Prepared by Strategies for a Resilient World for Great Valley Seed

Authors: David Festa and Karina Mudd

Introduction

California has embarked on an ambitious campaign to increase the health and productivity of its natural and working lands. This is not a campaign in the sense of a coordinated effort, but rather it is the product of numerous programs, legislation, and funding designed to support conservation, restoration, and land repurposing efforts. Collectively, the programs envision enhanced conservation on 7+ million acres. While specific environmental goals vary in each case, a common theme is the need for native habitat restoration and increased populations of native plants, which are the most resilient and well-adapted to local ecosystems. The large-scale restoration and land repurposing efforts that are underway will consequently require a cost-effective, biologically diverse supply of native plant materials specifically adapted to local ecosystems (“ecotypes”) in addition to non-native plants.

In anticipation of this unprecedented demand for native plant materials, Great Valley Seed (GVS) commissioned Strategies for a Resilient World to answer several questions focused on better understanding the market dynamics in the Central Valley:

How is demand for native plant materials likely to shift over the next decade, and does adequate supply exist to meet that demand?
If adequate supply does not exist, can the market grow fast enough under the current conditions to meet the rising demand?
What types of interventions will be required to ensure there is a network of growers and processors capable of providing native plant material at the scale required to meet projected demand?

To answer these questions, they conducted a survey of existing research and interviewed approximately 20 ecologists, high-level government representatives, and practitioners across various industries. The findings are largely qualitative, but clearly indicate that the current supply of native seeds and seedlings is unlikely to meet future demand, and that a coordinated policy effort will be required to support the necessary developments of the market. With supportive policy, California can avert a supply crisis and become a leader in native plant propagation.

We are sharing the summary of the report’s findings publicly to help inform policy, advocacy, and spending decisions across public, private, and non-governmental sectors. We have a shared interest in lowering costs of restoration, which will enable more effective restoration projects to be implemented, create more jobs, increase accessibility of restoration to disadvantaged groups and smaller producers, and ultimately enhance the state’s ability to meet environmental and conservation goals.

Summary

Despite clear benefits of incorporating local ecotypes into land restoration and repurposing, the use of native materials is currently restricted by their costly and limited supply. Historically driven by the boom-and-bust cycles of government demand, the native seed market is uncertain and volatile, which burdens producers with large amounts of risk. Despite documented supply constraints that have persisted for decades, the nature of the industry has kept competition too low to increase supply and bring down prices.
Meanwhile, demand for native plant materials in the Central Valley continues to rise in California, accelerated by SGMA-driven policy and large amounts of state funding. To prevent a supply bottleneck, a coordinated public-private sector effort is needed to invest in regional restoration planning, long-term forecasting for native plant material demands, and incentivization of ecotype propagation and planting innovation. Policymakers, scientists, NGOs, and private sector companies have the opportunity to collaborate to address the market limitations and increase the supply of native plant materials, which will be crucial given the need for restoration and land repurposing in California over the coming decades. Below, we break down the nature of the problem and propose some possible solutions.

Demand for native materials is on the rise, accelerated by state conservation initiatives.

Demand for native materials is likely to increase substantially from both the public and private sectors over the next decade. This demand will not only be driven by ecological factors, but economic and socio-political forces as well, through state policy and funding as well as consumer demand for more sustainable products.

In 2014, California enacted SGMA to regulate annual groundwater withdrawals and establish more sustainable management practices in overdrafted basins. The goal is to have all groundwater basins rebalanced by 2040. To accomplish this, it’s estimated that between 500,000 and 1 million acres of agricultural lands must be taken out of production.[1] Native plant materials will need to be incorporated into land repurposing efforts to increase their long-term ecological success. For example, planting regionally appropriate ground cover on retired and fallowed lands will help prevent further soil degradation, mitigate the spread of invasive species, reduce negative health impacts from dust pollution,[2] and provide pollinator habitat. Local native plants will also be necessary to establish groundwater-dependent ecosystem sustainability in protected areas such as rivers, riparian zones, and wetlands. Additionally, to help maintain the economic value of retired or fallowed lands, some native species can also be used for cattle grazing and as revenue-generating crops through the sale of their byproducts.

