Drought Costing California $2.7 Billion This Year

by | August 19, 2015

By Dale Kasler and Phillip Reese

The drought is costing California about $2.7 billion this year, according to a new UC Davis study, although the statistics suggest the state's overall economy can withstand the impact.

In their latest estimate of the four-year drought's economic effects, professors at the university's Center for Watershed Sciences said Tuesday the drought has reduced seasonal farm employment by 10,100 jobs this year. When indirect job losses are thrown in, including truck drivers, food processing workers and others partially dependent on farming, the impact on payrolls comes to 21,000.

At the same time, the study said farmers are holding up reasonably well in spite of significant water shortages and the fallowing of 542,000 acres of land. "Agriculture is very resilient because of the underground water," said Richard Howitt, professor emeritus of agricultural and resource economics and a co-author of the report. "The economic impact is not as severe as it could be."

Farm employment in California actually rose slightly in June compared to a year earlier, according to the most recent data from the state Employment Development Department. But the authors of the UC Davis study said farm payrolls would have been even higher if not for the effect of the drought.

The economic losses of $2.7 billion are equivalent to about 5 percent of annual agricultural production, and about one-tenth of 1 percent of California's total annual economic output.

Jeff Michael, a University of the Pacific economist not involved in producing the study, said the California economy is still growing, even in the agriculture-dependent Central Valley.

"Overall, the Valley has got more jobs than a year ago," Michael said. "That's not to say there aren't losses, but from a macro viewpoint, we're doing pretty well." Economic growth in the Valley "is a bit slower than it would be without the drought," he added.

Economic performance aside, Howitt said researchers remain concerned about the speed at which farmers are drawing down their groundwater to compensate for the scarcity of supplies from the State Water Project and federal government's Central Valley Project.

Parts of the southern Central Valley have largely exhausted their groundwater reserves and, when it does rain again, "it's a really slow replenishment," Howitt said. The relentless pumping is raising farmers' costs an estimated $590 million this year, which is included in the estimated impact of $2.7 billion.

The drought is leading to direct crop revenue losses of $900 million and is costing dairy and livestock producers $350 million, the report found. Crops most impacted include rice, alfalfa and corn.

Many rice farmers fallowed their land due to lack of water, or fallowed land so they could sell water to farmers growing more lucrative crops like almonds.

"There are people fallowing this year that have never fallowed before," said Paul Wenger, an almond and walnut farmer in Modesto who is president of the California Farm Bureau.

Wenger said he cut back the watering schedule on his farms. As a result, "Our walnuts -- a lot of them are turning black. It's not a bug that is doing it. It's water stress."

As for jobs, Wenger said state employment numbers mask a lack of full-time work for farmhands. "They are getting jobs," he said. "But they are not getting the hours they want."

(c)2015 The Sacramento Bee (Sacramento, Calif.)