President’s Column – February 2002

Title: I’m a Gas Farmer
Author: John Robinson
Publication: The Outcrop, February 2002, p. 3, 6-7

I was raised on an avocado and citrus ranch in southern California. Not a bad place to grow up, really. My parents grew navel and valencia oranges, tangerines and grapefruit, in addition to the avocados. Although my folks had various jobs through the years, the crops were always expected to at least pay the taxes on the land and hopefully turn a profit. As with many agricultural endeavors, profits were occasionally good but too often fell short of expectations. I remember one year that was particularly bad for our six-acre grove of tangerines. After a year of growing the fruit to maturity (which includes the cost to irrigate, fertilize, and weed control) my folks had the fruit picked by a local packing house. A crew was sent out to pick the fruit, and then it was packed and shipped overseas (most of it went to Japan). When it was all said and done the packing house sent my folks a bill instead of a check. I spent the following summer on the wrong end of a chain saw cutting down 1500 tangerine trees and replanting the area with grapefruit.

The weather was an annual agricultural malady, particularly freezing weather. Each winter was a crapshoot on whether freezing temperatures would damage the crops. Citrus trees can handle temperatures down to 25-26° F without much damage. Avocado trees get hurt below about 27° F. Both types bloom in the spring, and mature through the summer and fall. Avocados get picked in November-December, whereas the citrus is picked in January-February. Year to year, there was always the worry of getting the fruit picked before a damaging frost would hit. When I was about 15, a particularly bad frost occurred, with temperatures as low as 18° F. Trees were killed back to just the major branches and all of the fruit was lost. It took several years for the trees to recover and bear fruit again.

As I watched this annual agricultural lifecycle, it became clear to me that farming was far too uncertain and capricious. Although I could have continued in the family business or taken up a career in another type of agribusiness, I wanted something with more stability, more long-term continuity, more of a future. Science would be the answer — applied science would be the ticket to a future filled with opportunity and success.

Gas Farming

I was fortunate to enter the oil business during the Arab oil embargo — a time of intense hiring in the industry. A few years later, as commodity prices fell, layoffs occurred. It was a shock to see friends, colleagues, and co-workers lose their jobs. There were many “casualties” among this group. Some left the oil business very disillusioned and bitter and never returned. After several more up/down cycles, I started to see the similarities between my folks’ life in the citrus business and my life in the oil business. So much for my theory about applied science protecting me from the uncertainties of life.

I had the pleasure of reviewing Mike Wilson’s El Niño paper for the Gas in the Rockies book. The research explores the correlation between weather cycles and natural gas demand. There are three phases, each related to variations in sea surface temperatures in the central and eastern Pacific Ocean. Higher sea surface temperatures (El Niño) and lower temperatures (La Niña) both reduce heating demand in the U.S. and result in lower gas prices. The Neutral Phase between each El Niño/La Niña cycle results in relatively “normal” sea surface temperatures and gas demand conditions. Since 1980, there have been five El Niño’s and three La Niña’s. Mike’s work shows that these cycles can be correlated to Henry Hub gas prices and can be used as the basis for an investment strategy for industry or individuals. As I read the paper, I realized that my life (and career) could be summed up with every weather-related reversal in El Niño/La Niña. I was hired during a Neutral Phase (high price, but mostly aided by the embargo) and survived seven weather cycles before getting laid off in a rather severe La Niña (low price). I got re-hired years later during another Neutral Phase price upswing. In some years prices are up and companies are hiring while in other years prices are down and companies are un-hiring. In some years, cold weather wipes out the crops. So, despite my early attempt to avoid a lifestyle dictated by Mother Nature, I guess I’m just a gas farmer. With apologies to my folks, bring on the cold weather …