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.

Drought’s impact on crops

Source: Dale Kasler; The Sacramento Bee

It’s harvest time in much of California, and the signs of drought are almost as abundant as the fruits and nuts and vegetables.

One commodity after another is feeling the impact of the state’s epic water shortage. The great Sacramento Valley rice crop, served in sushi restaurants nationwide and exported to Asia, will be smaller than usual. Fewer grapes will be available to produce California’s world-class wines, and the citrus groves of the San Joaquin Valley are producing fewer oranges. There is less hay and corn for the state’s dairy cows, and the pistachio harvest is expected to shrink.

Even the state’s mighty almond business, which has become a powerhouse in recent years, is coming in smaller than expected. That’s particularly troubling to the thousands of farmers who sacrificed other crops in order to keep their almond orchards watered.

While many crops have yet to be harvested, it’s clear that the drought has carved a significant hole in the economy of rural California. Farm income is down, so is employment, and Thursday’s rain showers did little to change the equation.

An estimated 420,000 acres of farmland went unplanted this year, or about 5 percent of the total. Economists at UC Davis say agriculture, which has been a $44 billion-a-year business in California, will suffer revenue losses and higher water costs – a financial hit totaling $2.2 billion this year.

Rising commodity prices have helped cushion at least some of the pain, but more hurt could be on the way. With rivers running low and groundwater overtaxed, the situation could get far worse if heavy rains don’t come this winter.

“Nobody has any idea how disastrous it’s going to be,” said Mike Wade of Modesto, executive director of the California Farm Water Coalition, an advocacy group based in Sacramento. “Is it going to create more fallowed land? Absolutely. Is it going to create more groundwater problems? Absolutely.

“Another dry year, we don’t know what the result is going to be, but it’s not going to be good,” Wade said.

Central Valley residents don’t have to look far to see the effects. Roughly one-fourth of California’s rice fields went fallow this year, about 140,000 acres worth, according to the California Rice Commission, leaving vast stretches of the Sacramento Valley brown instead of their customary green.

“We’d all rather be farming, as would everybody who depends on us – the truck drivers, the parts stores, the mills,” said Mike Daddow, a fourth-generation rice grower in the Nicolaus area of southern Sutter County.

Daddow opted to fallow 150 of his family’s 800 acres this year and counts himself lucky. “We did better than a lot of people,” he said.

Last week, Daddow was gearing up for the harvest, which begins Monday. It was pleasantly warm, but the faint smoky smell from the King fire was another unwelcome reminder of the parched season of discontent.

“It affects me, yes, I will have less profit,” he said. “It affects hourly workers. If there’s no ground to till, I can’t hire them to do anything.”

Daddow hired just six workers during spring planting, instead of the usual nine or 10.

Calculating total job losses related to the drought is difficult, especially in an industry in which many workers are transient and much of the work is part time. The state Employment Development Department, drawing from payroll data, said farm employment has dropped by just 2,700 jobs from a year ago, a decline of less than 1 percent.

But experts at UC Davis say they believe the impact is more severe. Richard Howitt, professor emeritus of agricultural economics, said he believes the drought ultimately will erase 17,000 jobs. He bases that, in part, on the increased number of families seeking social services.

The human cost shows up at rural food banks, which are reporting higher demand for assistance from farmworkers and their families. At the Bethel Spanish Assembly of God, a church in the Tulare County city of Farmersville, the number of families receiving food aid every two weeks has jumped from about 40 last year to more than 200. Farmersville, a city of 10,000, is at the heart of a region that grows an array of crops, from lemons to pistachios to grapes.

“Some of them are working … but they’re not putting in the hours,” said the Rev. Leonel Benavides, who is also Farmersville’s mayor. Thanks to state-funded drought relief, the church has been able to meet the increased demand – and then some.

“Instead of just two boxes, we give them three,” Benavides said.

The effect goes beyond the farm fields. N&S Tractor, which sells Case IH brand farm equipment throughout the Central Valley, has seen business tail off as farmers conserve cash.

“It’s not just our dealership,” said N&S marketing director Tim McConiga Jr., who works out of the company’s sales office in Glenn County. “You talk to John Deere, you talk to Caterpillar, everyone is going to tell you their numbers are down.”

The drought has had varying impacts on different areas of the state, depending in part on who has first dibs on the dwindling water supply. Some growers have stronger water rights than others. Generally speaking, Sacramento Valley farmers have had it easier than their counterparts south of the Sacramento-San Joaquin Delta, where the cutbacks have been more severe.

