The Sustainability of Organic Farms Under the H2A Program: Evaluating the Program's Effects on Mitigating Farm Labor Shortages and Maintaining Business Viability

The Sustainability of Organic Farms Under the H2A Program: Evaluating the Program's Effects on Mitigating Farm Labor Shortages and Maintaining Business Viability

Summary

A survey was conducted among Georgia and North Carolina organic and conventional farmers who filed H2A applications in 2014. The respondent farms accounted for a total of 389 applications for about 6,800 H2A working visas covering a total of around 640 worker months. Major results indicate that most farmers acknowledge improved processing times and reasonable documentary requirements. The majority secure an external agency’s assistance in preparing and filing applications. About 40% of the respondents, however, emphasize cost issues, cite non-improvement in worker productivity, and report erosion of business profits attributed to their employment of H2A workers.

Objectives/Performance Targets

Initially, this project will determine the relative effectiveness of the H2A program in terms of filling in the farm labor supply gap among organic and conventional farmers in the Southeast.  Feedback, opinions, assessments and/or suggestions on the program’s usability and benefits-costs tradeoffswill be collected from farmers that have had availed of the H2A hiring alternative.

This project will also evaluate the impact of the real value (cost) of the H2A program on the organic farms’ profitability and viability as well as indirect effects on the local economy.   The farm-level impact will be assessed through an analysis of labor input substitution decisions, especially considering labor sourcing and opportunity cost issues, under a farm simulation-optimization analytical framework. Various possible model scenarios that capture H2A adoption and non-adoption options as well as several iterative combinations of possible H2A cost structures will be analyzed to accomplish the following:

1. discern the minimum conditions that will allow farm businesses to realize their viability and profitability potentials; and
2. determine the appropriate (ideal) cost structure of the H2A program that will make it easily more usable by small organic farmers and more compatible to the farm business’ operating profit goals.

The impacts on the local economy will be analyzed through a measurement of a number of macroeconomic indicators that could possibly be indirectly affected by the farmers’ hiring decisions and possible changes in the H2A program.

This project’s results will be disseminated to producers, commodity groups, policy makers, and academic professionals to clarify the program’s impact on farm businesses under the following scenarios:      

1. existing program features; and
2. a proposed modified version of the program as recommended by results of this project’s analytical methods.

Accomplishments/Milestones

The first year of the project’s implementation was focused on developing and implementing the farmers’ survey.  The survey instrument was carefully put together and submitted to the Institutional Review Board (IRB) for approval of its human subjects compliance regulations.  The IRB approval was granted on Sept. 1, 2015.

The survey was conducted as soon as the IRB approval was obtained.  The survey instrument was mailed to 956 organic and conventional farmers in North Carolina and Georgia. These farm businesses were identified using a database of H2A applications filed in 2014 provided by the Labor Department.  The concentration on North Carolina and Georgia was based on these two states’ consistent records as two of the top 5 states with the most number of H2A applications in the country over the past several years.

The survey received 46 responses,  representing a response rate of 4.8%.  This response rate could have been much  higher if the postal mailings were supplemented by online dissemination of the survey requests.  Unfortunately, all available H2A applications databases only contained postal addresses.

An outreach bulletin was written and completed that reports the findings of the survey results.  This bulletin will be published online and disseminated in every possible way to farmers, associations and other interested parties.

From hereon, the second phase of this project will be devoted to conducting further statistic analyses on the survey results and conducting the farm cases studies that will be used for the optimization-simulation analyses.  Two or three individual farms will be contacted to collect business operating data needed to set up the model.  The survey responses could also provided supplementary information on H2A implementation parameters provided by some farmers surveyed.

Impacts and Contributions/Outcomes

The survey results provided valuable information with important implications on the current state of the H2A program.  The 46 respondent farms accounted for a total of 389 applications filed during the past several years for about 6,800 H2A working visas. Of that total applications, about 6,600 visas were approved (96.85 approval rate) covering a total of around 640 worker months.

Nature of Demand

Farmer respondents provided specific indications on where H2A workers are being utilized for.  It seems that H2A workers are most needed by farmers during harvesting and production/planting work stage of farm activity (35 and 29 response counts, respectively). Farmers are more active in applying for H2A workers during harvest season as it tallied the highest average frequency of applications filed (5.6 times).  Processing (value-added production) stage requires the most number of H2A workers as farmers requested the largest number of workers during this stage. Pre-production/pre-planting work stage tallied the highest H2A work months approved (7.6 months).

Timing Issues

The period from approval to the arrival of the foreign workers seems to have taken the longest waiting time. Responses indicate that 43.5% needed to wait between 31 to 60 days before foreign workers arrive after their application had been approved. The waiting period between filing and approval of their application, however, was shorter.  40.9% of the farmers indicate that this waiting period only took 11 to 30 days. The preparation of the application documents seems to have required less time as half of the respondents indicate that they finished this activity within 1 to 5 days. Majority of the sample who provided an assessment (95.8%) stated that the time devoted for their H2A applications actually did not disrupt the implementation of their project.

Documentary Requirements and External Assistance

More than half (58.3%) of the respondents consider the documentary requirements as “reasonable” while 30.6% contend that these are “unreasonable.”  More than three-fourths (76.9%) have obtained the assistance of an external agent in the preparation and filing of their H2A applications.

Cost Considerations

The survey participants provided a general indication of the cost of hiring and the resulting productivity of the hired H2A workers.  Majority of the respondents have realized an increase in the cost of hiring to some extent. Among the respondents, 21.9%  estimated that the cost of hiring increased by more than 100%. A quarter (25%) of the sample indicate that a cost increase between 50% to 100%.

Even though hiring of H2A workers has increased the costs for most farmers, it also helped to increase their productivity. Among the respondents, 53.2% of the sample indicate that productivity has increased to some extent (from 25% to more than 50% improvement). Interestingly, about one-third of the respondents (34.4%) state that hiring of H2A workers does not affect overall worker productivity while 12.5% of farmers reported a decline in productivity by less than 25%.

A majority of farmers indicate that business profits improved after hiring H2A workers. 51.6% of the respondents increased their overall business profits by 25% to over 50%. On the other hand, 15.2% of the sample state that hiring H2A workers has left their business profits unchanged. Meanwhile, one-third of the sample (33.3%) reported that that hiring H2A workers even decreased their net business profits by almost 50%.

Wage Considerations

A majority of the survey participants perceive the resulting wage rate they pay to their H2A workers as excessive. Among the respondents, 90.3% indicate that the prevailing Average Effective Wage Rate (AEWR) is not affordable.  Only 9.7% of the respondents think otherwise.

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