Duncan MacEwan Archives - California Agriculture News Today

CULTIVATING COMMON GROUND: Economic Analysis of Drought on California Agriculture

Editor’s note: We thank Aubrey Bettencourt for her contribution to California Ag Today’s CULTIVATING COMMON GROUND commenting on the report, “Economic Analysis of the 2016 Drought for California Agriculture,” released this week. Lead UC Davis author Josué Medellín-Azuara’s response can be read below.

By Aubrey Bettencourt, executive director, California Water Alliance (CalWA)

Josué Medellín-Azuara, Duncan MacEwan, Richard E. Howitt, Daniel A. Sumner and Jay R. Lund of the UC Davis Center for Watershed Sciences, ERA Economics and the UC Agricultural Issues Center reported their views on the economic impact of California’s continuing drought on agriculture this week. The study, “Economic Analysis of the 2016 Drought For California Agriculture,” proved to be uncommonly riddled with errors, questionable metrics and inaccuracies; it’s a continuation of a disturbing recent trend.

The authors claim that about 78,800 acres of land might be idled due to the drought, but a quick Google search shows a single water district that had more than 200,000 acres of fallowed land in 2016. There are more than a hundred other water districts throughout the state, and most are reporting idled acreage.

In another irrigation district in Yuba County, more than 100 agricultural users have been cut off entirely, leaving their nearly-mature crops and fruit and nut trees without water. [North Yuba Water District (NYWD)]

This year the federal and state water projects announced they would provide agriculture with 55% of their water. Two months ago, they reduced the estimate to 5% south of the Delta, and they are struggling to even deliver that amount.

Across the state, water prices have increased dramatically, whether pumped from the ground or bought on the faltering water-exchange market. Water that costs less than $250 per acre foot in 2012 now costs up to $750 or more.

It doesn’t take a doctoral or economic degree to understand that when the price of water goes up, the cost to produce food also goes up. Farmers may be getting more money for the produce they grow, but they are watching their bottom line shrink because it costs more to grow it. Even water from their wells isn’t free; pumping takes energy, and energy costs money too.

Adding to rapidly increasing costs are the new minimum wage, capped work hours, and hundreds of regulatory mandates from the 80+ local, state, and federal agencies that oversee every aspect of California farming and bury farmers in paperwork and red tape. Compliance takes time away from growing food, and it costs money.

Take a look at rice farmers. Growing rice today is a losing proposition. After the labor, cost of rice plants, fuel, fertilizing, care, harvesting, drying and milling, growers pay substantially more to grow rice than they can charge for their crop. Many have converted rice paddies to other uses, and some sell their water or take money from federal agencies and conservation groups to create wildlife habitat in order to simply stay afloat. Some are selling off their land to developers, a lose-lose decision affecting everyone.

On main street, consumers are another group taking a second, alarmed look at their grocery, water and sewage bills. All are rising far faster than inflation. Whether you are talking about the price of fruit, bread and eggs or the cost of taking a shower, all have been increasing over the past five years because of the drought.

To really understand what’s happening, take a drive out of the city and into the countryside where your food is grown. Stop at a roadside produce stand or park your car and strike up a conversation with some ranchers and farmers in a small town cafe.

After you hear their stories, you may realize that almonds and pistachios are not as labor intensive as strawberries, tomatoes, cucumbers, grapes, beef, lamb or many others out of the nearly 450 crops grown in California. Some crops are thirstier than others, too. This doesn’t diminish the value of these fruits, nuts, vegetables, and proteins. The value of water is what it provides us: in this case, safe, local, and hopefully affordable food.

But commonsense interviews and case studies of actual operations — once the heart of any competent agricultural economic study — are virtually missing from the report’s statistical models built on university computers, research hypotheses and tables of statistics.

The drought has hurt California farmers, and it is hurting Californians wherever they live. Gross income may be up, but net profits are down, and the rate of decline hasn’t hit bottom yet.

Aubrey Bettencourt is the executive director of the California Water Alliance (CalWA), a leading educational voice and authority on California water. CalWA advocates for the water needs of California families, cities, businesses, farmers and the environment.

Editor’s note: California Ag today thanks Josué Medellín-Azuara, senior researcher, UC Davis Center for Watershed Sciences, and lead author of “Economic Analysis of the 2016 Drought For California Agriculture,” published this week, for his response to several claims made by Aubrey Bettencourt (above).

Josué Medellín-Azuara told California Ag Today, “I will not go over debating the comments which I very much welcome and respect, but I would like to provide some thoughts instead.”

1) “Through remote sensing,” Medellín-Azuara said, “we estimated summer idle land in Westlands by the end of the irrigation season to have been 170K acres in 2011 and just above 270K acres in 2014,” based on NASA data. The difference can be explained by some drought effects and other conditions, according to Medellín-Azuara, “so idled land differences should be taken with a grain of salt. As a point of interest, most of the fallow land we estimated was on the Westside of the south San Joaquin Valley.”