The Modesto and Turlock irrigation districts are delivering about 40 percent of their usual amounts. The Merced Irrigation District is far worse off, as are many of the West Side areas supplied by the federal Central Valley Project. The Oakdale and South San Joaquin irrigation districts have not had large cutbacks, but leaders worry about a dry 2015.

Regardless of geography, many growers have had to make difficult choices about which fields to water, leaving portions of their farms idle.

Bruce Rominger of Winters, chairman of the California Tomato Growers Association, made the decision to push ahead with his tomato crop at the expense of other commodities. With tomatoes selling for a robust $83 a ton, vs. about $70 a year ago, it was a matter of simple economics.

“Other crops are not getting the water,” said Rominger, who owns and leases a total of about 5,000 acres. “We sacrificed some alfalfa, we sacrified some sunflowers, we sacrificed quite a bit of rice. We fallowed 25 percent of our farm.”

Much of the processing tomato crop goes to canneries in Modesto, Oakdale, Escalon and Los Banos.

Choosing to focus on one crop doesn’t guarantee victory. Even the $4 billion almond industry – the great success story of California agriculture in recent years – could not be shielded from the drought’s effects.

As worldwide demand for almonds has boomed, prices have soared past $4 a pound and farmers have responded with more supply. Orchard plantings have continued unabated, even this year. With water supplies running low, many almond growers set aside other commodities to keep their orchards going.

Even so, the almond yield declined. Blue Diamond Growers, the big farmer-owner almond cooperative based in Sacramento, predicts that production in California will fall this year to around 1.9 billion pounds when the harvest is complete in a few weeks. That compares with the 2 billion pounds harvested last year and the U.S. Department of Agriculture’s forecast, released in late June, that this year’s crop would total 2.1 billion pounds.

What went wrong? Almonds are one of the thirstiest crops around, and there wasn’t enough water to generate big yields.

“I don’t think there was anyone who used as much (water) as they normally do,” said Dave Baker, director of member relations for Blue Diamond. The hot spells in June and July “stressed the trees even further” and curtailed production, he said.

With California accounting for 80 percent of global almond supply, Baker said he’s worried about being able to meet demand. “We have a growth industry,” he said.

Blue Diamond has plants also in Salida and Turlock, and several smaller processors are in or near Stanislaus County.

The lack of water last spring likely also has stunted navel orange production in the San Joaquin Valley, where harvest is expected to begin in a few weeks.

“We’re expecting some kind of damage to the crop,” said Alyssa Houtby, spokeswoman for California Citrus Mutual, a grower-owned association based in Tulare County. “We didn’t have the water in those key months.”

Economist Vernon Crowder, a senior vice president with agricultural lender Rabobank, said farmers went into this difficult season with a couple of advantages: Most commodity prices have risen in recent years, and most growers are in pretty good financial shape as a result. But another dry year could bring more serious hardship, he said.

“They have a little bit of cash to withstand this,” Crowder said. “They’re going to get through it. The real question is what is going to happen next year.”

Similar questions are being raised in the California wine industry, which produces much of its volume in the Modesto area. The last two grape harvests were extraordinarily strong, leaving an overhang of product that should help offset the slight declines in this year’s harvest. “Pricing should be steady,” said industry consultant Robert Smiley, a professor emeritus of business at UC Davis.

That doesn’t eliminate fears that next season’s crop could shrink substantially. Craig Ledbetter of Vino Farms, a Lodi grape producer, had enough water this year but said he’s afraid he’ll receive “curtailment notices” from the state signaling significant cutbacks in next season’s water supply.

“I’m very nervous about water,” said Ledbetter, who also raises wine grapes in Sonoma County. “If we don’t have a rainy winter, I can pretty much guarantee we’re all going to be receiving curtailment notices. If that happens, we’re going to be concerned about keeping the vine alive rather than harvesting it.”

Caifornia drought transforms global food

Source: Jeannette E. Warnert; ANR News Blog

Due to the California drought and what scientists believe will be a drier future, the state’s farmers will likely move away from commodity crops to focus on high-value products like almonds, pistachios and wine grapes, according to Richard Howitt, agricultural economist at UC Davis. Howitt was used as a source in a lengthy story on Bloomberg.com about repercussions worldwide of the three-year dry spell in the Golden State.

