WESTERN GROWER SHIPPER JULY/AUGUST 2018
TRANSPORTATION Ag Exemption Eliminates Major ELD Hurdles
AWARD OF HONOR Stephen Patricio Exemplifies the Best of Ag Growing a Better Environment for the Future CROP FORECASTING AgriData Estimates Months in Advance ORGANIC FARMING “Liquid Compost” Fuels AgroThrive TRANSPORTATION Ag Exemption Eliminates Major ELD Hurdles Green Jobs Still a Small Fraction of the California Economy
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WESTERN GROWER SHIPPER JULY/AUGUST 2018 WGA.COM
6 AWARD OF HONOR Stephen Patricio Exemplifies the Best of Ag 10 Growing a Better Environment for the Future 18 CROP FORECASTING AgriData Estimates Months in Advance 20 ORGANIC FARMING “Liquid Compost” Fuels AgroThrive 22 TRANSPORTATION Ag Exemption Eliminates Major ELD Hurdles 28 Green Jobs Still a Small Fraction of the California Economy 29 IN MEMORIAM Ernest J. (Ernie) Bontadelli
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TOM NASSIF | PRESIDENT AND CEO, WESTERN GROWERS PRESIDENT’S NOTES
Taking Care of American Farmers On Trade Back in April, President Trump was quoted as saying to Secretary of Agriculture Sonny Perdue: “You can assure your farmers out there that we’re not going to allow them to be the casualties if this trade dispute escalates. We’re going to take care of our American farmers. You can tell them that directly.”
This statement is revealing. The President is acknowledging the significant and precarious position of American agriculture in the world of international trade agreements. American farmers produce a product that the rest of the world wants, which makes our industry an easy target for retaliatory tariffs. With the current escalation of trade tensions between the United States and its historical trading allies, agriculture once again finds itself in the crosshairs of international political posturing. At the end of May, the initial reprieve from steel and aluminum tariffs granted to Canada, Mexico and the European Union expired. A series of retaliatory measures, including those aimed at American agricultural products, quickly followed. After a tense and hostile G7 summit in Canada in early June, these retaliatory tariffs are all but certain to kick in [not to mention the ongoing tit-for-tat trade measures with China]. I understand what the Trump administration is trying to accomplish. The scales of international trade are undeniably tilted in favor of our trading partners, a balance that began to tip during the late 1970s. While freer trade has benefited many American farmers, including those in the produce industry—in fact, we are now exporting more fruits and vegetables than ever before, nearly triple pre-NAFTA numbers—it is hard to ignore our perennial balance of trade deficits. I believe any rational supporter of free trade would agree that the United States could benefit from fairer deals with our trading partners. Thus, I applaud the President for getting tough on trade. However, there is a limit to the burden that agriculture should be asked to bear as the collateral damage of a broader trade war. The Trump administration should work to adopt measures to protect our industry from any potential fallout. In short, we expect the President to follow through on his promise to “take care of our American farmers.” Many farmers may be unwilling to swallow a bitter pill now in order to help reset our trade relationships and benefit the American economy in the long run, so we must see some type of plan unveiled to mitigate the losses agriculture is and will continue to experience so that we can gain their support. Stakeholder input will be critical to developing an adequate
mitigation plan, and we will work with USDA to pursue strategies that benefit not only our produce industry, but all of agriculture. It is estimated that American producers will face hundreds of millions, if not billions, of dollars in lost export opportunities due to retaliatory tariffs. Furthermore, the increased supply of fruits and vegetables that would have otherwise been exported will flood the domestic market, lowering prices and exacerbating the damage already being done to American farmers. While it is easy to get caught up in the tariff talk, an equally important concern must also be addressed by the Trump administration if we are going to truly level the playing field: non-tariff trade barriers. As an example, our government has long-reported to Congress that China unevenly implements its World Trade Organization obligations by erecting non-tariff trade barriers to U.S. agriculture. Indeed, the Chinese import and inspection system is frequently used to impede American measures—including pseudo-science—to block our export opportunities. In recent years, we have railed against barriers to apple exports to Mexico, as well as the illegitimate use of sanitary and phytosanitary standards in several Asian countries to delay or prevent our access to foreign buyers. Furthermore, we are concerned about the increasing use of divergent maximum residue standards, which have gone from a legitimate tool to protect public health and safety to a tool to protect domestic markets. Any renegotiation of our trade deals must include a more transparent, predictable and truly science- based trading system. President Trump is embarking on an aggressive path to rebalance American trade. He knows that taking this approach will put American agriculture in harm’s way. We urge the President to fulfill his promise to mitigate any harm that befalls the industry so we will not become “the casualties” of an escalating trade war. (Editor’s Note: An excerpt of this column appeared in the 06/15/18 edition of The Packer.) agricultural products from entering the country. More broadly, other countries also use non-tariff
