. PATRICIO Westside Produce, Firebaugh, California RONALD A. RATTO Ratto Bros. Inc., Modesto, California CRAIG A. READE Bonipak Produce, Inc., Santa Maria, California JOSEPH A. RODRIGUEZ The Growers Company, Inc., Somerton, Arizona WILL ROUSSEAU Rousseau Farming Company,Tolleson, Arizona VICTOR SMITH JV Smith Companies,Yuma, Arizona RYANTALLEY Talley Farms, Arroyo Grande, California BRUCE C.TAYLOR Taylor Farms California, Salinas, California JACKVESSEY Vessey and Company Inc., Holtville, California STUARTWOOLF Woolf Farming & Processing, Fresno, California ROBYRACEBURU Wonderful Orchards, Shafter, California

TOM NASSIF | PRESIDENT AND CEO, WESTERN GROWERS PRESIDENT’S NOTES

The High Calling of Statesmanship: John McCain

Several years ago, I opined in this column about the need for fewer politicians and more statesmen; individuals who are willing to look at more than ideology; individuals who are willing to roll up their sleeves and reach across the aisle; individuals who are willing to take political risk for the greater good that can be achieved. In our nation’s history, we have many examples. I think of Daniel Webster, one of the greatest politicians in American history, who staked his reputation and career on an oration he gave before the Senate in 1850. In his Seventh of March Speech, Webster spoke, “not as a Massachusetts man, nor as a Northern man, but as an American,” in his fervent defense of the Compromise of 1850, a deal that held the union together for another decade before the inevitable Civil War. While he recognized the principled positions of those among his colleagues who abhorred the Compromise, Webster was certain that rejection of the deal would likely precipitate a civil war, a horror he desperately sought to avoid. And what was the price of his patriotism? Subsequently viewed as a traitor to the South by his New England political base, Webster soon thereafter resigned from the Senate. Our disdain for the state of our modern politics may make it easy to overlook statesmen in our midst. I place Senator John McCain in that special class. He has always put America first in more than 60 years of service to our country. First, as a naval aviator who was shot down over Hanoi, captured and imprisoned for six years during the Vietnam War, despite offers of an early release (his

father was the commander of all U.S. forces in the Vietnam theater). In the face of unrelenting and harrowing torture, McCain demonstrated moral courage and refused to accept repatriation until every man taken before him had been released. The fortitude that defined McCain as a naval officer has also defined his political career. Over the past 35 years, McCain has rightfully earned the “maverick” moniker. As the successor to conservative icon Barry Goldwater, he has carved his own path, willing to break from the herd in service to his principles. This was often evident when it came to large federal spending requests—even for defense programs—and many a supplicant for the taxpayers’ dollars felt the sting of McCain’s pointed criticisms. McCain leaned toward tough but necessary compromise when he joined the “Gang of 14” in 2005, a bipartisan Senatorial construct designed to break the gridlock over President George W. Bush’s court nominees. In 2013, he joined yet another gang, this time the “Gang of Eight.” During this time, I had the opportunity to work closely with the Senator on immigration reform in an attempt to resolve the accelerating crisis of labor shortages in agriculture. I recall appreciating that his heart was always in the right place. For McCain, it has never been about the politics— which can chip away at even the noblest of intentions—which is why I think he has worked well with Democrats at key moments. During the tense negotiations, urgent issues would often come up, and McCain was always willing to accept a meeting, even at the last minute. Whenever we differed, we would both jump on the Straight Talk Express,

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being open and candid in our discussions. The trust and confidence that formed the foundation of our relationship was essential to the eventual approval of S.744 by the Senate with a strong bipartisan vote. McCain was the first Senator to praise our efforts and results, and he did so publicly. I also recall my time serving as an agricultural advisor to McCain during his presidential run in 2008. From time to time, our industry partners would claim that McCain wasn’t supporting us on critical issues. I would ask to speak with him, and he always returned my call, several times calling me at home. If I ever asked for a letter of support for our issues, he would respond immediately. McCain also has a sense of humor, which is occasionally on public display. One time we discussed my Lebanese heritage, to which I gave him the following definition: A Lebanese is someone who can buy from an Armenian,

sell to a Jew and still make a profit. He was astute enough to know that we were at an event in Fresno and began to extoll the virtues of the Armenian community. After the event, he said he didn’t think he could repeat my joke for obvious reasons, but we still had a good laugh in private. Given my personal relationship with John McCain, and my admiration for his years of tireless service to our country, the news of his cancer diagnosis has weighed heavily on my heart as it has the nation. However, through faith and prayer, I believe he will overcome this challenge, just as he has overcome every other obstacle in his life. Whatever the outcome may be, McCain has earned a title of far greater importance than Senator. He is an American Statesman and true hero. May the Lord bless you and your remarkable family, John McCain.

