New Avocado Study Outlines Costs/Returns of High-Density Plantings

By Pam Kan-Rice  UCANR Assistant Director, News and Information Outreach

Growers considering producing avocados in San Diego County with high-density plantings now have help to determine the economic feasibility. A new study on the costs and returns of establishing and producing avocados in San Diego County has been released by UC Agriculture and Natural Resources’ Cooperative Extension, UC Agricultural Issues Center and the UC Davis Department of Agricultural and Resource Economics.

UCANR Cooperative Extension Advisor Gary Bender, checks sunlight penetration in a high-density avocado orchard.

Avocado has been one of the prominent crops produced in Southern California since the early 1950s. California avocado production peaked in 1987-88 with about 76,300 acres. San Diego had been the leading producer accounting for about 60% of the acreage.

“Beginning in the early 1980s, there has been a continuous decline of acreage and production of avocados in San Diego County, said Etaferahu Takele, UC Cooperative Extension farm management advisor for Southern California and co-author of the study. “This is mainly because of the expansion of urban development that has increased the cost of producing the crop and especially the cost of water, reaching to up to $2,000 per acre feet in 2020.”

High-density planting increases profitability of avocado production given there is suitable land for high-density orchard development.

Although the cost of water accounts for 44% of the total production cost in the high-density planting, the water cost is proportionally less than in the conventional planting of 145 trees per acre when distributed over a higher yield per acre, the authors write.

Their cost analysis describes production operations for avocados planted at 430 trees per acre, with an expected life span of 40 years. The study includes a detailed summary of costs and returns and a profitability analysis of gross margin, economic profit and a break-even ranging analysis table, which shows profits over a range of prices and yields. Growers can identify their gross margin and returns to management based on their yield and prices received.

Input and reviews were provided by a UC Cooperative Extension farm advisor and grower cooperators in San Diego County. The authors describe the assumptions used to identify current costs for avocado establishment and production, material inputs, cash and non-cash overhead.

The new study, “Avocado  Establishment and  Production Costs and Profitability Analysis in High Density Planting, San Diego County-2020,” can be downloaded for free from the UC Davis Department of Agricultural and Resource Economics website at http://coststudies.ucdavis.edu and UCCE Riverside County Farm Management website at https://ucanr.edu/sites/Farm_Management/Costs_and_Returns. Sample cost of production studies for many other commodities are also available on the websites.

For additional information or an explanation of the calculations used in the studies, refer to the “Assumptions” section of the report or contact Takele at (951) 683-6491 Ext. 243 or ettakele@ucanr.edu or Donald Stewart at the UC Agricultural Issues Center at destewart@ucdavis.edu.

California’s Colorado River Water Users do not have Traditional Water Rights

By  Sean Hood, attorney of Fennimore Law

Farmer Michael Abatti v. Imperial Irrigation District is a landmark decision by the California Court of Appeals concerning the millions of acre-feet of Colorado River water used annually to meet the needs of Southern California’s agricultural empire.

The issue was the nature of landowners’ rights to use Colorado River water to irrigate their fields. The plaintiff, a farmer and landowner in the Imperial Irrigation District (“IID”), asserted that the farmers possess appropriative water rights to the Colorado River water delivered by IID, and are entitled to receive the quantities of water they have historically used on their fields. The Court of Appeals disagreed with most aspects of the plaintiff’s claims. The California Supreme Court recently declined to review the dispute making Abatti the law of the land.

The Abatti litigation arose from IID’s adoption of an “Equitable Distribution Plan” (the “EDP”) to govern allocation of water during times of shortage. IID is a California special district that delivers Colorado River water for numerous purposes including agriculture, municipal, and industrial uses, uses supporting feed lots, dairies, and fish farms, and environmental water uses.

Allocation under the EDP is dependent on the category of water use, and there is a stark distinction between agricultural water uses versus all others.  During times of water shortage, the EDP is far more favorable to non-agricultural water users, who are apportioned water based on criteria such as current and past uses, and future needs.

