Business & Real Estate

Few farmers immune to impact of epic California drought

When spring arrives, the Central Valley farm fields owned by Harris Ranch normally come to life with tomatoes, lettuce and watermelons. This year, much of the land has been left dry and bare.

California’s epic drought is being felt all over rural California, from small family farms to agribusiness giants such as Harris. Growers are fallowing land, tapping expensive groundwater and rationing supplies to keep their orchards and vineyards alive. This downshift will cost the state billions of dollars in lost economic activity and translate into higher food prices for consumers.

Harris Ranch, the brand-name beef company famous for its restaurant and cattle feedlot off Interstate 5, is idling thousands of acres of cropland. It plans to use its scarce water supplies to coax a respectable bounty of almonds, pistachios and asparagus, permanent crops that can’t be fallowed. Harris says it will hire at least 1,000 fewer field workers than usual this year.

“You’re used to going around, seeing everything green,” said Harris executive William Bourdeau, surveying an idled brown field on the company’s farm in western Fresno County. “In a normal year, 72 million heads of lettuce would come out of this ground.”

The drought has affected just about every place in California where agriculture is king, from the rice and tomato fields of the Sacramento Valley to the citrus groves on the east side of the San Joaquin Valley.

The California Farm Water Coalition estimates that 800,000 acres of land could be fallowed this year, or roughly 10 percent of the total, and the spate of rainstorms in recent weeks will do little to change that. “We’re just about past the window of opportunity,” said the coalition’s director, Mike Wade. “If they’re not in the ground now, they’re not going to get planted.”

The Legislature approved a $687 million drought relief bill, with most of the money going to improve water infrastructure. The Obama administration also directed more than $200 million in drought assistance to California. But the government aid could be dwarfed by the expected losses.

The water coalition said farm production could fall by more than $3.5 billion, a sizable bite out of the $44 billion produced annually in California, the nation’s leading farm state. The total hit to the farm economy, including related businesses, could total $7.5 billion, the coalition said. Richard Howitt, a UC Davis farm economist, said at least 20,000 farmworkers will lose their jobs, putting enormous strain on areas of California where unemployment is typically in double-digit percentages even during good times.

It could get a lot worse. Experts say most farmers should be able to keep going this season, but many of them won’t be able to survive another season of drought.

“The general mood is, ‘We’ll get through this year, but who knows about next year?’ ” said Erik Balling of Green Leaf Ag, a Coalinga irrigation-services company. “If there’s another severe drought, the face of farming is going to change.”

As it is, farmers and consumers alike are starting to feel the impact of three years of dry weather. Cattle ranchers throughout the West have been thinning their herds because of higher feed prices, and the result is higher beef prices. Joel Karlin, an analyst at Western Milling in Goshen, said hamburger prices have risen 20 percent in the past year. The same forces are at work in the dairy industry, and Karlin said consumers can expect higher prices for milk, cheese and other dairy products as well.

Sacramentans could see fewer tomatoes spilling out of farm trucks on the highways this summer, and fewer tomato products in the supermarkets.

“There’s going to be several million tons of production that will be lost,” said Winters farmer Bruce Rominger, chairman of the California Tomato Growers Association. “It will be devastating to the industry.”

That will mean less ketchup, pizza sauce and other tomato products. Although widespread shortages aren’t likely, “you’re talking about not having stuff on the shelves,” said Chris Rufer, owner of The Morning Star Co., a giant tomato processor based in Woodland.

Few farmers are being completely spared, although some are doing better than others. Warren Bogle, president of Bogle Vineyards in Clarksburg, said the family-owned wine business is “going to be OK this year.” But the drought is never far from his mind.

“We’re concerned about the amount of water that we’re all going to have to pump out of the river,” Bogle said.

Thirsty almonds

The impact of the drought varies with geography and legal status; some growers have more “senior” rights or more favorable water contracts than others. Most Sacramento Valley growers are getting 40 percent of their normal allocation, while farmers south of the Delta have been told to expect no irrigation water from the two government-run networks of reservoirs and canals, the State Water Project and the federal government’s Central Valley Project.

Many growers will have to rely on groundwater, but experts say groundwater supplies could run thin in some parts of the San Joaquin Valley. On the west side of the valley in particular, the groundwater quality is poor and could damage crops. Pumping groundwater also is usually more expensive than using surface water.

Of particular concern in the San Joaquin Valley is California’s almond crop. As companies such as Sacramento’s Blue Diamond Growers have built a worldwide demand for almonds, the nuts have become a kind of super crop for California. Prices have risen sharply, and almonds are now almost as big a business in California as grapes. The crop in 2012, the last year for which statistics are available, was worth $4.35 billion. The number of acres devoted to almonds in California has risen by more than 40 percent since 2003.