Our disdain for the state of our modern politics may make it easy to overlook statesmen in our midst. I place Senator John McCain in that special class. He has always put America first in more than 60 years of service to our country.

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ARIZONA DIRECTOR PROFILE

Steve Martori III CEO/President Martori Farms Scottsdale, AZ

Director Since 2017 | Member Since 1966

Fourth Generation Leading Martori Farms in its 2 nd Century

A LONG & WINDING HISTORY: Peter Martori, grandfather of former WG Chairman, longtime board member and Award of Honor recipient Steve Martori II, started the family business as wholesale vendor in New York City. The company migrated to Chicago and became a distributor years later under the tutelage of the second generation, which included Arthur Martori and his brother Stephen Martori. In the 1950s, the firm started acquiring farms in Arizona and California. Somewhere along the line, the farming operation, Martori Farms, took center stage. Arthur Martori was the father of Steven Martori II and the grandfather of current CEO/President Steve Martori III, who recently followed in the footsteps of his father

Yuma, but Arizona is its home. Steve III said California is always tempting as he calls it “the best place in the world to farm. You always have to weigh that against the regulatory environment which makes it difficult. We are an Arizona company, but I will always reserve the right to look at other farming regions.” MELONS ARE THE COMPANY’S FORTE: Martori Farms has long been noted for its cantaloupes and its Kandy brand. There are several articles written years ago in which Steve Martori II credited the advent of the Walmart Supercenters with propelling Martori Farms to the next level. The firm initially supplied Walmart with cantaloupes as it opened its first Supercenter in 1991 and grew along with that retail giant. Steve III said cantaloupes are still king but the company is constantly trialing new varieties. It is well known for its exclusive Kandy Lemondrop melons. The green-fleshed melon features the sweet tartness of a lemon with hints of honeydew and watermelon. STEVE III’s PATH TO THE EXECUTIVE SUITE: Not all of Steve II’s kids were interested in pursuing a career on the farm, but his namesake son was. After graduating from University of Arizona in 2008 with a combination degree in agriculture and economics, Steve joined the family firm fulltime. He had worked since high school in one capacity or another, but this was now his full time calling. Over the next several years, he worked in virtually all the company’s operations, including sales, farming, harvesting and its real estate development arm. By 2012, he was well on his way to being the next generation to lead the company. Steve II started stepping

and joined the WG Board of Directors. “The family acquired farms in the 1950s, ‘60s and ‘70s,” Steve III said. “Sometime in the ‘60s, the wholesale operation was closed and we concentrated on farming.” The firm does have some land on the California side of the border near

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back about three years ago just as Steve III entered a graduate program at the Harvard Business School. The prestigious school has a special program for executives running a company. As CEO and president of Martori Farms, Steve III began his quest for his MBA from HBS, as he calls it in an effort to downplay the degree. The program combines online course work with annual three-week stints on-site over a three year period. He graduated this past summer. “It was a life changing opportunity for me,” he said, noting that the course work led to better ways to run the company more efficiently and pointed to new directions in which to take it. He knew financing and technology were critical elements for example, but said the educational rigor was eye-opening in these particular areas. YOUNG PRESIDENTS’ ORGANIZATION: At 32, Steve III knows he is very young to be in his current position. He has looked for and found mentors in several areas including as a member of the YPO. “It’s a global organization open to presidents of companies that are under age 45 with over $12 million in sales and more than 50 employees. It is designed to be a

support group for company leaders in an uncommon situation.” He is one of the group’s youngest members. BULLISH ON AGRICULTUIRE: “I see the same headwinds as everyone else, but I fully intend for our company to be around for the next generation.” Martori said the agricultural industry has exhibited an amazing knack to “out-innovate” whatever problems lie in its path. He is confident technology can be utilized to solve the challenges that lie ahead. Of course, one of the biggest challenges is labor. Martori Farms was an early adopter of the H-2A program and has been using it successfully for 30 years. He is not confident Congress will successfully tackle immigration reform. “Seems to be such a wedge issue with both political parties using it to garner votes. It appears to be more useful to not have a solution.” In the long run, Martori does believe technology will play a role in reducing the need for labor but he sees it as a very long term project. He believes innovation in varietal production, harvesting and packing need to combine to create varieties where robotics can play a role. “I don’t see a lot of change in that area over the next 10-15 years. It’s going to take time.”