Agricultural water users, on the other hand, are restricted to the remaining available supply. In times of water shortage, the EDP would result in curtailment of agricultural water uses. In fact, the EDP imposes nearly the entire burden of water shortage on agricultural water users and the Abatti plaintiff contended that the EDP is inequitable in its treatment of farmers.

Under a traditional system of appropriative water rights, longstanding agricultural uses like the Abatti plaintiff’s would have senior priority over other uses. This means that, in times of water shortage, newer non-agricultural uses would be curtailed, whereas the senior irrigators would continue to receive their water supplies. Accordingly, allocations pursuant to the EDP are a significant departure from the manner in which allocations would be made following traditional principles of appropriative water rights.

The reason that senior agricultural water users in IID are not protected from curtailment is that they do not possess a water right to a particular quantity of water. In fact, according to the Court of Appeals, these Colorado River users do not possess a water right at all.

The Court of Appeals held that the water rights are held by IID, not by the farmers.  Instead, the farmers possess equitable and beneficial interests in IID’s water rights. A farmer’s interests are not water rights, but, rather, rights to water service.

This distinction is significant. It empowers IID to exercise discretion in allocating water.  Specifically, the Court of Appeals held that IID has discretion to modify water deliveries in furtherance of its duties to equitably distribute and conserve water for all users.

Because IID has discretion in how it allocates water among its users, landowners’ rights to water service are less protective than traditional water rights.

The good news is that farmers are not subject to the arbitrary whims of district decisionmakers. The Court of Appeals confirmed that farmers’ rights to water service are constitutionally-protected property rights, and that IID’s allocations must be consistent with the district’s purposes. The court made clear that IID’s allocations must provide for equitable distribution of water, and the allocations must be reasonable.

In this regard, the court held that it was not reasonable for IID to adopt a plan that singled out agricultural water users to bear nearly the entire brunt of water shortages. Accordingly, while the Court of Appeals disagreed with most aspects of the lower court’s analysis, it affirmed the lower court’s determination that IID abused its discretion by singling out agricultural water users for curtailment.

IID withdrew the EDP during the pendency of the Abatti litigation, and IID will presumably develop a new plan for water allocation. How IID will impose curtailments among the various categories of users remains to be seen. Abatti provides only general guidance. The Abatti decision stands for the proposition that IID has the discretion to develop an allocation plan as long as (1) it is consistent with the district’s purposes, (2) it is reasonable, and (3) it treats all categories of users equitably. Abatti strongly suggests that IID has the discretion to treat user groups differently, although requiring one class of users to bear the entire burden of water shortages is inequitable and unreasonable. That leaves a wide range of potential allocations, because Abatti otherwise does little to define the extent of IID’s discretion in making allocation decisions between and among different user groups.

The upshot is that, unless IID can achieve stakeholder buy-in, IID’s forthcoming plan will be fertile ground for additional litigation. IID should be motivated to find a balance that is acceptable to all categories of users, and agricultural water users will be wise to engage as stakeholders throughout the entire plan development process.

What Does This Mean for California’s Agricultural Colorado River Water Users?

The Court of Appeals was careful to note that its holding is specific to IID. However, the Abatti reasoning would seem to apply to Colorado River water users served by other special districts in Southern California.

The high-level takeaway from Abatti is that farmers’ rights to delivery of Colorado River water are less certain than traditional appropriative water rights. Longstanding water uses may be subject to curtailment at the same time that newer water uses are unaffected by water shortage.  Similarly, water uses that don’t exist today may in the future place additional constraints on the available supply, and, to a large degree, the allocation preferences afforded to these competing uses will be determined by the discretionary judgment of the users’ special district.

In other words, water supply allocation under a water rights priority system has been supplanted by political decision-making. It is therefore important for water users to exercise great care in selecting their districts’ boards of directors, and for these water users to be actively engaged in all phases of plan development and review.