4 Western Grower & Shipper | www.wga.com JULY | AUGUST 2018
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AWARD OF HONOR Stephen Patricio Exemplifies the Best of Ag
By Stephanie Metzinger I t’s 5:00 am on August 18, 1962, and the City of Los Banos is already buzzing with excitement in anticipation of President John F. Kennedy’s visit to their little community for the groundbreaking ceremony of the San Luis Dam. Nine-year- old Stephen Patricio is getting ready to hop on his bicycle to make the 15-mile trek with his cousins up to the site to see this monumental event. Just as he was about to put pedal to the metal, his mother stopped him, notifying him that he had to be at least 10 years old to bike to the dam. He was two months shy. “I was madder than a hornet,” Patricio said, and throughout the ceremony (which he traveled to by car), he stuck to his guns and remained passionately upset about not being able to bike up with his cousins. “It was out of principle, considering I was almost 10,” he laughed. This is the same grit and passion that has propelled Patricio to help advance the agriculture industry by leaps and bounds. Almost everyone who knows him mentions his dedication to the ag community—especially when it comes to water rights and food safety. One thing that might surprise people, given his influential leadership in the industry, is that Patricio’s roots are not ag-based. Though he was born and raised in the farming-rich town of Los Banos, Patricio still considers himself a “city boy.” His grandfather opened a small grocery store in 1922, and eventually, his parents took over the store. The family was not one of farmers. “I had a lot of farming around me and many friends who farmed dairy, but we owned and operated the store.” Patricio left his hometown for Santa Clara University, where he graduated with an accounting degree in 1974. He immediately headed to San Jose to work for Arthur Young and Company, a national CPA firm, specializing in accounting for high-tech electronics. Not long after, family friend Jess Telles reached out looking for a young CPA for his large-scale farm. Patricio was not sure that getting into ag was something he wanted to do but agreed to take the position on a trial basis. The young accountant spent 99 percent of his day inside the TRI Produce office as a “bean counter,” learning all aspects of the business from the ground up. After 15 years as the chief financial officer, he was asked to also become the general manager of the melon operation, which is when he started working closely with growers on a daily basis. Patricio quickly learned that the key to success was to work with growers, not just for them. “They are proud of what they do, and they become farmers because they want to make their own choices. Whatever decision they made, I tried to support them,” he said. “This became the mantra of my life.”
In 1993, the TRI entities were split and sold, and Telles and Patricio launched a different type of venture. Their idea was to have a company act as a true resource for growers. Westside Produce was created to be, and still is, fully dedicated to acting as the liaison for growers to bring product from field to marketplace in the most efficient way possible. At no point in time would the company start growing their own melons. Westside Produce is a place where growers know their product does not have to compete for sales with the owner’s crop. Between streamlining TRI Produce’s melon business and launching Westside Produce, Patricio experienced his first melon food safety crisis. In 1992, the Centers for Disease Control announced that people were getting sick from eating cantaloupe. The news spread like wildfire and all sales stopped. New orders were not being taken and stores were pulling existing orders. “It was my job to go tell six to seven hundred people to stop picking, pack up their stuff and go home. The crews looked at me asking ‘how long’ and it made me sick to my stomach that I just really didn’t know,” said Patricio. “This was an epiphany point for me. I vowed to make food safety a priority in my life.” Not being able to respond to workers, consumers and media with scientifically-based research and knowledge about food safety and melons was a huge mistake for the industry, according to Patricio. He started working with University of California, Davis to conduct a food safety analysis of melons. The research, which was funded by industry, resulted in the development of the first “Commodity Specific Food Safety Guidance for Cantaloupes.”