THE ORGANIC REVOLUTUION: Martori Farms has been a leader in the production of organic melons, and Steve III expects the growth trend in that sector to continue. “There is a lot of demand from retailers. We are going to have a significant increase in our volume this year.” The company markets its melons from May to December. THE WG CONNECTION: Steve Martori III was a graduate of the first class of Western Growers’ Future Leaders Program, and he is the first member of that program to make it to the WG Board of Directors. He is excited about the challenge of being on the board and interacting with some of the longtime leaders of the association and the industry. “I do plan to lean on the expertise of others.” But he has no plans to shy away from the role board membership creates. He believes his involvement in the aforementioned Young Presidents’ Organization has given him insights and standing in his position. ON A PERSONAL NOTE: Steve III is single and quite busy running a company. In his spare time, he loves outdoor activities, including snow skiing and mountain biking .

MARCH | APRIL 2018

Western Grower & Shipper | www.wga.com

Strengthening Company Culture… One Mindset at a Time

By Stephanie Thara Metzinger T he clock strikes midnight and disagreements continue to hold strong. The realization that they just missed a crucial deadline is slowly starting to sink in among the management team at agtech startup SWIIM System. Gradually, dissent about how the project should have been carried out dissipates, but one glaring fact remains: the company’s culture has to change. “When we were building our management team during the development stage of the company, we brought together high-caliber professionals who all had different expertise and personalities,” said Kevin France, CEO of SWIIM System. “Though these were all high-quality individuals, they just couldn’t execute to their full potential because they were constantly kicking and fighting each other.” The lack of agreement and collaboration began to foster low morale among the staff at SWIIM. France, in frustration, expressed that his 15-person startup needed a significant culture overhaul during the company’s board meeting in December 2016. A solution soon emerged. “Dave Puglia (WG executive vice president) told me about a training resource that Western Growers offered relating to the Arbinger Institute. He said that the program focused on changing the mindset rather than changing behavior,” said France. At first, France was skeptical, remembering the countless leadership development and management training sessions he had participated in previously. Trainings that involved the equivalent of holding hands, singing 'Kumbaya' and then forgetting all of the lessons learned immediately after leaving the session. France knew something needed to change or his budding company would not prosper. He understood that a healthy workplace culture drives positive business outcomes.

France signed up each of his employees—located in areas throughout California and Colorado—for the two-day workshop, where Karen Timmins, WG senior vice president of human resources and resident Arbinger trainer, traveled to the company’s headquarters in Colorado to share the principles of Arbinger. “The training brings to light what is wrong at the company and how to fix it. It’s especially helpful for organizations with challenging work environments,” said Timmins. France started to notice a change among his staff, especially the leadership team. Many of his team members saw how they

previously treated others as objects rather than people and had a self-focused—or inward—mindset. Lightbulbs started going off for team leaders, and they began to accept and adopt a culture where they held themselves accountable and stopped dehumanizing others. From there, a healthier and more collaborative work environment started to develop within SWIIM. Now, France finds ways to keep the Arbinger approach alive and well throughout the year, including an annual Arbinger-based retreat each year for his team.

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ADOPTING THE ARBINGER APPROACH The idea to focus on creating a workplace environment that fosters creativity and goodwill began in 2002 when Tom Nassif took the helm of WG. “Any significant change within an organization has to start from the top,” said Timmins. “Through Tom’s leadership, we adopted the principles of Arbinger and integrated this program company-wide.” Every employee hired at WG goes through the program, learning about the principles that drive a constructive work environment and receiving the guidance needed to thrive in their personal careers. Timmins explains how the workshop has successfully taken people out of their comfort zones by forcing them to focus on changes needed within themselves. This has resulted in positive change throughout the organization and has given managers the tools needed to be more effective in understanding how to help their staff grow. Seeing the success of Arbinger within the association, WG made this training a member benefit in 2007. Throughout the years, WG has provided training to many members seeking to reform and recalibrate company culture, including Ocean Mist Farms, The Growers Company, Bolthouse Farms and Five Crowns Marketing. In fact, several member companies—JV Smith Companies, Reiter Affiliated Companies and Monterey Mushrooms–were so inspired after the workshop that they sent their own staff to the Arbinger Institute to be certified as trainers. “We were looking for a development program that would be sustainable through time and not just a flavor of the month,” said

Joaquin Garza Jr., operations manager at Monterey Mushrooms. “After Karen conducted a pilot with our executives and selected team members, we immediately knew that this was something we could use long term to change leadership.” The methodology was a completely different way of thinking—a change that the organization needed at that time. According to Garza, team leaders were no longer afraid of confrontation and were able to talk openly about challenges they faced with each other. They also began focusing on helping others achieve their goals prior to completing their own, as well as exploring different methodologies to drive impactful change at a higher level. “We saw a big difference in the team and eventually started to see change throughout the company,” said Garza. “This isn’t a training. It’s a journey, which makes it even more special.” Now, with Garza certified to conduct Arbinger, Monterey Mushrooms has provided training and development to nearly its entire management staff who oversee the company’s 6,000 employees. To better serve members, WG added a second resident trainer in 2017 and is now helping ag-related businesses enhance their employee performance review process. Through the 3A+ performance review method, Timmins said, the script is flipped and employees are now encouraged to take initiative and speak with their managers about their progress. Timmins heads back to Colorado later this month to help SWIIM implement this new review system. For more information about Western Growers’ training resources, contact Karen Timmins at (949) 885-2295.

