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Drought’s Economic Pain Is Shared by Farms, Businesses, Shoppers

A tire rests on the dry bed of Lake Mendocino, a key Mendocino County reservoir, in Ukiah, California.

A tire rests on the dry bed of Lake Mendocino, a key Mendocino County reservoir, in Ukiah, California. NOAH BERGER / Reuters

The dry conditions in the western U.S. are so bad that even many of the companies that are thriving in the drought feel economic pain.

Case in point—Limoneira, of Santa Paula, California, and one of the largest U.S. growers of lemons and avocados: It reached record revenue of $100 million this year thanks to higher prices brought on by a freeze in South America, said president and CEO Harold Edwards.

Despite the higher sales, however, getting through the drought is costly, said Edwards, who noted that his firm constantly monitors its underground wells so as not to overuse them.

"We have to do more water pumping, invest in sprinkler systems, and every extra irrigation costs us," said Edwards, whose company has some 11,000 acres in agricultural production.

"This is the new normal. ... And that means a tough conversation for everyone about water."

Analysts say that no matter what, farmers, businesses and consumers are going to feel the effects of the drought, and survival will mean shared pain through conditions that show no sign of letting up.

"This is the new normal," said Lori Anne Dolqueist, a partner at the law firm Manatt, Phelps & Phillips and an expert in California water regulations. "In terms of the drought, we can't just expect to wait it out and pray for rain. We have to do a lot more through education on how we use water, stricter laws on water use and other means to get a handle on it," she said. "And that means a tough conversation for everyone about water."

‘Severe Crisis’ Leaves California Farmers Without a Harvest 2:33

Severity of drought

The current drought is not a new one. Various states have been in drought conditions for the last three to four years. But the severity of what's happening now is alarming to many observers.

For the first time in this century, the entire state of California is in a severe drought or worse, according to the U.S. Drought Monitor.

Drought conditions in Oklahoma have farmers there expecting only 20 percent of their normal wheat yield this spring. States like Kansas Arizona, Nevada, New Mexico and Colorado are also caught in the grasp of extremely dry conditions.

And a dearth of rain over the past four years in Texas has climatologists saying the state is suffering the worst drought conditions of the past 500 years. Dozens of Texas communities, especially in the southern part, are said to have less than 90 days of water, putting lives at risk.

California's drought will deal a severe blow to Central Valley irrigated agriculture and farm communities this year, and could cost the industry $1.7 billion and cause more than 14,500 workers to lose their jobs,according to preliminary results of a new study by the UC Davis Center for Watershed Sciences.

Consumers are taking a hit as well: Prices for meat, eggs, fresh fruits and vegetables and other foods are on the rise, in large part because of the drought that has seized western states.

The drought has an economic trickle-down effect that could leave some towns and communities devastated, said Umar Sheikh, an industry sector credit analyst at insurance firm Euler Hermes.

"Without water, there are no crops, and you have an exodus of people people moving out of the areas," argued Sheikh. "That means less kids in schools, less tax money for the towns and more dependence on government assistance."

Better use of water

With weather conditions as they are, a whole new way of thinking about water use is necessary, said Wayne Tucker, founder of BIO S.I. Technology, which makes microbial soil that helps increase water nutrients and efficiency for agriculture.

"Instead of planting 5,000 acres of a crop that could use thousands of gallons of water, we need to reduce crop planting to something like 2,000 acres, " argued Tucker. "We're not getting the sufficient rainfall we need to keep doing what we have been doing."

Lynn Wilson, academic chair at Kaplan University and an environmental researcher said it will take more than just shorter showers to help the situation.

"We have to look at all kinds of methods to save and produce water, like desalination as expensive as that is, and reusing waste water," she said.

Preparation for drought conditions is key, said Euler Hermes' Sheikh.That means bigger reservoirs for storing water when it rains so there's enough to go around during dry spells, he said.

An online wine-selling outlet, NakedWines.com, said it's helping wine growers in California with its own relief efforts. CEO Rowan Gormley explained that NakedWines, which uses crowdfunding from its customers to invest in wineries, allows those wineries to switch to producing other wines that aren't threatened by the drought.

The online outlet has also invested in wineries that have their own water sources. But the company's efforts don't help everyone—Gromley noted that it's primarily premium wines whose growers have sufficient water, whereas the drought is a bigger concern for "entry-level wines sourced out of the Central Valley of California." NakedWines doesn't focus on those areas.

'Share the burden'

According to the most recent outlook, drought now covers about 38 percent of the lower 48 states. Most of the Texas and Oklahoma Panhandles, northeastern New Mexico, and southwestern Kansas received only a few tenths of an inch of rain from mid-April to mid-May, when precipitation is usually on the increase in this region.

"Whole civilizations in the past have disappeared because of lack of water."

And drought persistence is highly probable along the West Coast and in the mountain areas of states such as Colorado, where summer is a relatively dry time of year and both surface and subsoil moisture almost always decline.

Experts say even if there were huge amounts of rainfall in the months ahead, the drought won't go away, and it's time to look for new ideas.

"Whole civilizations in the past have disappeared because of lack of water," said Kaplan University's Wilson. "We're going to be fighting over resources like water and it's time we looked at them as having limits."