Despite rains in the northern and southern portions of California over the last couple days, experts say the state's severe drought is on track to cause an economic loss there of roughly $3 billion in 2015—up from about $2.2 billion last year.
"There's going to be significantly more pain this year than there was last year," said Richard Howitt, a University of California, Davis professor emeritus of agriculture and resource economics who co-authored a study last year on the anticipated effects of drought on California agriculture. "I would be very surprised if the economic impact was less than $3 billion."
Howitt based his preliminary findings on several factors, including surface water reserves that have been "significantly run down" at key agricultural water districts, and an increase in groundwater pumping that may cause some farm wells to go dry partway through the next growing season. Moreover, he cited a second consecutive year of zero water coming from a critical federal government irrigation system as a blow to the state's $45 billion agriculture industry.
According to the UC Davis economist, the drought caused a loss of approximately 17,000 jobs in 2014 and will result in "mid-20,000" jobs losses in 2015. He estimates that 500,000 acres were left fallow in 2014 and that the figure will likely grow by 30 to 40 percent in the current year.
The latest U.S. Drought Monitor shows that 93 percent of California remains in severe drought. And the Sierra snowpack—the key water source for much of the state—remains at only 19 percent of average for this time of year.
"The water supply for California is probably just as bleak if not a little bleaker than what we were looking at this time a year ago," said USDA meteorologist Brad Rippey. "And we're looking at four weeks until the traditional peak snowpack date. Historically, there's no way we can make that up, so I think California with almost 100 percent certainty is facing a fourth year of drought."
The USDA estimates California suffered an 11 percent decline in acreage planted in 2014 compared with the prior year, with big agricultural production declines coming from crops such as corn, rice and cotton.
Rippey said the state saw significant production cutbacks in some of the more water-intensive crops in 2014, including cotton, corn and rice. Corn acreage, although not a top crop in California, showed a 39 percent decline year over year, and the state's $5 billion rice crop was down almost 25 percent in acreage.
"As long as this drought continues, we'll see somewhat of a shift—either in acreage being fallow or you'll have a shift to something a little less water-intensive," he said.
Last week, the U.S. Bureau of Reclamation cited low reservoir storage, combined with the sparse snowpack and low snow water content, for its announcement that farmers with junior water rights in the Sacramento and San Joaquin valleys will receive zero percent water allocations for a second year from the Central Valley Project. The Central Valley Project is a large federal irrigation system that in good years provides enough water to irrigate about 3 million acres—or about one-third of the agricultural land in California.
Erin Curtis, a spokesperson for the federal agency, said senior water rights holders could be in jeopardy of getting cuts, too. Some senior rights date back the 1800s.
"We're not even certain if we will be able to meet their obligations fully," said Curtis. "So they will get their contractual quantities reduced. The folks who are further down the line (junior rights holders), so to speak, will be getting no water from the project."
Some good news
That said, there was a bit of good news Monday, when the California Department of Water Resources announced a slight increase from 15 percent to 20 percent in its projected allocation of state water project supplies to public water agencies in 2015. Approximately 25 million Californians and nearly 1 million acres of irrigated farmland, mostly in Kern and Kings counties, rely on the state water project.
"This year in terms of precipitation statewide, Northern California has done better than last year," said Jeanine Jones, an official with the state water agency. "And in particular a series of wet storms in early December allowed us to get water into storage and to allow the state to move it into the San Luis Reservoir, which is crucial for being able to make that delivery."
Also, despite the industry's extensive well pumping last year, there are reports of groundwater being replenished in the Central Valley.
"We had a board meeting last week and the guys have noticed within their individual wells the groundwater has risen some," said Joel Nelsen, a citrus grower and president of the California Citrus Mutual industry trade group. "So there is some recharging going on from some of the rain that took place in December and so far in February. That is encouraging."
Ryan Jacobsen, a grape grower and CEO of the Fresno County Farm Bureau, said his county depends on the federal water supplies and is likely to see more trees and grapevines get bulldozed, especially in areas with little or no access to groundwater. Water is also expensive on the open market.
"This year, there's a point where you reach diminishing returns, and where it won't be economically viable to keep those trees in the ground," he said.
The cost of buying water on the open market reached as high as $2,200 per acre-foot delivered last year in some drought-stricken areas of the San Joaquin Valley. That compares with 2013 when some irrigation districts of the ag region were selling water as low as $175 per acre-foot, although $800 per acre-foot deals on the open market were more common, particularly as insurance against a well failure.
Central Valley farmer Mark Borba, who grows everything from tomatoes and onions to garlic and nut trees, said private water sales in 2015 will ''likely be in the $1,500 to $2,500 range. No crop can be profitably produced with water at these prices.''