Financially, 2001 continues to be an intensely difficult year for most farmers, ranchers and others involved with California agriculture. This cyclical downturn is affecting agriculture nationwide but certain factors are aggravating the situation in the Golden State, according to UC Davis agricultural economists Warren Johnston and Daniel Sumner.

Along with the rest of the nation, California agriculture is struggling with uncertain energy prices and supplies; higher costs for fertilizers, chemicals and other inputs; and dismally low prices for crops and other products.

The state's current cyclical woes are compounded by a gradual shift in recent decades from field crops to perennial tree and vine crops and to intensive livestock production, all of which require greater investment and tend to have more of a lag time in recouping the costs. As a result, the average agricultural debt-to-asset ratio is much higher in California than elsewhere in the nation. Labor costs and availability are also a greater concern in California, as are water-supply uncertainties, environmental and food-safety regulations, the threat of destructive exotic pests and loss of processing facilities.

"Although this is a cyclical downturn, it remains to be seen just how deep the slump will be and how long it will take to work through the cycle," says Johnston.

Sumner and Johnston note that recovery will be affected by economy-wide income growth in North America, harvests and commodity supplies elsewhere in the world, statewide weather conditions, access to China's markets and economic growth in Japan and the rest of Asia.