July 15, 2014

Report: Drought drains $2.2 billion from farm economy

California’s dogged drought will cost the state’s economy $2.2billion and an estimated 17,100 jobs, but consumers will largely be spared higher prices, according to a major study released Tuesday.

Drought will cost California farmers and ranchers $2.2 billion this year and put 17,100 people out of work, UC Davis experts estimated Tuesday.

The dollar figure is just 5 percent of the state agriculture industry’s $42.6 billion in gross income in 2012, but the losses are greater in some parts of the state, including much of Merced County and the west side of Stanislaus County.

“This is the worst we have ever experienced,” said Aaron Barcellos, whose family grows several crops on about 6,500 acres in the Los Banos area. “We haven’t hired back about 30 seasonal employees we usually have this time of year.”

The UC Davis Center for Watershed Sciences presented the report at a news conference at the National Press Club in Washington, D.C. The authors said the drought, despite leaving 5 percent of the state’s farmland fallow, will likely not raise food prices for consumers.

“On average, it’s not so bad,” said co-author Richard Howitt, an emeritus professor of agricultural economics, “but in certain parts of the Central Valley, it’s extremely bad.”

Barcellos, who normally has about 85 workers in midsummer, said he has increased groundwater pumping to make up for the especially drastic cuts from the federal Central Valley Project. He also has fallowed a quarter of his acreage, reducing tomatoes and other annual crops so more water can go to pistachios and other permanent crops.

The cuts are severe also in the Merced Irrigation District and in much of the stretch between Fresno and Kern counties. The Turlock and Modesto irrigation districts are doing somewhat better, delivering about 40 percent of their usual amounts, while the Oakdale and South San Joaquin districts are close to normal.

“It’s not good here, but it’s better than the southern part of the Valley,” said Turlock-area dairy farmer Ray Souza, a TID customer. The drought has squeezed feed supplies, including alfalfa purchased from around the West and homegrown corn that needs water through summer, he said.

“We have had to take measures now to live with less water,” Souza said. That includes sowing feed varieties with shorter growing seasons and lengthening the time between irrigating, both of which reduce yields, he said.

The report said the drought has been especially tough on beef cattle producers who rely on winter rain to grow feed in the hills flanking the Valley. Many have sold off animals early and will need a few years to rebuild their herds, said Karen Ross, secretary of food and agriculture for Gov. Jerry Brown.

The report followed up on an initial study in May that estimated $1.7 billion in losses and 14,500 people out of work.

The new jobless estimate includes about 7,500 workers on farms and ranches and about 9,600 others who lose work as the reduced spending ripples out to agricultural suppliers, processors and other businesses.

The year is the third-driest on record in California and follows two below-average years that drew down reservoirs. Tuesday’s report brought renewed calls from farmers for increased storage.

“One of the saddest things about the losses caused by the drought is that they could have been prevented,” said Paul Wenger, a Modesto-area walnut and almond grower and president of the California Farm Bureau Federation, in a news release. “California has spent 35 years pursuing a conservation-only strategy that has proven disastrous.”

Statewide, an estimated 428,000 acres of irrigated cropland have gone out of production, the report said. The vast majority is in annual crops, including feed for dairy cattle.

Much of the freed-up water has gone to almond orchards. The U.S. Department of Agriculture last month forecast a record crop of 2.1 billion pounds despite the drought, about a third of it from the Northern San Joaquin Valley. The USDA does not yet have an estimate for walnuts, another major crop in the region, or for the grapes that supply the Modesto area’s big wineries.

The poultry industry is in relatively good shape because its feed comes mainly from the Midwest and prices have dropped from the highs during the 2012 drought in that region. Valley dairy farmers also use this source.

Strong prices for milk, nuts and most other farm products will help farmers through the dry 2014, said Leonard Van Elderen, chief executive officer at Yosemite Farm Credit. The Turlock-based lender is a major source of financing for farmers in Stanislaus and Merced counties.

Van Elderen said farmers can prepare for drought by installing efficient irrigation systems and monitoring moisture in soil and plants. But should 2015 also be dry, or even just average, the pressures on surface supplies and groundwater will increase, he said. He also noted the possibility that river fisheries will get more water at the expense of farmers.

“We still live and work in one of the best water areas of the Central Valley of California,” Van Elderen said. “However, we will not be immune to natural drought and regulatory water shortages.”

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