The state mandatory water conservation regulations in California have been terminated, but that doesn’t mean that all of California agriculture is economically sound and has water for crops that require considerable water to grow. Water rationing and the economic impact of it are not over for agriculture, notes CoBank officials.

Although a projected reduction in farm income is occurrring, Co-Bank officials think California’s agriculture sector and best producers remain strong enough to manage through another year of drought.

Despite nearly normal rainfall and snowpack during the 2015 – 2016 rainy season, California farmers and agribusinesses could face up to $1.5 billion in losses due to persistent drought conditions, according to a report from CoBank. The drought’s lingering effects are going to cause regulators to put in place another round of water restrictions for agriculture through the remainder of the current growing year and beyond.
 
The report notes that Northern California saw the most precipitation during the rainy season, but much of the state is still blanketed by severe drought, especially in the central and southern regions. Government agencies in the state will again need to enforce water restrictions, allocating less than 60 percent of the state’s contracted water supplies. The estimate by Co-Banks is that these restrictions will result in a 5 percent to 7 percent loss in net cash income for farmers, ranchers and agribusinesses across the state.
 
“Although California’s cities, rural communities and farmland are less parched today than they were a year ago, water remains in short supply,” said Leonard Sahling, vice president with CoBank’s Knowledge Exchange Division. “While for some areas water allocations will be more than double last year’s amounts, growers will still fallow up to 350,000 acres this year.”
 
There are ideas that farmers should use alternatives to fallowing land. They suggest that growers have several other options to offset water restrictions and drought effects including increasing their use of groundwater stores, purchasing additional water from senior rights holders, increasing the use of crop insurance to mitigate risk and lost income, and shifting their crop mix in favor of crops that require less water.
 
“Some sectors will feel the effects of these water restrictions more so than others,” said Sahling. “Crops that yield the highest returns on investment, like permanent plantings of tree crops and vines, should be impacted the least. At the same time, we expect a large reduction in acreage for field crops that require significant amounts of water, including corn, wheat, cotton and alfalfa.”
 
For cattle and dairy farms, the biggest drought-related risk stems from potentially higher feed costs.  “Fallowing decisions will affect the price and availability of locally grown feed ingredients,” Sahling said. “However, grain and feed prices have declined across the nation, mitigating this risk.”
  
Sahling said, “Looking beyond this year, the outlook for California agriculture will depend on how much moisture the state receives, continued availability of groundwater and future regulations that impact access to surface and groundwater,”.
 
A synopsis of the cooperative bank report, “California Drought and its Economic Impact on Agriculture 2016” is available at CoBank.com.