About Caroline McDonald

Caroline McDonald is a writer and former senior editor of the Risk Management Monitor and Risk Management magazine.
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Drought Claiming California Crops

While many California farmers are taking a wait-and-see approach regarding future rainfall, some almond growers are moving ahead with the removal of mature trees. But much more is at risk, including jobs and agricultural products for the rest of the country.

California grows about half of all U.S. fruits and vegetables, mostly in the Central Valley region. It also ranks as the top farm state by annual value of agricultural products. Crops exclusive to California are almonds, dates, figs, grapes for raisins, pomegranates, olives, peaches, pistachios, plums, rice, walnuts, kiwi fruit and clover seed.

In January, Gov. Jerry Brown declared a drought emergency, and this month President Obama announced relief aid for California farmers and ranchers. Because of the severity of the ongoing drought, the U.S. Bureau of Reclamation as well as the State Water Project said there would be no water for Central Valley farmers and ranchers. According to the California Farm Water Coalition, it is expected that about 2 million acres in the San Joaquin Valley will receive no water this year.

“We estimate that more than 500,000 acres of farmland will be idled this year due to water supply shortages,” Mike Wade, executive director of the California Farm Water Coalition said in a statement. He added that agricultural water supply shortages “harm more than just the farms that produce hundreds of varieties of food, fiber and nursery products. Unemployment may hit 15,000 seasonal and full time agricultural workers if this year’s drought has the kind of impact on the economy that occurred in 2009.

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Water shortages then led to idling of 269,000 acres and over 7,400 workers, about half of the expected impact of this year’s drought.

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       Graphics/California Farm Water Coalition

Barry Baker of Baker Farming Company, which normally grows 5,000 acres of almonds, is one of the growers who is removing trees— 20% of them. The Associated Press reported that Baker calculated that before the summer almond harvest he would need to spend $2.5 million. That includes irrigating orchards with scarce, expensive water and paying to have the trees pruned and sprayed. He would also need to have bee hives brought in to pollinate the blossoms at a cost of nearly 0 an acre.
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Not knowing whether there will be any relief, he made the decision to go ahead and remove the trees.

Once removed, the trees are being turned into wood chips and taken to power plants for bio fuel. Tim Lynch of Agra Marketing Group said power plants in the state currently have almost more wood chips from almond trees than they can handle.

The Agricultural Marketing Resource Center reports that California is the only state producing almonds commercially. The state’s 2012 almond crop totaled 2.0 billion pounds, a 2% drop from the previous year and was valued at $4.3 billion. Per person consumption of almonds in the United States has generally been increasing and reached 1.8 pounds in 2011, according to the Almond Board of California.

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The United States is the largest producer of almonds, harvesting 80% of the world’s crop, followed by the European Union – 27, of which Spain, and Australia each harvest 6%, the organization said.

U.S. Fraud Up, Prevention Down

Although fraud has increased for U.S. organizations in the past two years—45% of U.S. organizations experienced fraud, compared to a global average of 37%—companies are doing less to prevent fraud than in 2011, according to a survey by PricewaterhouseCoopers.

The Global Economic Crime Survey 2014 found that the less proactive approach was consistent with the upward trend in economic crime in most fraud categories since 2011. Slightly more than half (53%) of organizations performed fraud risk assessments annually or more often, a significant drop from 70% of organizations that performed fraud risk assessments annually or more in 2011.

The report also found that the most serious economic crime experienced by U.S. respondents within the past 24 months was more likely committed internally (50%) than externally, (44%), but that external fraudsters are closing the gap. This trend is consistent with more organizations engaging in business opportunities in high-risk markets.

“The United States has proved to be fertile ground for domestic economic crime in recent years. Catastrophic coastal events on the Eastern and Gulf coasts have generated rampant insurance fraud that squanders taxpayer dollars and undermines community relief and reconstruction efforts. Farther inland, natural gas exploration and fracking have led to boom towns sprouting overnight in places like North Dakota, Wyoming, Utah, and Texas. Many of these towns do not have the infrastructure or governance capability to handle the influx of people, and crime, that inevitably accompany boom-town dynamics.

Land lease and mineral rights agreements, zoning ordinances, permits, and licenses have become particularly vulnerable to exploitation.” PwC Global Economic Crime Survey 2014

According to the report:

• More than half of U.S. organizations that experienced fraud in the past two years reported increased occurrences.

