A Newsletter about California Water, Land, and People


Farming and Capital, cont.

San Francisco was the booming financial capital of California at this time, and continued to be the center of California commerce until the Los Angeles land boom (stimulated by railroad fare wars and railroad-driven land subdivisions) in the 1880s which brought thousands of midwesterners to southern California's desert coastal plain

Few new farmers who bought these properties could pay cash in full, so they took out loans from the ever-present speculators or bankers so they could by these new farms. And since California was not yet a populous state in the 19th century, these farmers had to find a harvest labor force, otherwise the capital sunk into the crop could not be realized as profit when it was ripe.

CVP's Friant Dam, which supplies water via
Madera (bottom left) and Friant-Kern Canals
(center right) to San Joaquin Valley farms from Madera to Bakersfield.
Photo courtesy of U.S. Bureau of Reclamation.

This problem stimulated at least two responses in California: mechanization of harvest and packing, and the elaboration of farm credit systems - of fictitious capital - to overcome the natural delay between the infusion of capital for planting and preparation of crops, and their later harvest and sale to market. For the farmer's operations, the calendar is about 8 to 9 months of expenses followed by one desperate month of harvest and prayer for a fair price before the fallow season.

California bankers like A.P. Giannini (the founder of the Bank of Italy, which later became the more familiar Bank of America) saw opportunities for their capital in agriculture by extending credit to farmers for their expenses and financing institutions that aided their marketing and distribution of their crops to help ensure the realization of the bankers' initial investment in farms. The Bank of Italy was a major financier of irrigation district bonds, according to Henderson, for dam, canal, and irrigation distribution systems. These investments were calculated to stabilize California's farm economy, and prove profitable for California's first venture capitalists.

Unfortunately, despite ever-growing and more complex forms of farm credit available - both from private banks and the U.S. Department of Agriculture - farming as a way of life has not stabilized.

Farms have become increasingly captured by industrial corporations organized as vertically and horizontally integrated agricultural corporations who can marshal the capital to sustain these systems. Some of these corporations, like Cadiz, Inc., hold agricultural lands as a basis for eventually ranching water; that is, a significant part of their strategy is to acquire water rights to reap monopoly profits from sales of water to growing urban regions. (See SPILLWAY, v1n1 at Back Issues.)

In addition, as the retail food industry further consolidates into fewer and fewer retail companies (that is, our supermarket chains) they exert their power to keep prices low to farmers, intensifying competition among growers and shrinking profits. International trade barriers to the U.S. market have been reduced allowing growers with lower production costs in other nations to export their produce to the U.S. and California where they exacerbate competition and lower prices on agricultural commodities.

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