AN ECONOMIC ASSESSMENT OF LETTUCE Executive Summary U.S. farms produced $1.5 billion worth of lettuce in 1993. Three types of lettuce dominate commercial production: head or iceberg, 74 percent of the value of output, leaf lettuce, 17 percent, and romaine, 9 percent. Lettuce is produced and shipped year round in the U.S. with the source of supplies changing with the seasons. U.S. lettuce production and utilization has leveled off since 1987 after growing rapidly in the 1970s and early '80s. Only a small share of U.S. output is exported, mainly to Canada, and very little lettuce is imported. Although lettuce is produced in many states, California and Arizona dominate U.S. production. California, which produces lettuce year round, accounted for 76 percent of U.S. production in 1993. The major lettuce area in California is the Salinas Valley, where lettuce is harvested from early April through early November. In winter, most California production shifts southward to Imperial County. Arizona is the leading lettuce state during winter, accounting for about 19 percent of U.S. annual production in 1993. About 2,200 U.S. farms grow lettuce, according to the 1987 Census of Agriculture. Most lettuce farms are large, and many grow other vegetables in addition to lettuce. More than half of the farms producing lettuce in the top six states (California, Arizona, Colorado, Florida, New Mexico, and New Jersey) had more than $100,000 in crop sales in 1987; about half of the farms in California and more than 60 percent in Arizona had crop sales above $500,000. Lettuce farms are much smaller in the remaining top ten states. About 30 percent of the farms in Michigan, 40-45 percent in New York and Texas, and 50 percent in Washington sold less than $25,000 in crops in 1987. Lettuce is a cool season crop that grows best when day temperatures are between 70-75 degrees with nights at 45 degrees. Ideal conditions--cool temperatures, low humidity, and adequate water for irrigation--are present in different parts of California at different times of the year and in Arizona in the winter. The time from emergence to harvest of lettuce ranges from 55 to 70 days under normal day length and temperature conditions. Fall-seeded lettuce, however, may take upwards of 140 days to mature because of slower growth during the cool months. Almost all lettuce acreage in the U.S. is irrigated. Major natural perils during the summer are excessive rain, excessive heat, and hail; in winter the major perils are freeze damage, excessive moisture, and excessive wind. Poor weather not only can directly damage a crop but can weaken the plants, making them more susceptible to damage from diseases and pests. The major diseases of lettuce in the U.S. are big vein, lettuce mosaic, downy mildew, and tipburn. Lettuce can be attacked by several insects, including cabbage looper, beet armyworm, tobacco budworm, aphids, fleabeetles, sweetpotato whitefly, and thrips. The whitefly has been a particularly serious problem in the desert areas of California and Arizona in recent years. Most lettuce is harvested by hand labor. Mechanical harvesting is rare because of the lack of uniformity in maturity within a field. Labor for harvesting is usually supplied by a labor contractor who charges on a piece rates basis; thus harvesting costs vary directly with yield. Harvesting typically accounts for more than half of production costs. Historical ad-hoc disaster payments for lettuce provide an indication of high-loss areas and may indicate areas that would face relatively high risk under a FCIC lettuce policy. Disaster assistance payments for lettuce totalled more than $8.2 million during 1988-93, peaking at $2.5 million in 1988, and exceeding $1 million in each of the years 1989, 1991, and 1993. Payments for lettuce were spread over a geographically broad area. Payments were made in 38 states in at least one of the 6 years. Five states--Michigan, New Jersey, New York, Ohio, and Texas-- collected payments in all years. A crop insurance program for lettuce is complicated by lettuce's extended growing season during which yields, risks, and market prices can vary greatly. In some areas, lettuce growers schedule planting over several months in order to ensure a prolonged harvest. An insurable event that causes severe losses to a crop may not result in indemnity payments if output over the rest of the growing season raises the season-average yield above the yield guarantee. In Florida, for example, it is not uncommon for a freeze or excessive rain to destroy nearly all of the lettuce that would have been harvested during part of the season while reducing the season-average yield by only 10-20 percent. Lettuce prices are volatile, and low prices may be lettuce growers' greatest peril. A steady demand for lettuce combined with lettuce's perishability means that small changes in production result in large changes in prices. A revenue insurance scheme, covering low yields, low prices or a combination of both, would likely provide lettuce growers with much stronger risk protection and could at the same time avoid indemnity payments to growers who, despite low yields, had a good return because of high market prices.