• 67% of U.S. respondents said their organizations now have, or plan to have operations in high-risk markets, compared to only 58% of global respondents.

• 57% of U.S. respondents said their organizations pursued opportunities in markets with high-levels of corruption risk within the past 24 months, versus 38% of global respondents.

Fraud levels are climbing:

• 24% of U.S. organizations that reported economic crime experienced accounting fraud in 2009. While this dropped to 16% in 2011, accounting fraud increased to 23% in 2014.

• In 2014, bribery and corruption doubled from 2011 levels of 7%, after dropping by more than a half, to 16% since 2009 PwC said.

The Attack of Jamzilla

Residents of Los Angeles are serious about their cars. Really serious. Since traffic jams are routine in and around the city, an 80-hour closure of a major artery like Interstate 405 is nothing to be taken lightly. This is why the Metropolitan Transportation Authority needed a plan to get the attention of drivers before they made repairs to the 405—which carries more than 300,000 vehicles a day and is one of the heaviest traveled in the country.

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The $1 billion 405 Freeway construction project over President’s Day weekend added a carpool lane and improvements to entrances and exits along a 10-mile pass. It also required full and partial closure of the northbound lanes.

To get the attention of motorists, the project was dubbed “Jamzilla.

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According to the Los Angeles Times, this follows the lead of closures of the 405 in 2011 and 2012, with replacement of the Mulholland Bridge. Local media dubbed the events “Carmageddon” and “Carpocalypse,” and “Carmageddon II.” While the names may sound frivolous, the media hype helps make sure that drivers pay attention and stay away.

For Presidents Day weekend, “we wanted to come up with a term that would be like Carmageddon in its ability to influence the public,” said Dave Sotero, a spokesman for the Los Angeles County Metropolitan Transportation Authority, told the Times. The strategy has been successful in the past. In 2011, the Metrolink commuter train system, in fact, reported their ridership was 50% higher during the construction at the same time the previous year.

Jamzilla was a complex paving operation in a 5.6-mile stretch, with the contractor, Kiewit Infrastructure West, pouring single layers of pavement at a time. Metro officials compared the job to “baking layers of a wedding cake—a far more delicate task than the bridge demolition that prompted the ‘Carmageddon’ full-freeway closures.”

K.N. Murthy, executive director of transit project delivery at the Metropolitan Transportation Authority said, “Operationally speaking, demolishing a bridge is a much simpler operation than paving and striping freeway lanes that must return to public use as quickly as possible. It’s the essential difference between destroying a structure and building a structure. Building something is much more difficult, and the paving methods we are using vary between each material type and have specific requirements that must be adhered to.”

Last week I visited Los Angeles and found Jamzilla to be a topic of conversation everywhere. Trips to destinations on the West side of L.A., such as the J. Paul Getty Museum right off of the 405, were scrapped and an extra half-hour was added to my already generous travel time to LAX early Sunday morning.

The good news is that all the hype surrounding Jamzilla resulted in success. Fortunately for me, traffic was so sparse that I arrived at the airport an hour early. Traffic overall was said to be lighter than usual on the 405 with no major jams. The Times reported a successful project and the 405 was opened an hour ahead of schedule. So much for Jamzilla.

Commercial Aircraft Use Jumps

Higher demand from countries experiencing greater wealth is driving growth in the commercial airline sector, where passenger travel demand skyrocketed 396% from 1981 to 2012, according to a report from Deloitte. Utilization of commercial aircraft rose 15.4% during that period.

According to Deloitte’s “2014 Global Aerospace and Defense Industry Outlook,” Airline travel in China, India, the Middle East and other Asia-Pacific region countries contributed to an increased demand for leisure and business travel, also encouraged by lower fares and more available routes.

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In 2014, revenue growth is predicted at about 5%, similar to 2012 and 2013, Deloitte said.

Aircraft demand is also rising, as improvements such as fuel efficiency creates a need for upgrading and replacing aircraft.

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Commercial aircraft annual production levels are expected to increase by about 25%, the study found. Because there are few competitors in production, it is expected there will be more competition in the future, which could impact pricing. The aerospace supply chain will also be challenged to keep pace with the increased rate of production, Deloitte said.

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