Stephen Patricio with other members of theWG Executive Committee inWashington, D.C. during a lobbying trip.
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A young Stephen Patricio at the opening of the San Luis Dam.
Stephen Patriciio has been involved in water issues for his entire career, including supporting increased water infrastructure in 2009 when Arnold Schwarzenegger was governor.
This guidance was distributed and recommended to the California cantaloupe industry in the early 2000s and became the first-ever mandatory compliance program in 2012. Additionally, during his chairmanship at Western Growers in 2007, he guided WG members through a devastating E. coli outbreak with spinach and salmonella poisoning with tomatoes. Through his stewardship, Western Growers leadership helped lead the establishment of the Leafy
the Center for Produce Safety (CPS), a collaboration that provides and shares ready-to-use, science-based solutions to prevent or minimize produce safety vulnerabilities. Today, CPS serves the ag community both domestically and abroad. “When you look at the success of California agriculture, Steve is a true representative of why the ag community
Greens Marketing Agreement in California and Arizona. The Marketing Agreements have today become the model for produce safety and accountability. From that initiative, it became obvious that all of the stakeholders, from field to fork, needed a platform to conduct transparent, collaborative food safety research. This resulted in the creation of
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Steve Patricio and his family.
is as successful as it is today,” said Bonnie Fernandez-Fenaroli, CPS executive director. “He truly embodies passion and proactivity, and his commitment to food safety to benefit both the consumer and industry is unlike any other.” Patricio has played an integral role in the development and growth of the CPS, including leading a significant fundraising campaign when he was its chairman that raised more than $12 million to fund research geared toward preventing foodborne illnesses. His efforts on food safety have had an international impact and continue to shape public policy. “Steve has one of the brightest minds and quickest wits in the industry,” said Bob Gray, past WG chairman and former president/CEO of the California Ag Leadership Foundation. “He is a contributor of substance, and the expertise and competence he has brought regarding food safety and water have made major impacts for the industry.” Patricio’s tenacity does not stop at food safety. Under the mentorship of Telles early in his career, Patricio found what he later would refer to as his number one hobby: water. At TRI Produce, Telles—who was a water attorney—involved young Patricio in the dealings of federal, state and local surface water contracts since the farm owned a hefty amount of land throughout the West. “I needed to get involved to make sure we were compliant, and I came to realize how little people knew about their water and their rights to that water,” said Patricio.
At the time, he did not know much about water rights either, but he started attending meetings about water contracts; engaged in conversations about the Central Valley Project; researched and read articles about water districts and bureaus; and listened intently to stories Telles would tell about his firm forming many of these districts and negotiating these water contracts. After years of listening and learning, his hobby became his passion. In the mid-1990s, Telles and Patricio decided to launch an orientation program for their agribusinesses that focused exclusively on water rights. This was a first for the industry and something that was much needed. “There was a continuous stream of growers approaching us asking for our help. We needed a steady supply of melons to grow our future and water was the key,” he said. Patricio has spent countless hours throughout the years in lobbying meetings, press conferences and water debates advocating for a sustainable supply of water for farmers to grow the food that feeds the state, nation and world. In fact, while he was WG chairman, he was asked to join then-California Governor Arnold Schwarzenegger at the San Luis Reservoir to call attention to the need for more surface water storage and stress the need for a comprehensive water solution. “Steve has been a tireless advocate for agriculture, and his ability to turn some of the most tumultuous challenges that
our industry has faced over the past few decades into opportunities is unmatched,” said Tom Nassif, WG president and CEO. “He has already left a tremendous legacy as someone who shoulders the responsibility of igniting change that advances the industry as a whole. It’s been a true honor to work alongside him all these years.” To celebrate his accomplishments and passion for shaping the ag industry, WG will fete him with the 2018 Award of Honor during its Annual Meeting on October 30, 2018, in Palm Desert, CA. The Award of Honor is Western Growers’ highest recognition of industry achievement and is given to individuals who have contributed extensively to the agricultural community. “I was speechless when I found out I was selected for this award,” remarked Patricio. “I never thought that, in the end of it all, I would be a farmer or involved in this honorable and wonderful world that I am so engaged in today. I often tell youth that your career chooses you, and because I followed the path life decided to take me on, I am proud to say that I am a farmer. I couldn’t imagine being in any other industry.” The award will be presented during the Award of Honor Dinner Gala. There, Patricio will be celebrated by his wife, Nikki; children, Blake, Garrett and Ashley; grandchildren, Yale, Taylor, Peyton, Brooklyn, Carter, Paxton, Kennedy and Bryce; and peers and friends. To attend the ceremony, visit http://www.wgannualmeeting.com.
