February, 2017

Fruits of Thought

Mixed Expectations Ahead For Produce

When it comes to specific interests of the produce industry, the Trump administration’s priorities seem to hold much risk for the trade. On the immigration front, the industry depends heavily on immigrants – legal and illegal – to harvest crops, and one of the most important customer segments, the foodservice industry, depends heavily on immigrant labor as well.

On the trade side, the industry has become quite integrated with Mexico, so any disruption to NAFTA certainly poses a threat, and especially the fruit industry sees exports as an important source of sales. The abandonment of the Trans Pacific Partnership (TPP) agreement and the easier access this offered to markets, such as Japan, already was a negative for many in the industry and, in general, if America adopts more protectionist policies, other countries will respond in kind and cut off potential outlets for growers. The ripple effect would be reduced returns on the domestic market, which would be forced to absorb excess fruit.

Other areas are more uncertain. The President has said one of his priorities is to reduce regulation, and he has issued an Executive Order requiring regulatory agencies to eliminate two regulations for each new one created. It also requires that the cost to private enterprise of any new regulation should be offset by the cost of eliminating old regulations. Such an order will be hard to implement, as eliminating old regulations requires a process and is subject to litigation. 

Still, most businesses would welcome any reduction in regulation. But when it comes to the Food and Drug Administration (FDA) and food safety issues, and in other relevant departments such as the United States Department of Agriculture (USDA), there is a mixed bag for the industry. Sure everyone wants less oppressive regulation, but if it is perceived as making the food supply less safe, this could impact consumer willingness to purchase.

And, of course, these very specific issues may not be decisive in predicting the future of the produce industry. Overall questions, such as whether Trump policies will produce peace or war, how taxes will be reformed, what bilateral trade agreements might be made with countries such as Japan, etc., may be deeply significant in how things work out for the produce industry and those involved in the trade.

Technology, and how that progresses, also will determine a great deal. Can we plant and harvest robotically at a reasonable cost? There has been a lot of news about fast food chains such as McDonalds moving to self-ordering systems. Can our customers operate profitably and at a high service level with less labor?

What about education? Surely nothing will more influence the success of the produce trade than the availability of well-educated and properly motivated talent. Betsy Devos was recently confirmed as Secretary of Education following a contentious battle, which wound up with Vice President Pence having to make an unprecedented tie-breaking vote. A big part of the contention: fear about her endorsement and advocacy of vouchers and charter schools. 

Many believe these programs can be the way out of poverty and ignorance for poor inner city children required to attend sub-par public schools; others fear a drain of resources from public schools. Teacher unions are vehemently opposed, but others believe that competition will actually lead public schools to improve. What will actually happen is unclear and the impact even less so. Still here is an example of a policy change that might make a big difference for our country and that includes the produce industry – for better or worse is unknown.

The role of industry advocacy groups, such as the United Fresh Produce Association or the Western Growers Association, in the brave new world of Trump is uncertain. These organizations are most valuable to the White House, Congress and the broader regulatory state because they have specific and in-depth knowledge that the government generally lacks. Raising these points is always important as it can head off ill-conceived laws and orders and regulations. 

Trump has been quite faithful to the promises he made on the campaign trail but, as he has learned with his Executive Order on immigration, these things are subject to challenge and must be properly construed and promulgated to stand up to these challenges. Because Trump really is an outsider, his learning curve will be steep.

The produce trade associations will doubtless be there offering expertise, and we have good relations with the ag committees in Congress. Through the Georgia fruit and vegetable industry, the trade has good relations with Sonny Perdue, the former Georgia Governor who is nominated for Secretary of Agriculture. But how much influence Perdue will have is unknown, and many of the issues at hand are not under the jurisdiction of the ag committees.

Trump really is something entirely different. So we are at a moment when nobody really knows very much. So for the produce industry,  it means hold on tight, there may be a bumpy road ahead – but maybe not!             pb