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Western Grower & Shipper | www.wga.com

Innovation Summit Brings AgTech to Imperial Valley’s Backyard

By Stephanie Thara Metzinger C hatter surrounding the latest in technology and ag 200 people, Western Growers’ Innovation in the Imperial Valley Summit brought together farmers, researchers, technologists and agtech startups to delve into the labor and water issues facing agriculture in this desert region and the specific technologies being invented to help solve those issues. Innovation in the Imperial Valley, a full-day event, was divided into three parts, with the evening session at the Stockmen’s Club serving as the culmination of the event. The event is part of Western Growers’ latest effort to advance innovation by bringing agricultural technologies to farmers. “So many times, technology and innovation stay within the Silicon Valley. Today, we are bringing tech to our backyard, so that the innovators can fully understand who we are,” said Dennis Donohue, lead of the WG Center for Innovation & Technology. “Imperial Valley is the type of setting where these technologists and inventors can come to be fully immersed in our world of ag, even if it’s just for a short time.” R&D TEAMS LEARN AG AUTOMATION DURING FIELD TOURS The day began with exclusive field tours in the morning, where research and development specialists from Yamaha and Soft Robotics visited fields of iceberg lettuce, cauliflower and romaine innovation filled the corridors of the Stockmen’s Club in Brawley, CA, on February 8. Drawing a crowd of nearly

lettuce to learn about automation needed in the fields. Pat Stafford from Church Brothers Farms spoke to these automation experts about the labor struggles growers are facing and demonstrated the types of machines already in use in the fields. “The challenge is that the customers want exactly what they had yesterday—fresh produce that they are familiar with,” said Stafford. “You can create a new type of broccoli that can be easily machine-harvested, but it will look different and consumers may not want it.” Team members from Yamaha and Soft Robotics had the opportunity to ask the questions needed to learn how their companies can invent or improve mechanization to help farmers meet the needs of their customers. When the field tours concluded, a handful of guests headed to Farm Credit Southwest Services to meet with students, agtech startups and venture capitalists for the afternoon session. NEXT GENERATION ACT AS JUDGES FOR AGTECH PITCH COMPEITITON As part of WG’s goal to encourage students interested in science, technology, engineering and mathematics to pursue a career in agriculture, the Innovation in the Imperial Valley event included a session where youth were “AgSharks” for the afternoon. More than 60 students from 4H, Future Farmers of America and Imperial Valley College teamed with venture capitalists from Rabobank, Strategic Fresh LLC and Artemis Water Strategy to hear and judge pitches from agtech start-up companies. After the pitches and Q&A concluded, the students unanimously chose Novihum Technologies—who is producing a novel soil amendment product—as the winner. The students also heard from keynote speakers Rosibel Ochoa, associate vice chancellor for technology partnership at UC Riverside, and Carl Vause of Soft Robotics, on the importance of STEM professionals to the future success of agriculture. “The future is about science and technology,” said Ochoa. “It’s not enough to be a user. It’s important to harness that technology to solve problems.” AUTOMATION, WATER TECH, VENTURE CAPITALIST SESSIONS BRING AGTECH TO FOREFRONT The excitement from the AgSharks workshop carried over to the evening session at the Stockmen’s Club, where conversations about possibilities of technology among Imperial Valley locals began to flow. The event kicked off with opening remarks from Western Growers’ Hank Giclas, Larry Cox of Coastline Family Farms, Donohue of WGCIT, and Ted Horan of RDO Equipment

Fireside Chat: (left to right) Ken Zuckerberg, Rabobank International; Kirk Haney, Radicle Funds; Arama Kukutai, Finistere Ventures