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Growing a Better Environment for the Future
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
By Leah Freeman F armers are the original environmentalists, stewards of the land and protectors of the open space. Those who tend to our crops understand the symbiotic relationship between healthy food, healthy soil and clean water and air. The overwhelming majority of farmers operate with a single overriding objective: to sustainably manage our land so it can be farmed for future generations, just as it has been farmed for generations before. As knowledge of the interplay between agriculture and the environment deepens, farming practices have evolved to not only grow more with fewer natural resources, but to farm in a way that enhances the environment. Terranova Ranch and Bowles Farming Company are two examples of farms growing a better environment for the future. Don Cameron of Terranova Ranch has been an innovator in on-farm groundwater recharge. During last year’s historic rains, with excess surface water that would have otherwise been shunted to the sea, Cameron began flooding his pistachio fields and grape vineyards—sometimes to a depth of a foot-and-a-half. He did this for several months straight to build up their groundwater stores. All of his trees and vines survived and continue to produce their expected yields. At full capacity, this project is able to recharge up to 1,000 acre-feet of groundwater per day, which will help immensely during drought periods to prevent setbacks with production. This year, Cameron is embarking on yet another innovative project on his farm—he is building a monarch and honey bee habitat in collaboration with the Environmental Defense Fund (EDF). In a mutually beneficial endeavor, Cameron is using funding from the EDF to plant two varieties of milkweed, which is favored by monarchs, as well as a wild flower mix. In addition to providing habitat for native pollinators, which are critical to the crops at Terranova Ranch, the vegetation will help to prevent erosion of the levee that borders the farm. “We want to make mistakes now and learn from it so we can figure out what to do on a larger scale,” said Cameron. “Having the habitat will hopefully be beneficial long-term for us.” Because Terranova Ranch is only in the early stages of this process, Cameron knows it will be a learning year. Eventually, he would like to expand the project several more miles down the side of the levee. He also wants to add perennial flower plants to have additional habitat and flowering shrubs to attract bees year-round. His goal is to build up native pollinators but also see if he can make this location a successful habitat for monarchs. Monarch numbers have declined over the years and if this proves successful, then monarch butterflies will have a home to reproduce, feed and raise additional species. “We hope to improve relationships with the environmental community and show that farmers care about
the environment as much as other people do. We are willing to put time and money into developing habitat on the farm,” said Cameron. The diverse habitat at Terranova Ranch goes beyond monarchs and
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“As the habitat develops, benefits to wildlife are already revealing themselves. Even within two years of restoration, bird use has seemingly responded to the improvements in habitat quality. Accompanying accounts of long-tailed weasel, river otter, and monarchs, Point Blue’s monitoring efforts at the Bypass note 49 different bird species utilizing the area,” said Michael. “Such wildlife use on our projects encourages us to continue taking advantages of opportunities to build a healthier landscape.” Bowles Farming Company executives believe it is important to have good data to go along with the work they are doing, in order to demonstrate value and find partners who will help them in their conservation efforts. Technology is that crucial piece that gives them the data they need to help make improvements across the farm. Where they have put in native grasses, shrubs, and trees, they are also incorporating a data management system similar to what they use in the field for their crops. In this way, they can have good data to help them make decisions on how to continue and improve these types of sustainability efforts. Terranova Ranch and Bowles Farming Company are but two in a growing list of farms partnering with environmental organizations to improve their conservation practices, proving that farmers and environmentalists can have a shared interest in protecting the land and its resources. As part of the broader story it is trying to tell as an industry, agriculture must continue to seek out and engage in these types of productive relationships, which will allow it to more credibly communicate the full extent of its collective environmental stewardship.