Various stakeholders such as landowners, farmers, and Groundwater Sustainability Agencies (GSAs) are under pressure to adapt quickly to SGMA and take advantage of the state funding programs that are rapidly being developed to support the ecological changes needed on natural and working lands. In September 2021, the state legislature passed a record $1.3 billion in funding for Equitable & Resilient Food & Farming Systems. As part of this budget package, $400+ million has been allocated to funding for groundwater management, land repurposing, and restoration efforts alone through the Department of Conservation’s Multibenefit Land Repurposing Program and the Department of Water Resources’ Sustainable Groundwater Management Grants. Other funding opportunities continue to surface from state agencies such as CalTrans and the California Department of Food and Agriculture, as well as organizations like the California Association of Resource Conservation Districts. Federal funding opportunities are also on the rise through initiatives like the USDA’s $1 billion Climate-smart Commodities Program.

As stakeholders scramble to apply for this funding, many are focused on high level planning and the issue of sourcing plant materials has not yet come into focus. It will take a few years to ramp up production of the necessary native plant materials, so it’s critical to incorporate demand forecasting for native plant materials into the long-term planning and preparation that is currently underway.

Native plants are essential for an ecologically and economically sustainable Central Valley.

While non-native plant species play a role in restoration and ecosystem productivity, incorporating native materials is crucial for achieving restoration and conservation goals. Native plants are used in habitat restoration projects, hedgerows, cover crop mixes, livestock forage, groundwater recharge projects, and mitigation of development impacts (e.g., solar projects, high-speed rail). Natives often out-perform non-natives because they are drought-tolerant, better adapted to local soils, and provide more suitable habitat for native pollinators and other local species. Plants and animals have evolved together in the same region, resulting in a beneficial codependency of one upon the other. Incorporation of native plants into land repurposing will be foundational to rebuilding California’s populations of bees, butterflies, and other species. Protecting the uniqueness of California’s landscapes and wildlife through environmental restoration efforts will therefore require a diverse supply of ecotypes that are well-adapted to their local ecosystems.[3], [4]

Additionally, once native plants are established, they can require fewer inputs to thrive, sequester carbon, help with erosion control, and provide other agronomic benefits to landowners. The use of native plants therefore increases success rates of restoration projects and minimizes long-term irrigation needs and costs. For example, a long-run assessment of Atwell Island Restoration Project (8,000 acres of restored grassland, wetland, and sinks near historic Tulare Lake that had been farmed for the past century) documented that local ecotypes outperformed commercial seed by a factor of 4 to 1 in their ability to thrive. The performance of local ecotypes in this project illustrates their contribution to high returns on the investments in site preparation, planting, and other associated costs.[5],[6]

Ecologists, conservation advocates, seed suppliers, and government representatives interviewed during this study all expressed the importance of using native plant materials as well as concern about their accessibility.

Sourcing native materials is restricted by a limited supply and exorbitant costs.

As restoration and land repurposing projects increase across the state, there is likely to be a supply shortage–both in terms of the diversity of ecotypes available and total volume.[7] Many species and local ecotypes are not yet being produced commercially, and lead time is required to develop and scale up production capabilities.[8] Many producers—and particularly smaller ones—cannot take on the associated risks and costs of doing so in this uncertain market that is subject to boom and bust cycles of government demand. There has also been consolidation among commercial producers of native plant material in California. Consumers have reported that, over the past few years, this market condition has further limited their access to diverse ecotypes, especially at affordable prices.

The cost of plant material is already a major driver of overall restoration project costs, and those costs are likely to rise as demand outpaces supply. Data from USDA’s NRCS, Xerces, and other sources suggest that native plant material frequently comprises around 60% of a project’s total budget (excluding irrigation expenses, which vary widely but tend to be lower when using regionally-adapted ecotypes).[9],[10] Native seed is so expensive to source that the cost is often prohibitive to incorporating more natives into restoration efforts. If left unaddressed, this market condition will result in higher costs to the public and government agencies, putting the State’s investment into land repurposing at risk. The consequences will include degraded ecosystem health and frustration among landowners, advocates, and businesses involved in land repurposing or restoration, whose work will be hindered. Furthermore, the high cost of natives will make effective restoration inaccessible for many stakeholders without a substantial budget, such as farmers with smaller operations and Native American tribal organizations.

