Implications of the True Cost of Water on California Agriculture

Dennis BaldocchiProfessor of Biometeorology

True Cost of American Food, SF, April, 2016

Brentwood Walnut Orchard circa 1960

Reared on a CA almond/walnut ranch, I have been concerned and interested in Ag Water Use Most of my life

How Much Should Water Cost, Given a Limited Supply and Demand from Numerous and Legitimate Stakeholders?

How Much Water Is Available in California for Agriculture, Now and in the Future?

Given a Limited Water Supply, which crops may we want to favor, based on California’s unique ability to produce them and their economic and nutritional value?

Can they be grown elsewhere more cheaply and with less water?Corn, wheat, Sorghum, forage crops: YESDairy and Alfalfa: yes/noWalnuts, Almonds, Apricots, assorted Fruits and Nuts: NO

How many acres of Specific Crops do we want to support with highly subsidized water?; do we need 400,000 or 900,000 acres of almonds which use 1 m of water/year?

Are we willing to pay for the true cost of water to produce that crop and establish a better equilibrium in crop choice and its acreage?

Over Arching Questions

Circumventing the Myths and Politics of CA Water

‘Whisky is for Drinkin; Water is for Fighting Over’

Why We are in The Pickle of Demand for Water Exceeding Its Supply

• Mediterranean Climate, Wet Winters, Dry Summer• High Evaporative Demand During Summer Growing

Season• High Year to Year Variability in Rain, Snow is Normal

– Extended Droughts– Reduced Snowpack

• Cheap Water and Rapid Growth in Acreage of Intensive Water Using Crops like Almonds and Alfalfa

• Climate Change, New Normal

Why Subsidize Water in California?• Produce Cheaper and Affordable Food for Americans• Produce Healthy Choice of Fruits, Nuts and Vegetables that

Are Not Produced elsewhere in the US• Enable Small Farmers to make a Profit and Supply Cities

with Local and Fresh Produce with Low Carbon Footprint– Irrigation is the Extra Cost of Doing Business in California

• It’s been the Basis of California Growth– Hollywood, Silicon Valley, University of California, 7th

Largest World Economy

Why Should We Not Subsidize Water In California, as Much as We Do?

• Water is a Scarce Resource in CA– It needs to be shared among a mix of legitimate stakeholders; Better

Pricing Does this.– Climate Change is Causing our Water System to Experience a New

Normal in terms of Supply and Demands• We must Pump Vast Quantities Uphill from the North to the South• Too much Expensive Water is Used to Produce Low Value Forage Crops• It Takes ‘Money to Make Money’; Cheap Water is Being Gamed!

– Business with Large Capital are Expanding Production into the Semi-Arid and Deserts Regions, which have Huge Evaporative Demand, not Small Farmers

• Many Societies in Semi-Arid Regions based on Irrigated Agriculture eventually Succumbed to Salt build-up, impervious Clays and Depletion of Ground Water

What are Untended Consequence of Cheap/Subsidized Water?

• Inefficient Use• Expansion of Acreage of Water Intensive Fruits and

Nuts• Reduced Flows out of Delta, affecting Water

Quality, Fisheries, Habitat, to Meet Water Contracts

• Salinity Build-up• Depletion of Ground Water• Expensive Water on 2nd Markets.

Jiang, Ryu and Baldocchi, unpublished

The Irrigated Agricultural Regions use 700 to 1000 mm/yNative Savanna and Grasslands use 300 to 500 mm/y

-50 -40 -30 -20 -10 0

Canopy Photosynthesis ( mol m-2 s-1)

0

100

200

300

400

500

600E

vapo

ratio

n (J

m-2

s-1

)Alfalfa

High Productivity Comes at the Cost of Higher Water Use

Geissler and Horwath

No Wonder CA Alfalfa Production is so High and why CA has become the Number 1 Dairy State; not Wisconsin

Climate Change: The New Normal

irrigation district cost of water$/acre-ft year

Oakdale 27 2015Modesto 40 2015Turlock 60 2015Central California 17 2015Merced 23.25 2014Tulare 32 2012LindsayShafter-Wasco 23.5 2013San Luis 61.86 2011Westlands 86.29 2012Westside 25.72 2010FresnoByron-BethanyGlenn-Colusa 16.45 2014Ivanhoe 55 2013East Contra Costa 20 2005

What Irrigation Districts Have Been Charging

How Cheap is Water in CA?