Another source was Dan Sumner, director of the UC Agricultural Issues Center. He said shifts in California ag trends reverberate globally.

“It’s a really big deal,” Sumner said. “Some crops simply grow better here than anyplace else, and our location gives us access to markets you don’t have elsewhere.”

California is the United States’ top dairy producer and grows half of the country’s fruit. In 2012, almonds became the state’s second-most valuable ag crop. The Washington Post reported that in the U.S., almond consumption has grown by more than 220 percent since 2005. In the late 2010s, almonds surpassed the long-running nut leader peanuts (not including peanut butter) in per capita consumption.

The Bloomberg article opened with the story the Fred Starrh‘s family farm in Kern County. The Starrh family was a prominent cotton grower for more than 70 years. The shifting global market and rising water prices prompted the family to replace more of their cotton plants with almonds.

“I can’t pay $1,000 an acre-foot (of water) to grow cotton,” said Starrh, 85.

California grows four-fifths of the world’s almonds, the Bloomberg story said, using enough water to meet the needs of 75 percent of the state’s population. An advocate for bigger water supplies for cities suggests in the story that farmers should be profitable, but it shouldn’t come at the expense of urban water ratepayers.

JUST IN: UC Davis’ Preliminary Findings on Drought Impact in Central Valley

Source Office of Public Affairs

Photo Source-Aquafornia

California’s drought impact will be a severe blow to Central Valley irrigated agriculture and farm communities this year and could cost the industry $1.7 billion and cause more than 14,500 workers to lose their jobs, according to preliminary results of a new study by the UC Davis Center for Watershed Sciences.

Researchers estimated that Central Valley irrigators would receive only two-thirds of their normal river water deliveries this year because of the drought.

The preliminary analysis represents the first socio-economic forecast of this year’s drought, said lead author Richard Howitt, a UC Davis professor emeritus of agricultural and resource economics.

“We wanted to provide a foundation for state agricultural and water policymakers to understand the drought impact on farmers and farm communities,” Howitt said.

The Central Valley is the richest food-producing region in the world. Much of the nation’s fresh fruits, nuts and vegetables are grown on the region’s 7 million acres of irrigated farmland.

The center plans to release a more comprehensive report of the drought’s economic impact on the state’s irrigated agriculture this summer.

The analysis was done at the request of the California Department of Food and Agriculture, which co-funded the research, along with the University of California.

“These estimates will help the state better understand the economic impacts of the drought, ” said CDFA Secretary Karen Ross. “The research confirms where emergency drought assistance will be needed most, and efforts are already underway.”

The UC Davis researchers used computer models and the latest estimates of State Water Project, the federal Central Valley Project and local water deliveries, plus groundwater pumping capacities to forecast the economic effects of this year’s drought.

The analysis predicted several severe impacts for the current growing season, including:

▪Reduced surface water deliveries of 6.5 million acre-feet of water, or 32.5 percent of normal water use by Central Valley growers. An acre-foot is enough water to cover an acre of land in a foot of water, or enough water for about two California households for a year.

▪ Fallowing of an additional 410,000 acres, representing 6 percent of irrigated cropland in the Central Valley.

▪ The loss of an estimated 14,500 seasonal and full-time jobs. About 6,400 of these jobs are directly involved in crop production.

▪ A total cost of $1.7 billion to the Central Valley’s irrigated farm industry this year, including about $450 million in additional costs of groundwater pumping.

▪ About 60 percent of the economic losses will occur in the San Joaquin Valley and Tulare Lake Basin.

Growers are expected to replace much of the loss in project water deliveries with groundwater, California’s largest source of water storage during drought years, said co-author Jay Lund, director of the Center for Watershed Sciences and a UC Davis professor of civil and environmental engineering.

“Without access to groundwater, this year’s drought would be truly devastating to farms and cities throughout California,” Lund said.

The additional pumping will cost an estimated $450 million and still leave a shortage of 1.5 million acre-feet of irrigation water, about 7.5 percent of normal irrigation water use in the Central Valley, according to the forecast.

While the current drought is expected to impose major hardships on many farmers, small communities and the environment, it should not threaten California’s overall economy, Lund said.

Agriculture today accounts for less than 3 percent of the state’s $1.9 trillion a year gross domestic product.Other authors on the report are UC Davis agricultural economist Josue Medellin-Azuara and Duncan MacEwan of the ERA Economic consulting firm in Davis.