Jan. 23 (Bloomberg) -- Count Kevin Kester’s cows among the casualties of what California water officials say may be the worst drought in history for the state, the world’s eighth- biggest economy.

Kester, a fifth-generation cattle producer, said the lack of green grass on his ranch of more than 20,000 acres (8,100 hectares) halfway between Los Angeles and San Francisco has forced him to reduce his herd by 60 percent. More cuts may be coming.

“If we don’t get substantial rainfall in the next few weeks, we will have to liquidate percentages that would be a disaster to us financially,” said Kester, 53. “I’m very pessimistic.”

Two years of drought have left California’s reservoirs at below-average levels. Water deliveries from the Sacramento-San Joaquin Delta, which supplies millions of acres of farmland, have been restricted by regulatory rulings to protect an endangered ecosystem there.

The drought is felt across the state: Oakland residents face higher fees for water use, restaurants in Los Angeles aren’t supposed to serve water unless diners request it, and homeowners in San Diego are asked to cut back on watering their lawns. In San Francisco’s East Bay, an advertising campaign praises water-saving “heroes” who take shorter showers, load up their washing machines and turn off the faucet while brushing their teeth.

“We’re in a very precarious state,” said Wendy Martin, drought coordinator for the California Department of Water Resources. A third consecutive dry year coupled with the delta restrictions “could result in more severe water shortages than we’ve ever seen,” Martin said.

Farmers Suffer

The drought is withering California’s $36 billion-a-year agriculture industry, the biggest in the U.S. Crop losses from the water shortage total $308.7 million as of Dec. 17, the California Department of Food and Agriculture estimates.

Shawn Coburn, who needs more water for his 1,500 acres of almonds and 300 acres of wine grapes in Firebaugh, 150 miles (240 kilometers) southeast of San Francisco, is among those who may have to close down if the weather doesn’t improve.

“What are we going to do to keep those trees alive?” said Coburn, 40. “I don’t know. The drought will put me out of business.”

In the water year ended Sept. 30, 2007, runoff from precipitation and snowmelt was 53 percent of average, Water Resources Department data show. Runoff of 57 percent the following year prompted Governor Arnold Schwarzenegger to declare the first statewide drought since 1991. The department will conduct its first comprehensive snow survey for 2009 in early February.

La Nina Effects

Forecasters say the state may experience more of the weather phenomenon known as La Nina, or cool temperatures over the tropical Pacific Ocean, which last year caused some of the driest months on record in the northern Sierra Nevada. Only 3.5 inches (8.9 centimeters) of precipitation fell from March through September, compared with an average of more than 15 inches, said Elissa Lynn, senior meteorologist for the Water Resources Department.

“The worry is that if La Nina does stay in place and does what it did last year, that would add up to some very dry conditions,” Lynn said. “The potential for what we see ahead is worrisome.”

Dry Reservoirs

Water in Shasta Lake, the state’s biggest reservoir, is at 30 percent of capacity, down from 39 percent last year, Lynn said. Lake Oroville, another large reservoir, is at 28 percent, less than half its average.

Household water rationing may be imposed soon. Another dry winter probably will cause the Metropolitan Water District, the water wholesaler to about 18 million people in Southern California, to reduce deliveries to its 26 member cities and water districts for the first time since 1991, said Jeffrey Kightlinger, general manager.

Metropolitan relies on imports from Northern California and the Colorado River for 60 percent of its water budget, sources that have yielded less recently because of drought and regulations, Kightlinger said.

Court decisions have reduced water deliveries by as much as 30 percent from the delta, where two of the state’s biggest rivers converge, in an effort to stop damage to the estuary’s ecosystem from pumping water. About two-thirds of Californians use water from the delta, according to the Water Resources Department.

Outdoor Limits

Water departments in Los Angeles and Long Beach already are restricting some outdoor water use, Kightlinger said. The San Diego County Water Authority is asking residents and businesses to cut water use by 20 gallons a day.

“These are as difficult water conditions as I’ve ever seen,” Kightlinger said.

Kester, the cattle producer, said the number of farmers and ranchers affected in the state by the lack of water will inevitably hurt consumers. The drought already has caused more than 106,000 acres in the state to be abandoned or go unplanted, according to the Food and Agriculture Department.

“This will translate into higher food costs, and even shortages,” Kester said. “Whether it’s almonds, or beef. People don’t realize that yet.”

To contact the reporters on this story: Jeran Wittenstein in San Francisco at jwittenstei1@bloomberg.net; Ryan Flinn in San Francisco at rflinn@bloomberg.net

Last Updated: January 23, 2009 03:00 EST