Don Cameron at Terranova’s monarch and honey bee habitat
bees. The preservation of wildlife is important to Cameron, who has partnered with the Audubon Society to place owl boxes throughout the fields, which helps with pest control (they constantly have problems with gophers eating the irrigation drip tape). Since adding the boxes, the owls have been extremely successful in controlling the gopher population while adding diversity to the local environment. Additionally, Cameron maintains a four-acre wildlife refuge that houses a variety of wildlife from egrets and frogs to ducks and hawks. Cannon Michael, with Bowles Farming Company, is another pioneer in incorporating environmental sustainability on the farm. As a steward of the land, Michael recognizes that his farm plays a distinct role in ensuring the long- term health of the environment. He is committed to investing in conservation efforts just as he is investing in his crops. “Amongst our sustainable landscape goals is the desire to continually improve the quality of wildlife habitat throughout the farm and its surrounding landscape,” said Michael. In recent years, the Bowles Farming Company has broadened its habitat footprint through collaboration and partnership with local agencies and conservation organizations. They have worked closely with partners including the Wildlife Conservation Board, U.S. Fish and Wildlife Service, Audubon Society and Nature Conservancy. These partnerships helped develop the Bowles Pick Anderson Habitat Project, which is a four-mile restoration effort and enhanced riparian habitat alongside the San Joaquin River.
This effort is making a home for the terrestrial and avian species in the area. So far, they have 17 acres restored, with more than 2,500 potted plants installed and nearly 300 pounds of native seed drilled. They also have drip systems in place to keep the native species watered and healthy. “Even within two years of restoration, bird use has seemingly responded to the improvements in habitat quality. Accompanying accounts of long-tailed weasel, river otter, and monarchs, Point Blue’s monitoring efforts at the Bypass note 49 different bird species utilizing the area.” Cannon Michael
Bowles Farming Company’s restoration of the riparian habitat
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CHRISTOPHER OERMAN | FINANCIAL ANALYST/ADVISOR FINANCIAL SERVICES
The Debt and Dangers of the Eurozone
You may have heard the words ECB, Eurozone, or even “Mario Draghi’ sometime in the past. But who and what are they, and why should Americans care about what’s going on across the pond? The Eurozone is a monetary union of 19 of the 28
This decision isn’t unfamiliar. The U.S. Federal Reserve (FED) purchased $4.5 trillion in investments during the years following the financial crisis. The bond buying program ended in 2014 and the FED has since raised interest rates seven times. The FED has been relatively successful in its effort to de-lever its balance sheet. Europe, however, has more complex issues, including political uncertainty, which has the potential to plague each nation. Just this year, the Italians threatened to leave the EU in its most recent elections, and most feel that the political unrest is far from over. Italy’s debt to GDP ratio is currently at 132 percent. By comparison, at the height of the Greek debt crisis in 2015, its debt-to-GDP ratio was at 178 percent, and shockingly enough, it remains around the same level today. As it currently stands, seven of the 19 Eurozone members have debt-to-GDP numbers above 95 percent, with many well above 100 percent, including Greece (178%), Italy (132%), Portugal (126%), and Belgium (103.1%), with Spain (98.3%), Cyprus (97.5%), and France (97%) not far behind. For reference, Germany’s debt-to-GDP level is at 64 expanding global economy, if we start to see economic slowing, especially in Europe, we could see an escalation of problems as these debt-to-GDP numbers rise. In the event of a downturn, at least the United States would be able to implement another version of QE, if necessary. The ECB, however, would be in a much tighter position as it has fewer “tools in the toolbox” because of its current monetary policy and the balance sheets and political ideologies of many of its members. percent and the United States is at 105 percent. While these numbers remain tolerable with an
European Union member states that have adopted the euro as their common currency and sole legal tender. The Eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The ECB, also referred to as the European Central Bank, is the central bank for the euro and administers the monetary policy of the Eurozone. The objective of the ECB is to maintain price stability within the Eurozone and the bank has the exclusive right to authorize the issuance of euro banknotes. The current head of the ECB is an Italian economist named Mario Draghi, who has been president since 2011. After the financial crisis of roughly 10 years ago, central banks began a process called QE or Quantitative Easing. QE is the process by which a central bank purchases government securities in order to keep interest rates low and expand the money supply, thus flooding financial institutions with capital with the goal of increasing lending and liquidity. The European Central Bank has purchased more than 2.5 trillion euro ($2.9 trillion) worth of assets and kept a zero interest rate policy since launching quantitative easing in 2015, in an effort to keep the debt service of Eurozone countries low so that they can increase economic activity and improve their balance sheets. The ECB’s balance sheet is now 40 percent of the Eurozone GDP. On Thursday, June 14, the ECB said it would reduce its bond purchases in the final three months of the year, and halt purchases all together at the end of December. The ECB cautioned that the plan was subject to incoming data, and that interest rates would remain at present levels until at least through the summer of 2019. Currently the key ECB lending rate is at zero percent. Draghi said the decision to wind down the stimulus program was based on strong economic growth and solid inflation levels.
