Drought jeopardizing California’s $50B agricultural sector

California’s farms are the largest food producers in the nation, but ongoing drought conditions are wreaking havoc on this $50 billion sector.

Crop revenue losses, combined with groundwater over-pumping and upstream supply-chain impacts, may have slashed the state’s agricultural revenue as much as $1.7 billion in 2021, according to a new brief published by the Public Policy Institute of California.

Drought conditions last year also contributed to the loss of 14,600 related jobs, amounting to about 3 percent of a sector that employs more than 420,000 people, the authors stated. 

While the economic effects of the 2021 drought may have only been “modest statewide,” the authors warned that persistent dry conditions in 2022 will likely exacerbate such impacts.

California’s farms have become increasingly productive as they’ve shifted to crops that produce more profit and jobs per unit of water, while also strengthening dairy and beef output, according to the brief. But the state’s reliance on irrigation amid decreasing water availability remains “an enduring concern.”

Despite improvements in irrigation efficiency, both climatic conditions and regulatory constraints have restricted the availability of surface water, and the over-pumping of groundwater has dried up wells, the brief explained.

“Climate change is making California’s variable climate even more volatile, with increasingly dramatic swings between wet and dry conditions—or ‘precipitation whiplash,’” the report said, citing a 2018 Nature article that coined this phrase. “At the same time, California is experiencing a megadrought along with much of the West, with chronic low precipitation and higher temperatures.”

As a result of the drought, surface water deliveries to farms in the state’s central valley and north coast regions dropped by 41 percent in 2021, in comparison to the 2002-2016 average, according to the brief.

Increased groundwater pumping raised farmers’ energy bills by about $184 million, while water shortages led to 395,000 excess acres of “idled land” — or land that is left unplanted — in 2021, the report found. Most of that idled land was in the Sacramento Valley.

In order to subsist with limited supplies, many farmers resorted to watering below the actual needs of their crops — a process known as “deficit irrigation,” which results in lower crop yields, the report explained.

Across impacted regions, the authors estimated that crop revenue losses and increased pumping costs amounted to about $1.1 billion, with about 8,700 jobs lost.

“Crop losses do not occur in a vacuum,” they warned, noting that upstream sectors also suffered as a result.

The brief therefore estimated that the 2021 drought’s true economic impact was as much as $1.7 billion in revenue losses and 14,600 in lost jobs.

Going forward, the brief’s authors suggested several policy changes to help California’s farmers adapt to a changing climate.

To mitigate the impacts of over-pumping, they suggested that groundwater agencies incentivize farmers to avoid such activity by paying for alternative solutions like replacing at-risk wells.

The authors also called for an acceleration of demand management strategies and “land repurposement” — such as a reorganization of perennial and annual crop mixes.

Lastly, they stressed the importance of improving water storage in underground recharge basins and upgrading conveyance infrastructure.

“Getting more water into the ground can help recharge groundwater basins and build up critical reserves,” the authors added.