The substantial scale of the problem calls for proactive problem-solving to reduce long-term costs.

To give an example of the potential scale of the problem, consider the following. A common seeding rate for a restoration project is 20 lbs/acre and a good benchmark price for a blend of species is $100/lbs. Therefore, the seed costs alone associated with repurposing 100,000 acres of farmland would be $200 million given the current market conditions. Based on industry experience with vegetables and other crops and the price history of generic versions of native plants, and our own on-farm experience, we believe that proactive public policy and public-private partnerships could cut seed costs by 50% or more over the long run. Further, with policy nudges, the cost saving associated with innovation in plant propagation, establishment, and distribution can cut total restoration costs even further. In a recent trial, Great Valley Seed (GVS) was able to reduce the crop establishment cost of an ecosystem enhancement project that included locally sourced milkweed ecotype from a quoted $7,000/acre to under $1,000/acre.

While this anecdote highlights the value of innovation in the native seed industry, producers are limited in their capacity to take on the associated costs and risks. The ability of small companies to independently conduct trials at scale, modify equipment, experiment, and invest in the dissemination of new practices is constrained by the conditions of the industry.

The solution is a coordinated public-private sector effort to incentivize private sector investment in native seed production.

Public policy and investment will be required to address this market failure. As stated by the Bureau of Land Management (BLM), “native plant materials, like agronomic crops, take an average of 10-20 years to develop as consistent, reliable commercially available species.” But unlike agronomic crops, the native seed industry is comparatively nascent in its development and has received far less investment in research and development (R&D) to spur its advancement.

Efforts to support producers could include:

Increasing the confidence in market demand by having RFPs include a stated preference for native species with ecotypes appropriate to the region when possible, and specifying an appropriate risk-assessment of the introduction of non-natives.
Providing grants and subsidies to share the R&D costs with seed suppliers for new or hard-to-produce ecotypes (for growing, harvesting, cleaning/coating, etc.).
Providing grants and subsidies to share capital costs with seed suppliers for specialized equipment and facilities required for native seed production.
Increased regional restoration planning and forecasting of demand for native materials.
Providing advance contracts for native materials guaranteeing purchase volume and price.
Offering loan guarantees or low-cost loan programs to support industry development and ameliorate cash flow constraints from small operations.

The native seed business is not unique in its need for this kind of investment. In other sectors of the economy facing similar challenges, public policy and public-private partnerships have been critical to the development of emerging industries and associated technologies. The same kind of societal investments in the supply chain for native plants will strengthen the resilience of California's ecosystems and its farming communities in the face of drought, climate change, and other threats. This will require lowering barriers to entry for a network of growers dedicated to meeting California’s demand for native plant materials. Increasing the availability of these important ecological resources will be critical to the conservation, restoration, and productivity of California’s natural and working lands.

[1] Hanak, E. et al., Water and the Future of the San Joaquin Valley, Public Policy Institute of California, 2019.

[2] Dangers Lurk in the San Joaquin Valley’s Dust, Interview with Dr. John Balmes and Dr. Isabel Jones, Public Policy Institute of California, 2022.

[3] McKay, J.K., et. al, ‘How Local Is Local?’’—A Review of Practical and Conceptual Issues in the Genetics of Restoration. Restoration Ecology, 2005.

[4] National Academies of Sciences, Engineering, and Medicine. 2020. An Assessment of the Need for Native Seeds and the Capacity for Their Supply: Interim Report. Washington, DC: The National Academies Press.

[5] Cypher, Ellen. Atwell Island Upland Habitat Restoration Evaluation, 2017.

[6] U.S. Department of the Interior et. al, Land Retirement Demonstration Project; Five-Year Report, 2005.

[7] Garrambone, M. and Saroa, S., Seed-Based Restoration: Scaling up for the Future, Fremontia, Vol. 48, 2020.

[8] National Academies of Sciences, Engineering, and Medicine. 2020. An Assessment of the Need for Native Seeds and the Capacity for Their Supply: Interim Report. Washington, DC: The National Academies Press.

[9] NRCS Practice Scenarios, California Payment Schedules, Fiscal Year 2021.

[10] Estimated Costs to Establish Pollinator Hedgerows, Xerces Society, 2016.

Strengthening the Native Plant Supply for California’s Central Valley