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on how technology will continue to reshape all businesses in the future. “The reality is that there is a labor shortage in agriculture due to an aging workforce and increased regulations and costs. Today, we are going to talk about possible solutions,” said Donohue. Next, in-depth panels on automation and water technology took center stage. A “cattle call” topped off the hour, where start-up companies housed in the WG Center for Innovation & Technology came on stage to each provide a 90-second pitch about their company and technology. Attendees then had the opportunity to touch base with the startup that peaked their interest during the exhibition showcase that followed. To date, numerous startups are in talks with growers who attended the event about possible implementation of their technology in their fields. The second half of the evening session included fireside chats with venture capitalists on what they look for when providing seed funding to companies, as well as with educators speaking on the role of university and research in the agtech space. The night ended with a keynote speech from Richard Moran on succeeding in the workplace and a candid outlook on living amongst the tech community in Silicon Valley. From the dynamic topics discussed to the diversity of speakers, guests left the event with a wealth of information, including: • Technology needs to be looked at as a system, not as one action: Mechanization needs to happen across the entire value chain, because if one robot is working faster than the other parts of the production chain, there will be a bottle neck. Likewise, with irrigation technology, focus needs to be beyond one water valve. All other elements that are affecting or are affected by the valve need to be taken into consideration, as well. • Today’s farm practices won’t work for tomorrow’s machines: Growers and technologists need to collaborate to identify what in the planting and harvesting process can be modified. In order to create machines that meet growers’ needs, two items must be identified: 1) breeding genetics: how can a plant’s structure be modified to allow it to be easily harvested by a machine; and 2) growing systems: how can the

way things are grown be changed for automation (i.e., growing on fewer beds, but having more rows). • Acceleration of technology that will help solve ag’s biggest issues is driven by collaboration: One of the biggest pain points startups face is finding growers who are willing to test out and demo their technology in the field. • Timing and risk matter most to venture capitalists when considering investing in startups: Venture capitalists consider many factors when deciding to invest in startups. Most importantly, they focus on 1) ability to solve problems in a timely manner; 2) market and capital risk; and 3) execution risk. Innovation in the Imperial Valley — sponsored by RDO Equipment & Water, Netafim, Imperial Valley College, Farm Credit, UCANR and UC Riverside—is one of many events Western Growers plans to host to bring technology to the farming areas in California and Arizona. This summit followed on the heels of WG’s “Deep Dive Forum” last year, where 160 people gathered in Fresno to hear about specific technologies to address the Central Valley’s water ailments. Western Growers plans to bring the innovation conversation back to the Central Valley area later this year, this time focusing on issues beyond water.

Field Tours: George Kellerman of Yamaha participates in the morning field tours to learn more about in-field automation.

“Bringing technology to Brawley is not something that happens all the time,” said Kathy Smith, director of strategic accounts and industry affairs at Monsanto. Smith was one of the nearly 200 attendees at Innovation in the Imperial Valley . “It’s so rare for anyone to bring this type of conversation to the farming community, and it’s great that Western Growers is taking the initiative and doing it.”

More than 60 students from 4H, Future Farmers of America and Imperial Valley College heard pitches from agtech startups and team with venture capitalists to provide feedback during the noon session of the Innovation in the Imperial Valley Summit

MARCH | APRIL 2018

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PRODUCE TRANSPORTATION Data-Driven Predictive Models Could Aid Industry Down the Road

By Tim Linden U sing information provided by many different shippers and a computer program, the Western Growers/C.H. Robinson Transportation program has brought increased efficiency, better service and cheaper rates to shippers enrolled in its LTL (less than full load) program. Aggregating these LTL shipments has allowed the program to schedule transportation on a reoccurring basis, allowing a shipper with even a partial load to take advantage of completive rates. Heretofore, a load requiring multiple pickups and multiple drops was the scourge of the industry. No trucker wanted to participate without premium rates. And the new electronic logging device regulation makes the proposition an even harder sell. But access to data has allowed CHR schedulers to note that several shippers have LTLs headed to Chicago, for example, on a regular basis. Loads can be scheduled and efficiencies can be achieved. Collaboration and cooperation is the key…and it works. But still Luke Gowdy, general manager of operations for C.H. Robinson Worldwide, said this type of advanced planning is only occurring three to 10 days out. Imagine a future, he said, in which data science and artificial intelligence can be used to always make sure the capacity is where it is needed, to be able to accurately predict, with a great amount of certainty, how long it will take a load to get from point A to B and where it might be most advantageous to pick up a shipment if there is a choice. Might it be better to pick up a load in Santa Maria rather than Salinas because of an unrelated event snarling traffic? Charlie Loes, director of fresh technology for CHR, said the company is already moving in that direction with the introduction of its Navisphere Vision platform last fall. The effort is on the front-end of creating a predictive model for the transportation of fresh produce and other items. Loes though is candid in noting that the accuracy of such predictions improve as the number of data points increase. “Our logistics operations