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Member Since 1978
Withstanding the Test of Time
I t is hard to believe that any technology applicable in 1936 is still viable today, but getting the field heat out of produce by topping it with ice is still in vogue. Growers Ice is offering the same service concept today that fueled its establishment more than 80 years ago. “Some of the equipment is 50 years old,” says Jim White, who is in charge of the operation these days. But that is not an indication that Growers Ice is stuck in the past. Even as its core business proposition remains the same, it has been moving aggressively on its strategic plan, which maps out a progressive future. In fact, White’s presence is a testament to the company’s forward thinking philosophy. But before exploring that, let’s go back to the beginning. It was in the middle of the 1930s that four pioneer Salinas farming families jointly established the cooling operation. “Some have called them the four horsemen of Salinas,” quipped White. “There was K.R. Nutting, T.R. Merrill, Bruce Church and E.E. Harden.” Those names were synonymous with western vegetable production and as demand grew for East Coast bound shipments of their products, it was necessary to find a way to help extend shelf life. Boxes of lettuce were harvested in the fields for these four companies and brought to the Growers Ice facility on Abbott Road in Salinas. “They would dump ice on the lettuce to cool it down quickly,” said White. “I understand it is where the name ‘iceberg lettuce’ came from.” The operation occupies the same Abbott campus today though it has expanded over the years. For the first 35 years or so, it chugged along as the private cooler for those four operations. In the 1970s, T.R. Merrill bought out the other partners and commercialized the operation, using it for his own product and also providing cooling and loading service for other Salinas Valley shippers. Over the years, Growers Ice Company expanded adding Growers Custom
Equipment, Central Coast Cooling and finally Post Harvest Technologies. Each of those firms was devoted to improving the logistics portion of the supply chain assuring that the crops harvested in the West arrived in the East in top condition with maximum shelf life. The next major change came in 1997 when Merrill Farms got out of the growing and shipping business. At the time, the Merrill family and its descendants, including the Gheen family, began leasing out their farmland to other growers and concentrating their efforts on Growers Ice and the affiliated companies. Though the future was not known, it was also in the 1990s that the current changes at Growers Ice had their genesis. It was about a quarter of a century ago when Jim White met Bill Gheen. White was a local businessman who made a name for himself as an
The four founders of Growers Ice: K.R. Nutting, T.R. Merrill, Bruce Church and E.E. Harden (not necessarily pictured in that order).
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international entrepreneur. He worked for companies all over the world and in 1991 founded Monterey, CA-based JL White International as a full service management consulting and leadership development firm. He made his name as a turnaround specialist. Over the years he has bought, expanded and sold 22 companies in 43 countries. He has also written several business management and leadership training books and conducted countless leadership training sessions and seminars. Gheen worked with White in the consulting business in the 1990s, and in 2014 they reconnected as Gheen looked for ways to breathe new life into the Growers Ice Company. White was hired in 2016 to help the company move forward and develop a five year strategic plan. In 2017, he was hired to implement that plan as CEO. Initially, fact finding fueled his activity. Now he is in full execution mode. White said in analyzing Growers Ice, he discovered a facility that was in need of updating and had many operational challenges. His strategic plan includes updating technology, improving procedures, and upgrading the staff and the training of the staff. At 70, White said it is a perfect transition to the next phase of his business life as he has been scaling back his consultancy work. As a practical matter, Growers Ice Company has been
reorganized with each of the entities spun off as their own operating company. Post Harvest Technologies, Inc. (PHT) is the management firm, which provides management services to Growers Ice and the other portfolio companies. It is under the umbrella of PHT Inc. that White has built what he considers to be a top-notch executive team with good leadership skills. It is in the area of leadership that he believes companies separate themselves from the pack. He said new technologies and updated facilities will be part of the mix but before he ever calls for capital investment, he strives to take waste out of a company and improve its efficiencies. He believes that effort is proving successful as Growers Ice had what he called its “best year ever” in 2017 as 26 million cartons of product for 38 different growers moved through the facility.
