A Californian enigma: Record-high agricultural revenues during the most severe drought in history

Drying wells

Guillaume Gruère, OECD Trade and Agriculture Directorate

Drought in California has been in the headlines frequently these last three years, with startling pictures of empty reservoirs, rivers and canals, wildfires, disappearing snowpack and dry earth. The ongoing drought in the State is believed to be the most severe in the last 500 years.

The drought is having many different effects. After limiting outdoor watering use in cities, the governor has imposed an emergency state-wide reduction of 25% in urban water consumption. The use of water from the Central Valley project, a federal grand canal which links the northern and southern parts of the state, was banned for farm irrigation. Some media reports are asking how soon the Central Valley will turn into a desert; others ask when the population will start to leave the “Golden state”.

Drought monitor

Yet these dramatic effects have not stopped the agricultural sector from growing. Even though large amounts of land were fallowed and there were significant losses in production and agricultural jobs (an estimated direct agricultural revenue loss of $1.5 billion in 2014), figures for 2013 and 2014 show the highest agricultural net income ever recorded in California. The fruit and nut industry, in particular, just like the state’s economy, continues to grow despite a four-year quasi absence of precipitation. Curiously, consumers have not seen any price increase in their food basket and are unlikely to do so.

How is this possible? The response lies underground. Groundwater has allowed high value Californian agriculture to continue thriving. It is estimated that groundwater has replaced 70% of the surface water lost through lack of rain in 2014. The California Central Valley aquifer, serving as a natural reservoir, has been used by farmers to replace unavailable surface water, helping California remain the top agricultural state in the leading agricultural nation, even under extremely high water stress.

Groundwater pumping like this is highly unsustainable; it is drying up the resources California will need in the future to face climate change. A growing body of evidence suggests that groundwater withdrawals largely exceed natural recharge and cause long-term environmental damage. While available data is partial and insufficient for a full diagnosis, satellite and other sources show that the Central California Aquifer is one of the most rapidly depleting aquifers globally.

Intensive pumping of groundwater for irrigation also generates large, increasing, and, in some cases, irreversible environmental damages. Pumping in coastal areas has led to sea water intrusion, making groundwater increasingly saline and difficult to use for irrigators and cities. Pumping in the valley has also compacted aquifers, resulting in a drastic lowering of the land (geologists call this land subsidence). In some areas, the land has gone down by 2m in the last 25 years and 20m in the last 90 years! This has not only damaged infrastructure, houses and canals, but is also probably irreversible, reducing the capacity of aquifers to store water in the future. A 2014 study even suggested that groundwater pumping has contributed to seasonal uplift of the Sierra Nevada Mountains (by up to 1-3mm) and that it has increased micro-seismic activities around the San Andreas Fault.

So what can we do? Groundwater has long been unregulated and unmonitored in California. Until last year, each landowner could use groundwater under his or her land with little or no constraint. This changed in September 2014 with the introduction of the California Sustainable Groundwater Management Act (SGMA) which requires the formation of regional groups of users to set up a monitoring and management system to reach sustainable use of groundwater resources. In the absence of action by such local collectives, the state reserves the right to exert its authority.

The recent OECD report, Drying wells, rising stakes: Towards sustainable agricultural groundwater management, shows that California is one among the many semi-arid regions in OECD countries that face a similar situation. Farmers have largely benefited from the development of groundwater irrigation, during what has been called the “silent revolution”. But they have also started to see the effects of intensive pumping as water tables have dropped, rivers and wetlands have dried up (even under rainy conditions), and salinity has intruded into fresh water bodies.

Although groundwater policies have begun to be put in place, many management systems still lack critical components to be fully effective. Information and data monitoring systems for groundwater remain largely insufficient. This is because not enough attention is paid to groundwater despite the fact that it will become even more important as climate change advances. A good management system will comprise regulation, the right economic incentives and collective action – the tripod approach in this figure:Groundwater systemsSome countries do not enforce the regulations they have put in place (resulting in tens of thousands of illegal wells), and other countries even give incentives, such as reduced-price electricity for pumping, which exacerbates the problem.

With its recent reform, California may now be moving in the right direction. While the implementation of SGMA will take time and will be challenging, it is encouraging that more and better information will foster a promising combination of collective management, new regulations and economic instruments. At a minimum, it will help ensure that farmers play an active role in managing this critical resource, rather than simply emptying nature’s “savings”, inducing lasting environmental effects and jeopardising their future. It could also help ensure that this dry region remains a major producer and exporter of a broad range of agricultural products.

Useful links

OECD work on water use in agriculture

Policies to manage agricultural groundwater use, 16 OECD country profiles providing an overview of the national and regional policies to manage groundwater use in agriculture.

Howitt, R.E., MacEwan, D., J. Medellín-Azuara, J. R. Lund, and D. A. Sumner (2015), “Economic Analysis of the 2015 Drought for California Agriculture”, Center for Watershed Sciences, University of California – Davis, Davis, CA, 16 pp.

Pacific Institute (2015) Impacts of California’s Ongoing Drought: Agriculture, Oakland California.

Giannini Foundation of Agricultural Economics (2015), “The Economics of the Drought for California Food and Agriculture”, Agricultural and Resource Economics Update, Vol 18 (5), University of California.

The second International conference on Groundwater management in agriculture will take place in San Francisco in June 2016.

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