has generated three billion unique data points over the last six years, and the Western Growers partnership has made a significant contribution to that,” he said. While that is seemingly a great deal, it’s only the tip of the iceberg. In a discussion with Western Grower & Shipper on the future of fresh produce transportation, Loes and Gowdy said transparency is the key for the most efficient use of transportation. If everyone had access to all the data surrounding the shipments of fruits and vegetables from California to the rest of the country, a very efficient transportation system could be managed. The use of a computer and artificial intelligence could much more efficiently schedule those 500 loads that might be leaving the state with lettuce for the Midwest today. The produce industry, rightly so, prides itself on its unpredictability. Every day is different is the mantra heard from everyone along the supply chain. Loes said that while that is true on the granular level, zoom out and nine out of 10 loads are reoccurring and predictable. If only all the data was available to a transportation scheduler, a better system could ensue. Bottlenecks could be identified and avoided. Pickups and deliveries could be better scheduled to decrease wait times at each end. Gowdy said there will always be a need for spot market brokering of a truck. A shipper will make an unusual sale to a new customer in a different place and will need a truck quickly. But that is the exception. “We just want to move the industry forward to a more predictive model,” he said. Of course that is already occurring for many shippers participating with CHR and other logistics companies to fill their contracted sales. Many companies have standing orders from buyers, which allow for the advanced scheduling of equipment. But Loes said much more could be done. More data, he reiterated, leads to better analytics and allows transportation service providers to better cater to the needs of their customers.

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Of course, these two industry veterans understand that complete transparency might be too high of a hurdle to jump in the fresh produce industry. Industry members believe they are uniquely independent and are really not that interested in sharing all of their data. Gowdy said CHR knows this will be an evolutionary process, which has already begun. He said the history of the WG/CHR program shows a great deal of technological advances over the last decade. “We are absolutely doing a much better job,” he said, noting that the data accumulated does allow for better positioning of equipment. He added that on a year-to-year basis trends are being analyzed and acted upon. But Loes said data science is changing industry after industry and there is no reason it wouldn’t do the same to the transportation of fresh produce. Ten days, 30 days, six months out, the industry should be able to better manage its transportation equipment needs, and shippers should be able to make smarter choices. He said Navisphere Vision is already performing some predictive tasks—like predicating the best route for a cross country trip taking into account, weather, traffic and other factors—but he has no doubt it will do more in the future. In the short term, CH Robinson is still adept at using some tried and true methods to forecast the needs of its clients. Gowdy said looking forward to the normal rise in fresh produce shipments in the spring and summer this year, it’s clear that there will almost certainly be some volatility. “There are macro indicators that supply and demand (of equipment) are not in balance. We are continuing to see an increase in demand, and for many reasons we see less supply of equipment.”

Currently, he said truck utilization is as close to 100 percent as you can get. So as there are surges in supply, there is a high level of certainty that there will be periods of shortages and high prices, especially on the spot market. Add in the regulatory components, including the electronic logging device regulation that will, in aggregate, decrease the number of trips for the average driver, and shortages can be predicted. He said the transition in supplies from the desert production areas of Arizona and California to the valleys of California will certainly result in surge volumes and probably surge pricing. Looking at the upcoming situation through the lens of what occurred when increased equipment demand took over after the hurricane, it is almost inevitable that shortages will occur. But Gowdy said CHR did learn from that event and is doing what it can to position carriers as effectively as possible. He said the best strategy for shippers is to align upcoming freight opportunities with capacity, which basically means committing shipments to specific carriers. He also commented on the many reports that truck orders are up significantly year over year leading to much speculation that supplies are catching up with demand. Gowdy said in the first place it takes a while for a truck order to get into commerce. These orders are placed by truck dealerships but the truck still has to be sold to a company or an individual and then get on the road. “We know there is a shortage of drivers. Just because there are trucks purchased, doesn’t mean the driver supply is there.” Ultimately, it could be a challenging spring and summer. It points again to the need for better predictive models so those challenges can be anticipated and met.

With 800 attorneys practicing in major locations throughout the U.S. and Puerto Rico, Jackson Lewis provides the resources to address every aspect of the employer/employee relationship. *Proudly working with Western Growers, agricultural and distribution industries for years Jonathan Siegel 200 Spectrum Center Drive, Suite 500 Irvine, CA 92618 949-885-1362 SiegelJ@jacksonlewis.com jacksonlewis.com

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WATERBIT Tech to Simplify Irrigation and Make Smarter Water Decisions in Real Time