2) In addition, Medellín-Azuara clarified, “My understanding is that there is a cost issue and a cutoff issue. We estimated about 150 TAF (Thousand Acre-Feet) of [water] shortage in the Sacramento Valley in our study. At current conditions for North Yuba Water District (NYWD) agriculture is no more than 3 TAF from my reading of the attached document. I am not saying the cutoffs are not hard for the more than a hundred users, but [I] also want to put numbers into perspective.”

3) “From what I’ve heard and read,” Medellín-Azuara stated, “the timing [of] more than quantity of the projected releases is unfortunate. One of the things we highly encourage in this and past reports is easing of low environmental impact water transfers among users.”

2015 Drought Costs Ag Nearly Two Billion!

DROUGHT COSTS CALIFORNIA AGRICULTURE $1.84B AND 10,100 JOBS IN 2015

The drought is tightening its grip on California agriculture, squeezing about 30 percent more workers and cropland out of production than in 2014, according to the latest drought impact report by the UC Davis Center for Watershed Sciences.

In 2015, the drought costs to the state’s agricultural economy will reach about $1.84 billion and 10,100 seasonal jobs, the report estimated, with the Central Valley hardest hit.

The analysis also forecasts how the industry will fare if the drought persists through 2017.

‘NOT A FREE LUNCH’

Currently, the industry overall remains robust. The agricultural economy continues to grow in this fourth year of severe drought, thanks mostly to the state’s vast but declining reserves of groundwater, which will offset about 70 percent of the surface water shortage this year, the researchers said.

California is the world’s richest food-producing region. Continued strong global demand and prices for many of its fruits, nuts and vegetables has helped sustain the farm economy along with intrastate water transfers and shifts in growing locations.

“We’re getting by remarkably well this year — much better than many had predicted — but it’s not a free lunch,” said lead author Richard Howitt, a UC Davis professor emeritus of agricultural and resource economics.

The heavy reliance on groundwater comes at ever-increasing energy costs as farmers pump deeper and drill more wells. Some of the heavy pumping is in basins already in severe overdraft — where groundwater use greatly exceeds replenishment of aquifers — inviting further land subsidence, water quality problems and diminishing reserves needed for future droughts.

Further, several small rural communities continue to suffer from high unemployment and drying up of domestic wells because of the drought, particularly in the Tulare Basin.

“If a drought of this intensity persists beyond 2015, California’s agricultural production and employment will continue to erode,” said co-author Josue Medellin-Azuara, a water economist with the UC Davis Center for Watershed Sciences.

MAJOR CONCLUSIONS

The UC Davis team used computer models and the latest estimates of surface water availability from state and federal water projects and local water districts. They forecast several drought-related impacts in the state’s major agricultural regions for the current growing season, including:

The direct costs of drought to agriculture will be $1.84 billion for 2015. The total impact to all economic sectors is an estimated $2.74 billion, compared with $2.2 billion in 2014. The state’s farmers and ranchers currently receive more than $46 billion annually in gross revenues, a small fraction of California’s $1.9 trillion-a-year economy.

The loss of about 10,100 seasonal jobs directly related to farm production, compared with the researchers’ 2014 drought estimate of 7,500 jobs. When considering the spillover effects of the farm losses on all other economic sectors, the employment impact of the 2015 drought more than doubles to 21,000 lost jobs.

Surface water shortages will reach nearly 8.7 million acre-feet, which will be offset mostly by increased groundwater pumping of 6 million acre-feet.

Net water shortages of 2.7 million acre-feet will cause roughly 542,000 acres to be idled — 114,000 more acres than the researchers’ 2014 drought estimate. Most idled land is in the Tulare Basin.

The effects of continued drought through 2017 (assuming continued 2014 water supplies) will likely be 6 percent worse than in 2015, with the net water shortage increasing to 2.9 million acre-feet a year. Gradual decline in groundwater pumping capacity and water elevations will add to the incremental costs of a prolonged drought.

GROUNDWATER LAWS COULD HELP

The scientists noted that new state groundwater laws requiring local agencies to attain sustainable yields could eventually reverse the depletion of underground reserves.

“The transition will cause some increased fallowing of cropland or longer crop rotations but will help preserve California’s ability to support more profitable permanent and vegetable crops during drought,” said co-author Jay Lund, director of the UC Davis Center for Watershed Sciences.

The report was primarily funded by the California Department of Food and Agriculture.

Other authors on the report include Daniel Sumner, a UC Davis professor of agricultural and resource economics and director of the UC Agricultural Issues Center, and Duncan MacEwan of the ERA Economics consulting firm in Davis.