Unleashing the full power of Oklahoma’s agriculture sector

November 1, 2016

Steve Anderson

I have written several articles outlining the enormous impact on Oklahoma’s economy that could result from moving agricultural acreage currently committed to the stock bulk crops (such as wheat and corn) to high-value vegetable, melon, and potato crops.

For many years agricultural experts have discussed this possibility of moving high-value crop production that currently favors state like California and Florida to those states that now produce the bulk crops like grain. The Midwest is an ideal location.

During the time I worked for Secretary of Finance Tom Daxon in the administration of Governor Frank Keating, the idea of a north-south axis of vegetable production was discussed after one of the Department of Agriculture’s top officials was sent to California to talk to processors and growers. Mr. Ron Voth came back from that meeting with a number of interesting observations and planted the seeds that resulted in the movement of some large dairy entities to western Oklahoma from California. But overall, it was not yet economically viable for those processors who needed the 12-month growing period to generate a sufficient return on their investment in large fixed processing plants to look at Oklahoma.

The idea of a north-south axis starting in South Dakota and running to the tip of southern Texas was the solution that seemed to address the issue, but at that time not one processor showed any interest. Since that time much has changed, including greatly increased costs—including energy costs and tax burdens—for processors’ operations. Moreover, agriculture regulations in California via the Environmental Protection Agency’s surrogate—the California State Implementation Plan—have created rules that drive up costs of production with no basis to recover those costs.

Hence, there is a new opportunity for Oklahoma and the Midwest in general to revisit high-value crop production.

This north-south axis would provide an environment that would allow for processors to have access to 12 months of regional production of seasonal crops like broccoli with the ability to avoid contamination issues like E.coli from constant production in the same area. The axis also provides processors with the opportunity to access the abundant natural gas reservoirs which could provide low-cost energy for their plants. The cost of moving natural gas to end users has long been one of the issues suppressing the price and the large volume of energy needed for the frozen component of the processors’ products could easily produce a win-win for both the processors and the states on the axis.

Kansas Governor Sam Brownback has long wanted to unlock the value that high-value crops can bring, with the added incentive that he anticipated the need to minimize irrigation use. Bulk crops like corn do not generate enough revenue to allow growers to use the less wasteful irrigation methods like drip or soaker hose irrigation. Kansas is now discussing a more aggressive approach to the use of its major aquifer with the major corn growing areas potentially seeing their wells being greatly reduced in the volume they are allowed to pump.

In addition, the federal government has threatened to completely shut down the hundreds of irrigation wells near the Quivira and Cheyenne Bottoms waterfowl refuges to protect the flow of the rivers and creeks that feed those important migratory bird areas. Oklahoma as well as the rest of the Central Migratory Flyway has its share of federal refuges and one can reasonably assume that there will be a time of reckoning with the federal government in these areas sometime soon. The looming water issues create an incentive for agriculture to look to the high-value crops as one of the solution sets which could certainly provide ample opportunity for processors to obtain commitments from growers to move some percentage of their operations to those crops.

In conjunction with the other Midwestern states, there is much the state of Oklahoma can do from a tax and regulatory standpoint to break the inertia and stimulate the state’s agricultural sector in a way that unlocks the huge hidden value of this rural component of the state’s balance sheet.