July 24 (Bloomberg) -- Farmers in California’s Central Valley, the world’s most productive agricultural region, are paying as much as 10 times more for water than they did before the state’s record drought cut supply.
Costs have soared to $1,100 per acre-foot from about $140 a year ago in the Fresno-based Westlands Water District, which represents 700 farms, said Gayle Holman, a spokeswoman. North of Sacramento, the Western Canal Water District is selling it for double the usual price: $500 per acre-foot, about 326,000 gallons (1.2 million liters).
“This year the demand was great, the competition was high,” said Ted Trimble, general manager of Western Canal, which represents rice farmers. “You have huge demand in the southern end of the state.”
The drought gripping the state that supplies half the fruits, vegetables and nuts consumed in the U.S. has led federal and state providers to curtail the water they distribute to California’s farmers. That’s prompted districts representing growers to buy and sell for escalated prices from other parts of the state as thousands of acres go unplanted.
The drought threatens to boost produce costs that are already elevated following a December frost, according to the U.S. Agriculture Department. The price of fresh fruit is forecast to rise as much as 6 percent this year, the department said last month. Dairy products, of which California is the biggest producer, may rise as much as 4 percent.
Agriculture consumes about 80 percent of all delivered water in the most-populous U.S. state. California’s 80,500 farms and ranches supply everything from milk, beef and flowers to some of the nation’s largest fruit and vegetable crops, including almonds, avocados and strawberries.
After three years of record-low rainfall, 82 percent of the state is experiencing extreme drought, according to the U.S. Drought Monitor, a federal website. Governor Jerry Brown in January declared a state of emergency and called for a voluntary 20 percent cut in water use.
Farmers and local water officials say the surge in water prices stems from the government decision to limit the water they provide. The U.S. Interior Department’s Bureau of Reclamation supplies water to a third of the irrigated farmland in California through a 500-mile network of canals and tunnels. In February, the agency made its initial allocations, and has since said it would reduce its California water distribution to between zero and 75 percent of contract supply this year.
The rising prices are “a function of supply and demand in a very dry year and the fact that there are a lot of competing uses for water in California,” said Mat Maucieri, a spokesman for the Bureau of Reclamation.
Those with senior water rights, many of which date to before 1914, are getting from 50 percent to 75 percent of their water, he said. The rest didn’t get any federal water this year because of the severity of the drought, he said.
“We’re not delivering nothing,” Maucieri said. “For the users who have water rights that are lower in priority, they are in many cases receiving zero because there is not enough water in storage to meet those deliveries for them.”
The most severe water shortages are in the San Joaquin Valley, in an area from Bakersfield to Patterson and Chowchilla, said Mike Wade, executive director of the California Farm Water Coalition, a Sacramento-based group representing farmers and most agricultural irrigation districts in California.
“Those are the areas that are hardest hit and that are seeking water transfers to bring water from other parts of the state that have some that they’re able to share,” Wade said.
Prices range from $1,000 to $2,000 per acre-foot, with higher costs in the southern part of the state, he said.
The Westlands district, created in 1952, is among those that didn’t get any water from the Bureau of Reclamation this year, Holman said. About 200,000 acres, or a third of the district’s 600,000 acres of farmland, were left unplanted, she said.
“The growers are having to make difficult decisions about how much land they can keep productive,” Holman said. “Some growers have had to remove older trees that they felt needed to be sacrificed for a water supply in another area of their farming operation.”
Daniel Errotabere, 59, a partner at a family-owned farm in Riverdale near Fresno that gets its water from the Westlands district, bought 600 acre-feet of water at rates ranging from $1,000 to $1,800 per acre-foot, about 10 times what he pays normally, he said.
“It’s unprecedented,” said Errotabere. “These are values that farming doesn’t support, but I have to protect the trees and my operation.”
In the northern Sacramento Valley, 50 rice farmers this year agreed to forfeit part of their crop and sell their water at double the usual price to drought-stricken peers to the south.
For the rice farmers who give up some of their water, “the price comes down to what they would get for their rice, so the profits are about the same,” Trimble said.
President Barack Obama offered millions of dollars in aid and other help to California farmers during a visit to Fresno in February.
The water shortage most severely affects the fertile Central Valley with $800 million in lost farm revenue, according to a July 15 report by the University of California at Davis. Direct costs to agriculture total $1.5 billion, in addition to 17,100 seasonal and part-time jobs, according to the report.
The inflated amounts paid for water reflects “the number of people who don’t have access to underground water, who’ve planted very valuable perennial crops,” said Richard Howitt, one of the authors of the report.
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