By Stephanie Thara Metzinger C an smart technology offer remote irrigation for agriculture that’s affordable? With the help of WaterBit, the answer is “absolutely.” When Manu Pillai, founder of WaterBit, was growing up in Nigeria, prolonged droughts were a typical occurrence. The massive shortage of water supply wiped out agriculture and devastated the country, severely hindering the ability of Nigeria’s economy to thrive. Pillai saw how it depleted his homeland and wanted to develop a solution that would address this issue globally. “The idea of sensors came to mind,” said Pillai. “We needed something that would be able to monitor soil and crop conditions and deliver the precise amount of water needed for a grower’s specific acreage.” Pillai started refining his idea through his treks across the world. He traveled with his father, who worked for the United Nations, and had the opportunity to live in numerous countries to observe how each community received, accessed and controlled water. When he was ready to put pen to paper, he founded WaterBit with Leif Chastaine in 2015. And in 2017, with the help of TJ Rodgers, he recruited Andrew Wright, a former Cypress Semiconductor executive vice president, to help assemble the building blocks for an invention that would have the potential to revolutionize irrigation. WaterBit now offers a complete irrigation program that allows growers to automate irrigation across their crops . HOWWATERBIT WORKS “Essentially, we offer a complete package that can be installed in a matter of minutes,” said Leif Chastaine, chief operating officer of WaterBit. “We put sensors into the ground, set up the communication gateway and, in minutes, data from the sensors is sent to the cloud where the grower has easy access to analysis and scheduling tools that enable control of irrigation block valves.” More specifically, the following four components of the WaterBit technology work together to act as one cohesive solution: • Monitoring (WaterBit Carbon): Small, solar powered telemetry nodes—or Carbon nodes—are connected to sensors, including capacitive soil moisture probes, to monitor soil moisture and field conditions. They can also control actuators and relays. Carbon nodes are long-range and can communicate to WaterBit Connect thousands of feet away (up to 1.5 miles under foliage). • Communication (WaterBit Connect): WaterBit Connect gateways provide connectivity between Carbon nodes

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deployed in the field and the WaterBit cloud application. Data from the sensors is sent to the WaterBit cloud application where it is analyzed to determine if a block needs water. Irrigation schedules are sent from the cloud through the gateways to the Carbon nodes that control the irrigation valves. • Planning & Visualization (WaterBit Dashboard): Data is stored in the cloud and can be accessed by growers 24/7 via computer or smartphone to make fully-informed decisions. • Automation (WaterBit Block Valve Controller): If the crops need to be irrigated, growers can access the dashboard and control irrigation from virtually anywhere through a mobile- friendly app. The control valve can then automatically dispense the precise amount of water needed for that block. The smart technology understands that delivering water at the right time is critical to the success of a crop, while comprehending that the amount of water needed varies by crop and condition of the field. This results in a better, more informed water delivery, which is crucial in maximizing crop yield and quality. Chastaine notes that WaterBit’s sensors have a two-year payback, guaranteeing 20 percent higher yields at that time. Additionally, the startup’s fully autonomous solution saves hundreds of hours of labor by eliminating the steps of manually checking soil moisture on each plot of land and sending workers to turn on and off the valve. “We don’t just send you an alert, we go the extra mile by providing end-to-end irrigation,” said Chastaine. HOWWATERBIT PARTNERS WaterBit joined the Western Growers Center for Innovation & Technology (WGCIT) in March 2017 and, at that point, was in the process of creating relationships with numerous WG members such as Bonipak Produce and Bowles Farming. During the 2017 season, Bowles used WaterBit to gather baseline data on soil moisture levels and correlated that information with crop yields. In the past, this was done manually. With WaterBit’s help, Bowles was able to better assess the water needs of the crops using the sensors. This 2018 season, they plan to use

WaterBit to make real-time irrigation decisions for other crops in the typical Bowles rotation. The farm also hopes to utilize the technology to assess water needs for new crops like watermelon and garlic, where they need to gather baseline data. In the future, WaterBit looks forward to tapping the WGCIT’s resources—such as instant access to growers and exclusive opportunities to showcase their technology during WG events—to expand the startup’s network and bring this technology to more agricultural operations. “In addition to providing a place to work and meet in Salinas, the WGCIT has been instrumental in providing opportunities to interact with growers,” said Pillai. “Understanding the needs of your customers is critical to developing

solutions and in this regard, the WGCIT has been instrumental.” WaterBit is continually looking to improve its solution to make its irrigation technology as easy as possible for growers. In their latest effort, the firm has partnered with AT&T to ensure that their communication gateway runs securely and uninterrupted. Their new relationship with AT&T provides highly secure connectivity to its autonomous irrigation solution and enhances growers’ ability to improve labor, water and land efficiency using the WaterBit technology. “With the support of partners like AT&T and Western Growers, we will continue to strengthen our solution in an effort to make irrigation smarter,” said Chastaine.