four years. He said the company is investing in R&D and is striving to maintain its leadership role in the industry. He said labor and energy are its top inputs and it will be investing in new technologies in those areas for efficiency sake. White said diversification is another strategy but added that a successful company never wants to wander too far from its core competencies. The company has moved forward as a real estate management company. It owns all of the properties it manages (pre-cooling and cold storage real estate assets) along with the pre- cooling equipment that is leased to the tenants. Central Coast Cooling (CCC), the largest tenant on the 28-acre Salinas Campus, leases the pre-cooling equipment from Growers Ice and CCC takes care of the pre-cooling operations. And Growers Custom Equipment (GCE) designs, engineers and manufactures the specialized pre-cooling equipment. As far as he is concerned, White is committed to seeing Growers Ice through the five year strategic plan. And from the outside, the company continues to do what it has been doing for 80 years—taking the field heat out of the product.
But he said capital improvements will be part of the mix, estimating that $100 million will be spent over the next three to
The Growers Ice campus in Salinas.
JULY | AUGUST 2018
Western Grower & Shipper | www.wga.com
TERRY O’CONNOR | NOLAND HAMERLY ETIENNE & HOSS AGRICULTURE & THE LAW
California Supreme Court Ruling Threatens Independent Contractor Relationships
An increasingly unloved category of working persons, the Independent Contractor, has been moved to the endangered species list by a recent California Supreme Court decision.
service providers are employees of the hiring entity, unless all of the following are present: A. The worker is free from the control and direction of the hiring entity, both under the contract for the performance of the work and in fact; and B. The worker performs work that is outside the usual course of the hiring entity’s business; and C. The worker is customarily engaged in an independently established trade, occupation, or business. The ABC test is not a balancing test – if the hiring entity cannot prove all three prongs in an administrative or judicial proceeding, the presumption of employment applies and the worker will be classified as an employee. Part A of the ABC test looks to both the right to exercise control and whether control is exercised in practice. Like the traditional multi-factor “right to control” test, Part A looks to the nature of the work and the relationship between the business and the person performing the work. A business need not control every detail of the work in order to have maintained enough control to fail this test. Hiring entities and individuals should scour their contractor agreements to remove any language that would give them implied control over a contractor. Independent contractor agreements should scrupulously avoid any employment-like provisions. For example, at-will employment status, overly restrictive prohibitions on working for others or other policies drafted for the entity’s true employees. Part B looks to the services provided and whether they are the same services provided in the ordinary course of the hiring entity’s core business. It requires an analysis of whether the worker is providing services that are not routine in the hiring business but rather need to be performed by a traditional independent contractor like a plumber or electrician or one who otherwise has expertise not required in the hiring entity’s day
On April 30, 2018, the California Supreme Court adopted a new test for determining whether a worker should be classified as an independent contractor or an employee. When this test is applied, expect a breath-taking expansion of the number of California workers covered by the wage and hour regulations of California’s Industrial Welfare Commission (IWC) Wage Orders. There will be a concomitant decrease in the number of independent contractors. Many businesses and individuals will painfully learn that the independent contractors they engaged are actually employees with all of the considerable rights and obligations attached thereto. In Dynamex Operations West, Inc. v. Superior Court of Los Angeles , the California Supreme Court rejected the long- standing “right to control” standard, which weighed various indicia of the principal’s control over the worker to determine if a worker was properly classified as an independent contractor or employee. Dynamex had originally engaged its drivers and couriers as employees. It later reclassified them as independent contractors. When challenged in court, the company argued that its contract and practices did not show the requisite control over the workers to characterize them as employees. The court rejected the “right to control” standard and adopted an “ABC” test to determine whether a worker falls under the broad “suffer or permit to work” standard. “Suffer or permit to work” is part of the definition of employer contained in all Wage Orders. Under this test, an entity which knowingly allows another individual to provide services, regardless of a lack of control over the worker, is nevertheless the employer of that individual. The ABC test is used by many state unemployment insurance agencies and more broadly in certain other jurisdictions, including Massachusetts and Vermont. It appears that California has now joined these other liberal Blue States to limit the use of independent contractors. The ABC test begins with the presumption that individual
