The UC Davis Center for Watershed Sciences released a detailed report projecting the economic impacts of the drought of California, outlining the serious losses in revenue and jobs that have been brought on by the third driest year in 106 years of record keeping in California history. The report was released during the peak irrigation season. Total statewide impacts for California in 2014 amount to $2.2 billion in lost revenue and 17,100 lost jobs. These losses stem predominantly from hits taken by groundwater pumping, crop farming, and livestock farming industries.
With the loss of 6.6 million acre-feet in surface water, which is usually allocated for agriculture, farmers must pump an additional 5.1 million acre-feet of groundwater to partially replenish the lost water supply. This raises the groundwater contribution to agriculture from 31% to 53%. The 1.5 million acre-feet shortage that is needed will cause “losses of $810 million in crop revenue and $203 million in dairy and other livestock value, plus additional groundwater pumping costs of $454 million. These direct costs to agriculture total $1.5 billion,” according to the Center for Watershed Sciences. Additionally, roughly “89% of increased pumping costs occur south of the Delta, where only 40% of the power generation capacity occurs.”
Not only are the impacts on groundwater depletion significant in this drought that is expected to continue through 2015 and 2016, but the escalated pumping costs for groundwater and inevitable continued losses from reduced agriculture revenue could cost California another $1 billion a year, for at least the next two years.
With scarcer water supplies, the price of water leases has increased in many California counties. One-year water lease prices in 2014 in the Central Valley rose to 2.2 to over 3 times the prices of 2013, and an auction in Kern County revealed a price that was five times higher than what growers there pay for SWP supplies. (For more on the 2014 agricultural water market, see “California Agricultural Water Prices Pressured by Limited Supplies in 2014” in this issue).
And reduced water supplies could have a permanent impact. “Long-term reductions in groundwater overdraft, Delta imports and San Joaquin River diversions could reduce water availability to this region by 2-5 maf/year, requiring the permanent fallowing of up to 1-2 million acres of this region’s 5 million irrigated acres,” the report’s authors Richard Howitt, Josué Medellín-Azuara, Duncan MacEwan and Jay Lund wrote in the California WaterBlog.
As dairy and livestock industries make up 30% of California’s total agricultural commodity value in 2012, and 65% of dairy costs are for feed, the drought has rippled into these highly reliant industries. Not only is surface water severely depleted, which the dairy and livestock industries rely on for crop raising for feed, but the drought has also had damaging effects to the pastures that are so crucial for feeding the livestock. It is estimated that the drought has therefore caused a 1.5% loss in the dairy industry and a 3% loss for the cattle industry, resulting in an estimated $203 million revenue loss, in addition to the 1,651 seasonal and full-time jobs lost statewide in 2014 in these industries alone.
At the end of the report, the Center for Watershed Sciences makes several policy recommendations for helping to alleviate the economic pain from the wound that this drought is causing California.
The report states: “State and regional policymakers concerned with drought should pay special attention to (1) groundwater reliability, (2) the ability of state and county governments to provide technical and organization assistance to rural communities and (3) facilitating voluntary water trades between willing parties, including defining a standard environmental impact report for water transfers that can be assessed and approved prior to droughts.” In these recommendations, the Center hopes to “give local governments the ability to mitigate the impacts of droughts on rural and agricultural areas and economies susceptible to water scarcity.”
Written by Stratecon Staff