MARCH | APRIL 2018

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THE NEW TAX LAW Nuances Require an Expert’s Knowledge

By Tim Linden W hen The Tax Cut and Job Act was passed in December, it was touted as an overhaul and simplification of the tax code. For the average American, that may well be true. But if you have a business, even a relatively simple, small, home-based operation, there are many nuances in the new tax law that the services of a certified public account are almost universally well worth the effort and the expense. And it’s probably best to make that appointment soon as there are many strategies moving forward that the business owner can employ to substantially reduce a company’s tax bite. Proponents made no secret of the fact that the bill would lower the tax rates on businesses. It does that and then some. There are several provisions that are very advantageous to even the smallest operation or farm. At least that was the takeaway after a conversation with a couple of tax experts in the Yuma, AZ, office of Frost PLLC, a certified public accounting firm. Last year, Terkelson, Smith and Tyree merged their 50-year old firm with Frost, another independent CPA specializing in agriculture, with offices strategically located around the country. Partners Carol Smith and Tim Terkelson talked to Western Grower & Shipper in February and noted that the merger was designed to help the firm better serve its clients. “Our clients are growing and we didn’t want to be outgrown,” said Terkelson. “We now have unparalleled resources to meet their needs.” Smith said it was a seamless transition for the firm’s clients as the two firms merged in June of 2017. “As far as our clients are concerned, nothing changed in our day to day operation.” What has changed for every CPA, however, is the federal tax law. There is some truth that for many individuals, the law will mean filing a standard return for 2018 utilizing the standard deduction rather than filing the “long form” which involves itemizing one’s deductions. Matt Lewis, vice president of financial services for Western Growers Financial Services, noted that the new law does have a $24,000 standard deduction for a married couple filing jointly. The law still allows for unlimited charitable contributions, but with caps on deductions for property taxes, mortgage interests and state income tax, he said many couples will not reach the $24,000 threshold. However, there are legitimate strategies that can be employed to run one’s income and expenses through a business, thus taking advantage of the tax breaks this law gives business owners. There is also a loophole in the law that treats sales to a co-operative more advantageously than sales to a company. Terkelson expects a legislative fix to this provision…or a stampede by businesses to operate as co-ops where possible. Co-ops have long been utilized in agriculture and, with no change, this law would give them a huge boost. Smith said that for most of the firm’s ag business clients the most advantageous provisions in the new law are the lowering of the top

corporate tax rate from 35 percent to 21 percent, and the change to depreciation schedules. In fact, the depreciation change went into effect on Sept. 22, 2017, so some firms were able to take advantage on their 2017 returns. Without getting too deep in the woods, the new law allows for faster depreciation, expands the amount that can be depreciated and also applies the rules equally to both new and used equipment. In the past, they were treated differently with new equipment having an advantage when it came to write-offs. Terkelson said another big change is the way net operating losses are treated. Under the old law, losses had a carry back provision of five years and a carry forward limitation of 20 years. The new law limits carry back losses to two years but carry forward is unlimited. And still another advantageous provision for many people is a provision that establishes a 20 percent deduction of qualified business income from certain pass-through businesses. Joint filers with income below $315,000 and other filers with income below $157,500 can claim the deduction fully on income from service industries. This provision would expire December 31, 2025. This is another provision that should make small business owners at least consider how they are structured. Terkelson said this deduction requires some complicated calculations but it’s very much worth looking at. The advantageous co-op provision, which the Frost duo believes is an unintended consequence of the law, points to a fact that is almost always true with major legislation, and that is that “fixes” are needed once the law is analyzed by experts. These types of laws are the result of lots of negotiations and unintended consequences are inevitable. Terkelson said the co-op provisions appears to give sellers of products to co-ops a 20 percent deduction on the revenue. So if a grower sells his product to a packing house that without a co-op status, he or she would have to report 100 percent of the income. If the packing house was a co-op, only 80 percent of the income would be reported. “This is a competitive advantage,” he said. “Co-ops are going to come out of the woodwork if this isn’t changed.” Smith said Congress is aware of this needed fix as well as some other necessary changes and many are anticipating that corrective legislation will be written and passed. The new law also changes the deductibility of business entertainment. Under the old law, 50 percent of the cost of business meals could be deducted. Under the new law, business entertainment is no longer deductible. Employee expenses when on business trips or at conventions are still deductible but that expensive client dinner is not. As Smith and Terkelson looked at other nuances in the law, the bottom line remained the same: go see an accountant as you plan your business strategies for 2018 and beyond. It might be an opportune time to change your business structure or buy that piece of equipment you have been putting off.

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