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.

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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).

UC Davis Center for Watershed Sciences
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.”

US rice farmers see opportunity in China – from the Los Angeles Times

By David Pierson

Gregg Yielding was given a quixotic task: travel to China and determine if consumers there would be willing to eat American rice.

So he set up tables at some of the most popular supermarkets in southern China, hung American flags and began dishing out steamy samples of rice from Arkansas and California.

“At first they’d say, ‘There’s rice in the U.S.?” said Yielding, head of emerging markets for the U.S. Rice Producers Assn., a Houston-based trade group. “And we’d have to show them a map to explain that it’s grown in California and the South. Then they’d try it, and they would really like it.”

Chinese importers, distributors and grocery chains lined up. Selling U.S. rice to China seemed like a slam-dunk. But eight years after Yielding’s first venture on behalf of the U.S. industry, not a single shipment of American rice has officially made it into Chinese hands.

That won’t happen until the two countries agree on a so-called phytosanitary protocol, which determines the necessary steps U.S. rice exporters must take to mitigate pests such as insects. The disagreement highlights the growing pressure on U.S. agricultural producers to either accommodate China or risk being shut out of the world’s largest emerging consumer market.

That might not have mattered a decade ago when U.S. farmers could rely on domestic buyers or traditional foreign markets such as Mexico and Canada. Today, China’s swelling appetite for food is touching agribusiness everywhere and forcing companies to choose whether to adapt.

Those that comply are seeing dividends. American agricultural exports to China rose to a record $25.8 billion last year from $5 billion a decade earlier.

Until a few years ago, no one would have considered exporting much rice to China, the world’s largest producer and consumer of the grain.

Tim Johnson, president and chief executive of the California Rice Commission, called it “the ultimate example of selling ice to the Eskimos.”

But starting in 2012, China went on a spree, scooping up millions of tons of the grain from countries such as Vietnam, Pakistan and India. China is now on pace to import a record 3.4 million tons of rice this year — six times more than it did in 2011, according to the U.S. Department of Agriculture.

Other industries remain shut out. The U.S. beef industry is still trying to overturn a 2003 ban on American cattle over mad cow disease. Starting late last year, nearly a million tons of U.S. corn have been rejected at Chinese ports because of inclusion of an unapproved genetically modified strain. And some American pork imports were halted this month over fears they contained traces of ractopamine.

“Demand is growing so quickly in China for so many food products — and with so many places to get them from — China can pick and choose,” said Jim Harkness, a senior advisor on China for the Institute of Agriculture and Trade Policy in Minneapolis. “From a U.S. perspective, it looks like the Chinese are being picky and erecting non-tariff barriers for political reasons. But I think from the Chinese perspective, the U.S. is an outlier in some cases. Ractopamine is banned in over 100 countries.”

In addition to China, the European Union and Russia also ban the additive. It’s deemed a risk to people with cardiovascular problems.

While other products struggle to win access, the U.S. rice growers are hopeful that officials in Washington and Beijing can come to terms as early as next year. If they do, analysts estimate, U.S. rice exports to China could reach several hundred million dollars a year. That would make China a top buyer of the American grain, on par with Mexico and Japan.

Though it produces only 2% of the world’s rice, the U.S. accounts for nearly 10% of the rice traded globally — enough to make it the fifth-biggest exporter. About half the rice grown in the U.S. ends up abroad. Still, rice consumption in China is so high the country could eat through America’s annual production in 17 days.

The growing Chinese appetite for imported rice may partly reflect surging food demand, analysts said. But it’s mostly driven by arbitrage, as government policies have kept domestic rice prices high to protect Chinese farmers. Rice mills in China decided it was cheaper to buy foreign supplies.

American rice producers can’t meet that sort of mass demand — nor do they want to. Their interest is in selling packaged rice to China to fill a high-end niche. The rice producers association’s survey of Chinese consumers buttressed that idea. Despite the concerns of Chinese regulators, shoppers in China overwhelmingly perceived U.S. rice as a safe alternative in a country hit by myriad food safety scandals.

Josh Sheppard, a fourth-generation rice grower in Biggs, Calif., about 60 miles north of Sacramento, said he’d welcome Chinese buyers because they probably would pay more for his grains than U.S. customers — much the way Japanese buyers currently do. That’s especially important now when drought has cut rice acreage in the state by 25%.

The cooperative is managed by Stuart Hoetger, co-founder of Stogan Group, an agricultural consulting firm in Chico, Calif.  Hoetger has arranged a partnership between the rice growers and Chinese food and agriculture conglomerate Wufeng.

Medium grain rice known as Calrose grown by the cooperative is being shipped in limited quantities to Chinese ports, where Wufeng is redirecting it to customers in small markets such as the Solomon Islands, the idea being Hoetger and his growers will be ready to ship to China shortly after a trade agreement is finalized.