The problem is, almond trees are among the thirstiest crops around, and they can’t be idled for a year the way row crops can. Farmers who jumped into the almond business in the past couple of decades now find themselves desperate to keep the orchards alive. Most of growth in acreage has occurred in Coalinga and other communities on the west side of the San Joaquin Valley, where the water shortage is probably the worst in the state.

“The trees are there. They can’t be moved, they can’t be put away,” said David Goldhamer, emeritus water management specialist with UC cooperative extension. “They can’t be put on hold for a year.”

Most growers will be able to squeeze out a crop, although some will have to settle for sprinkling just enough water on the trees to keep them alive. Goldhamer said yields will fall by as much as 25 percent, mainly because the almonds themselves won’t grow to full size.

“You’ll have a crop, (but) the nuts will be small,” Goldhamer said.

That will put stress on processors like Blue Diamond. Less than a year ago, the grower-owned cooperative headquartered north of downtown Sacramento was announcing record annual revenue of $1.2 billion, a 20 percent jump from the year before. This year, Blue Diamond frets about not being able to meet all of its customers’ orders.

“We are eating into our carry-overs already,” said director of member relations Dave Baker, referring to almonds left unsold from last year. “When you get into a situation like this, it slows demand because you can’t fulfill it.” He declined to offer an estimate of Blue Diamond’s crop this year.

Other permanent crops face similar issues, but the situation isn’t as dire. Most citrus trees are located on the east side of the San Joaquin Valley, where groundwater is more plentiful than in almond country on the west side. Grape growers have water problems, too, but grapevines need only about half as much water as almonds, Goldhamer said.

‘An illiquid market’

With limited allocations from the government water projects, farmers are going to extraordinary means to find supplies. In January, the Buena Vista Water Storage District sold 12,000 acre-feet of surplus water. (An acre foot is 326,000 gallons). It got so many bids, it could have sold five times as much. The average sale price: $1,135 per acre-foot, or four times what water would cost in normal times.

“I was floored when I was opening those (bids) up,” said the district’s manager Maurce Etchechury. “It is a comment on the seriousness of the drought.”

Such water sales have been rare, frustrating agribusinessmen who have cash to spend but can’t find enough sellers.

“We’ve got the wherewithal to buy water, but it’s a pretty illiquid market,” said John Harris, chairman and chief executive of the venerable conglomerate that bears his name. “There’s not that much water around.” Harris plans to fallow as much as 9,000 of its 14,000 acres of vegetables and fruit, saving what water it has for its almonds, pistachios and asparagus.

Not surprisingly, the drought is exacerbating age-old legal and political fights over how to allocate water in a state that would be mostly desert if not for the man-made plumbing systems devised in the 20th century.

Some environmentalists say the problems in agriculture are the culmination of decades of over-consumption by farmers, especially those whose water must be pumped through the environmentally fragile Delta. In particular, they point fingers at giant corporate growers such as Paramount Farms, owned by Beverly Hills billionaire Stewart Resnick, which converted cropland on the west side of the Valley to almond and pistachio trees, putting permanent crops in places with an unreliable water supply.

“They’ve overstressed the system, and they’re taking way more water than the system can handle,” said Adam Keats, senior counsel at the Center for Biological Diversity in San Francisco. The organization is suing the state and several large growers and water districts over the management of the Delta and other issues.

Most farmers, however, blame the state and federal governments for making the water supply south of the Delta so unreliable. As they see it, the Delta and the rest of the state’s water system are being operated to protect endangered fish at the expense of people. They argue that more reservoirs must be built to capture water before it flows out to the Golden Gate.

“The project let a lot of water go out into the ocean,” said Dan Errotabere, a grower in Riverdale, southwest of Fresno.

Errotabere has fallowed his garlic and onions, some 1,200 acres worth, to keep his almond orchard going. “That’s a pretty difficult choice we had to make,” he said. “We can’t employ when we’re not farming.”

The ripple effects are felt in farm towns throughout California. Not only are fewer farmworkers needed in the fields; sales of seed, fertilizer and tractor parts are affected, too.

In Coalinga, population 18,000, drought is an everyday fact of life. A digital sign greeting visitors to the downtown urges residents to “turn off faucet when brushing teeth,” and city officials say the dry weather is the worst natural disaster to hit Coalinga since a massive earthquake devastated much of the downtown in 1983. The city’s unemployment rate for January was estimated at 14.8 percent by the state Employment Development Department.

“We have people in the community who work in agriculture,” said Mayor Tony Garcia. “If there’s no water, they’re not working.”

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