Almond Acreage

Year

1990 1995 2000 2005 2010 2015 2020

acre

s

300000

400000

500000

600000

700000

800000

900000

1000000

http://www.nass.usda.gov/Statistics_by_State/California/Publications/Fruits_and_Nuts/201505almac.pdf

Almonds: 900,000 AcresAcreage Doubled in 20 years; Why?

Almond Production

Year

1990 1995 2000 2005 2010 2015

Gro

ss $

per

acr

e

1000

2000

3000

4000

5000

6000

7000

8000

$7000 per acre gross vs ~ $100-200 per acre for Water and $3897 cost of production

Capitalized Value of Water

$3723/acre-ft (95% CI $1146-6300)

Unintended Consequences of Expensive Water

• Loss of Jobs• Shift of Agriculture elsewhere

Summary and Conclusions

• Cheap Water Has Provided Many Benefits for Consumers in terms of Fresh, Healthy and Local Produce, Nuts and Fruits

• Cheap Water has Led to Over-Expansion of Irrigated Forage Crops, Fruits, and Nuts, Putting Pressure on the Source among competing legitimate Stakeholders

• Charging Capitalized Value of Water Will Make Water Too Expensive for Growers, make Food too Expensive and Displace Farm Workers

• We Need to Re-Invent the CA Water System so it is Fair and Equitable and Considers the New Normal of a Warmer and Drier World

Outline• What is the Problem?

– Why or Why Not Subsidize Water• How Much Water is Used/Needed?• How Did We Get into This Problem• How Cheap is Water?• What are Untended Consequence of Cheap

Water?• Solutions/Options?

Jiang, Ryu and Baldocchi, unpublished

California’s Vegetation has the Potential to Use 1000 to 1500 mm of water per year, per unit area

Years

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

ET,

mm

y-1

500

600

700

800

900

1000

1100

1200

rice, Twitchell Islandpasture, Sherman IslandCorn, Twitchell IslandAlfalfa, Twitchell Island

Measured Water Use by Selected Crops in CA

Warmer Temperatures Impose more Evaporative Demand

What Knobs Can We Turn To Better Deliver Water to CA

Technology: More Efficient IrrigationEconomics: More Equitable Water Pricing

CA Water State and Federal Distribution System

Almond Production

Year

1990 1995 2000 2005 2010 2015

$100

0

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

Almonds: $6 Billion Dollar Industry

http://hilltopranch.com/almond-outlook-2012-forward/

What’s encouraging planting?– Low interest rates– Low returns outside of agriculture (stocks, bonds, etc.)– Profitable almond prices– Increased yield potential– Growing demand in emerging markets giving growers confidence to plant more– The central valley’s housing crisis has meant some properties that were soon to become housing or commercial developments, are now being developed into young orchards– Growers have the capital – this factor cannot be underestimated

It takes money to make money…and to produce big almond crops too

http://hilltopranch.com/almond-outlook-2012-forward/

Growth in Almond Acreage

Capitalized Value of Water$3723/acre-ft (95% CI $1146-6300)

See Buck, Aufhammer, Sunding analysis of true water costThe estimatedcapitalized value of one acre-foot of wateris one and a half to four times larger thanthe estimate obtained in the cross-sectionalanalyses. Although we have limited evidenceon whether the average capitalizationvalue of $3,723/acre-foot of surface waterextends to all agricultural land in the SanJoaquin Valley, the result that studies relyingon cross-sectional data and methods mayunderestimate the capitalized value of irrigationwater is empirically demonstrated