“If China asks for something, you do it,” Hoetger said. “You ask any farmer that’s sold to China in the last few years and they’ll tell you they’ve made a lot of money.”

 

California Rice Farmers Could Get Pollution Credit

Source: Edward Ortiz; The Fresno Bee

California’s evolving cap-and-trade market may soon have a new player: rice farmers.

A proposal by the California Air Resources Board staff, up for board approval in September, would allow rice farmers in the Sacramento Valley to sell carbon emission offsets as part of the state’s effort to combat climate change.

Rice farmers would flood their fields for shorter periods, which would reduce the decomposition process that emits methane – a potent greenhouse gas.

Businesses seeking to offset their own greenhouse gas emissions could buy credits from the farmers who had made gains in curbing pollution.

“The rice cultivation protocol is the first time rice practices have been identified as a potential source of greenhouse gas emission mitigation for California,” said Dave Clegern of the Air Resources Board.

The program, called the Rice Cultivation Projects Compliance Offset Protocol, is slated to go into effect on Jan. 1, 2015, and run for a 10-year period. State air quality officials and environmental groups say other crops could eventually be included in cap and trade as well.

“I think this rice protocol sets an important precedent for agriculture,” said Robert Parkhurst, director of agriculture and greenhouse gas markets for the Environmental Defense Fund. The nonprofit has been working with the California Rice Commission and the Air Resources Board to craft the program.

Rice was selected as the first crop because it’s a potent contributor of methane – a greenhouse gas implicated in climate change.

Methane is produced when rice farmers flood fields during spring seeding and prior to fall harvest. Flooding cuts off the soil’s exposure to oxygen. This causes anaerobic fermentation of the organic matter in the soil. Methane is an end product of that fermentation. The methane is released into the atmosphere primarily through the rice plant. A smaller portion bubbles up from the soil and escapes through the water.

The cap-and-trade program, launched in 2013, is an outgrowth of the state’s emissions-reducing law, AB 32. The program caps overall greenhouse gas emissions at a lower level each year. It allows industries to buy pollution allowances, within a certain limit, to offset their own release of greenhouse gases.

Farmers are largely exempt from cap and trade, and the offset program is voluntary for rice farmers. In order to sell credits, they will need to prove they changed the way they flooded their fields and reduced the amount of methane emitted as a result. The reductions will be measured using a complex computer model with independent third-party verification before offset credits are issued, according to the air board.

Those reductions can then be sold as part of the cap-and-trade program – at a market rate.

“For this to be successful, we’re going to need to see a group of farmers get together to cooperate in order to create these projects,” said Parkhurst. “The opportunity is large because there are a large number of acres, but the credits per acre (figure) is on the small side.”

The amount of methane that can be reduced would be about a half a ton to a ton per acre per year, said Parkhurst.

“What we would like is to take the opportunity with rice and see how it can be applied to other crops in other regions,” Parkhurst said.

He said that almonds are among a few crops now being considered for involvement in the cap-and-trade program. The Environmental Defense Fund has been working with the California Almond Board on a proposal.

That program would likely address fertilizer application practices in almond cultivation and their contribution to greenhouse gases.

The ARB is offering rice farmers two options under the new program. The first is a process called ‘dry seeding’ – where water is put on rice fields later during seeding season. The other demands farmers drain rice fields seven to 10 days earlier than usual.

Most of the 550,000 acres of rice planted in the state is in the Sacramento Valley, and most of that is grown by farmers who flood their fields – typically to a depth of 4 to 5 inches prior to seeding

Many unresolved factors could limit enthusiasm among rice farmers for the program, said Tom Butler, owner of the Sutter Basin rice farm corporation.

Butler grows 4,000 acres of rice and 265 acres of almonds several miles south of the Sutter County town of Robbins. He’s one of four farmers participating in a pilot program begun in March as part of the cap-and-trade effort with rice farmers.

The new practices suit his farm because his soil drains much more quickly than most rice farms in the Sacramento Valley. He said he thinks other farmers will be wary about draining their fields.

“Pulling water on and off can cause some serious nitrogen and erosion problems for your rice if you are not careful,” said Butler. “I would not have jumped into it feet first if we did not have the soil we have.”

If a lot of farmers sign up, however, the drying of their land could cause another environmental problem. Flooded rice fields provide more than 300,000 acres of wetland habitat for waterfowl and other birds that travel through the Sacramento Valley on the Pacific Flyway.

For now the air resources agency has decided to exclude winter flooding of rice fields from the cap-and-trade program. It is winter flooding – and not flooding during spring seeding or before harvest – that provides the most crucial wetland habitat for bird populations.

Butler said he’s decided to participate in the cap-and-trade program more for altruistic reasons than financial ones.

“I think about this as the right thing to do,” Butler said. “We’re trying our best to be good stewards of the land, and produce a crop … and this program could be a next step for us.”