16 Western Grower & Shipper | www.wga.com JULY | AUGUST 2018
to day operations. Part B will be challenging for gig economy providers. Indeed, the District Attorney in San Francisco, inspired by the Dynamex decision, has subpoenaed all of Lyft and Uber’s records to determine if their drivers are properly being treated as employees. Even if the hiring entity does not control or direct the work, the nature of work performed must also be differentiated from the company’s core business and processes. The Part B test will likely be the most difficult for a hiring entity to establish, because it requires showing that the worker is truly providing a unique and isolated service for a business. As an example of this, the Supreme Court described a plumber hired by a retail store to repair a bathroom leak. Because the plumber is performing work that is not part of the store’s usual business of selling clothing, it would not be reasonably viewed as working within the scope of the hiring entity’s business. On the other hand, a seamstress working from home for a clothing manufacturing company to make dresses from company-supplied cloth patterns likely would not pass muster under Part B and would be viewed as part of the hiring entity’s usual business operations. Part C focuses on the provider to determine whether he/she is providing services as an independent business or is providing services as a de facto employee. Freedom to provide services to others and the actual exercise of that right are important considerations. This can be evidenced by such things as incorporation, licensure, advertisements or routine offerings to provide services to the public or a number of potential customers. A worker solely dependent on a single principal for his entire livelihood is unlikely to be regarded as independent. Lengthy relationships over many years will be suspect. Hiring entities should confirm that the contractor has other sources of business and holds herself out to the general public as a separate business. As in Part A, it will not be enough that the contract allows the contractor to work for others, the worker must actually perform work for others. This decision leaves many unanswered questions, including how courts will reconcile the ABC test for claims under the IWC Wage Orders with the “right to control” standard used for Labor Code claims. The Labor Code imposes other remedies for wage violations and provides a right to bring representative actions for penalties under the Private Attorneys General Act. Plaintiffs frequently bring claims subject to both standards. Applying two different tests to classify a single worker will lead to bizarre jury instructions,
but that challenge remains for the courts to address, along with other questions involving preemption. Dynamex is also silent on whether the ABC test applies retroactively or prospectively. The decision leaves no doubt that there are significant risks for businesses in California who use independent contractors without careful analysis. While a legislative fix would be helpful, powerful forces in government, unions and plaintiff lobbyists have been urging the elimination of independent contractors for many years. Meanwhile, the consequences of misclassification liability continue to be significant, including assessments for unpaid payroll taxes and penalties, worker claims for back pay and penalties for unpaid overtime, meal and rest breaks, attorneys’ fees and interest, along with workers’ compensation coverage issues. Businesses may also be exposed to vicarious liability when former independent contractors are reclassified as employees with an accompanying agency relationship to the employer. Individuals and businesses using independent contractors should carefully
analyze their independent contractor relationships to make sure they comply with the ABC test. If an independent contractor’s services are not clearly beyond the range of ordinary business operations, the hiring entity should consider whether those workers should be reclassified as employees. Obviously reclassifying an employee as an independent contractor, even if the employee’s role or duties may be different, would be foolhardy. If a company uses labor contractors or other temp agencies to provide services, it should ensure that the relationship between the labor provider and any independent contractor also passes the ABC test. Labor Code section 2810.3 holds companies using labor contractors jointly liable for the wages of labor contractor employees. This section would presumably hold the “client employer” liable for the wages of employees misclassified as independent contractors.
(Terry O’Connor is an attorney with Noland, Hamerly, Etienne & Hoss. His expertise involves counseling and representing business owners in employment practices.)
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