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A woman walks near the receding waters of California's Folsom Lake, which is at 17 percent of its normal capacity, in January 2014.


California Report Warns of Worsening Economic Impacts of Drought

Parts of state to experience "pain and poverty," while officials roll out solutions.

A new scientific and economic report commissioned by California's state government warns that the ongoing drought crisis will cost billions in lost farm revenue and thousands of jobs, although wider impacts on the national food system are unlikely. The report also outlines ways officials could act now to avoid the worst effects of the drought.

California's drought is now in its third year and is expected to worsen, thanks to record high temperatures and a low snowpack in the state's mountains. Nearly 80 percent of the state is now in what scientists call "extreme or exceptional" drought, which has caused the state water control board to call for mandatory water restrictions in urban areas and for some holders of agricultural water rights. (See "Storms Get Headlines, but Drought Is a Sneaky, Devastating Game-Changer.")

In the midst of this drought crisis, California's Department of Food and Agriculture commissioned a report from scientists and economists at the University of California, Davis. In a press event announcing the report Tuesday, co-author Richard Howitt warned that the state is "running down our bank account [of stored water]."

Howitt, a UC Davis professor emeritus of agricultural and natural resource economics, said California's economy is expected to lose a total of $2.2 billion this year as a result of the drought.

"What really hurts is we're losing 17,100 jobs," said Howitt. Most of those jobs are seasonal and part-time work in the Central and San Joaquin Valleys.

"They are mostly from the sector of society that is least able to roll with the punches," Howitt added. "There are pockets of extreme deprivation where they are out of water and out of jobs... There are going to be more pockets of pain and poverty."

According to the UC Davis report, the state's agricultural sector faces a net water shortage of 1.6 million acre-feet this year, which will cause losses of $810 million in crop revenue and $203 million in lost dairy and other livestock value, plus additional groundwater pumping costs of $454 million. These direct costs to agriculture total $1.5 billion. When the job losses are factored in, the total economic impact to the state economy is estimated to be $2.2 billion.

Karen Ross, secretary of the California Department of Food and Agriculture, said at the press briefing that the purpose of the report is to "figure out how to survive droughts better." She said the state government had been surprised by the impact a smaller drought in 2009 had on seasonal farm workers in Fresno County, when food banks were overwhelmed by those seeking assistance.

Which Crops Are Affected?

Despite the California drought, Howitt said most consumers around the country aren't likely to notice any significant impacts on food prices or availability this year. Many of California's important vegetable crops will continue to be watered by groundwater, although he notes that there is growing concern about the long-term viability of that arrangement.

Citrus crops are likely to be affected but, Howitt added, "don't worry, your Napa wines will be just fine, as will Monterey wines."

Ross said California's growers have been able to increase their productivity by 80 percent over the past five decades in part because they had been ramping up their water efficiency. About half of the state's producers already use some kind of precision water technology, either drip irrigation or targeting sprinklers.

Even so, Ross says, "I think we will continue to see a tradeoff that farmers and ranchers are making, with more people giving up annual crops like cotton, feed grains, and oilseed crops because they are trying to put their water into the highest value crops."

Those crops include perennials that grow on trees like almonds, walnuts, and pomegranates, which yield particularly high values per unit of water. About a third of the state's land is currently devoted to such "permanent" tree crops, and Howitt said he expects that percentage will increase as a result of the drought.

At the other end of the spectrum, prices for alfalfa hay have shot up 40 percent because of the drought. The increase hasn't affected consumer prices for milk because grain prices have been low, says Howitt, and dairy cows eat more grains than hay. Still, the dairy industry is expected to take a hit, as reflected by the report's numbers. (See "Exporting the Colorado River to Asia, Through Hay.")

Drought Solutions?

Report co-author Jay Lund said chances are good that the drought may continue into next year. While some people have looked to this year's El Niño as a potential savior, "it's probably not relevant to northern California for this drought," says Lund, "and that's where most of our water comes from."

Lund, who serves as director of the UC Davis Center for Watershed Sciences, said drought in California "is inevitable." According to him, what's needed is a "portfolio approach of solutions." Those solutions must include short-term relief, not just massive projects that would take years to come online, such as desalination plants or new pipelines from far-off places.

In response to the crisis, California's government is taking a number of steps, said Ross, including pushing conservation, increasing efficiency, investing in new infrastructure to safely recycle used water, and increasing storage capacity. (See "5 Dramatic Ways California Is Tackling Drought.")

Currently two bills before the state legislature would reform how groundwater use is regulated. Right now, property owners can take as much water as they can extract. The agricultural sector is making up 75 percent of its water shortage by increasing groundwater pumping.

Howitt said the state needs to start tracking groundwater use, as its Western neighbors already do. He noted that in areas where farmers can practically sell water to each other, prices have tripled over the past few years, contributing to some hard choices.

Peter Gleick, a water expert at the Pacific Institute in Oakland, has publicly called recent water actions too little, too late. He told National Geographic in May, "It is the third year of the drought, and we did not act in the first two years as though anything was abnormal."

The fundamental problem remains that California's water has been overcommitted, says Gleick, while the state's population continues to rise and the economy continues to grow.

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