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Less Water, More Ag Value, What's the Problem?

So, while gross revenue can make things look good, things aren't necessarily as good as they look.

Sep 12, 2013

How is it that farmers are getting less water yet still setting ag production records? Are farmers complaining all the way to the bank? Farmers aren't unlike any other businessmen in that they adapt to changing conditions and are constantly analyzing their respective situations. They look at the amount of water and price of water they're getting. They look at the crop value for what they're growing. They've conserved their use of water to get the absolute most they can get out of an acre-foot of water.

Farmers are shifting what they're growing. They want crops that give them the most return on investment, just like anyone else. According to grist.org "In 1979, California farmers grew about 1.6 million acres of the stuff. But over the past three decades, cotton has largely shuffled off the stage in California. In 2009, the state’s farmers grew only 191,000 acres." It's all about economics. "That’s what drove cotton out of the west side,” says Marvin Meyers, a longtime Westlands farmer who now grows mostly almonds and olives. Farmers who use the water to grow higher-value crops like almonds “can afford to pay more,” Meyers says, “because the almond returns are greater than you would have gotten for cotton.” We won't go into all the other crop changes, but there are many. These crop changes along with comodity price increases due to policies like quantative easing (money printing) have made farming profitable in spite of water shortages. Many of these crops are at record-setting prices, which can come tumbling down.

We also need to point out that these county and state ag values are based on gross revenue, not net revenue. As the cost of water goes up, net revenue goes down, even while gross revenue goes up. General Motors had huge gross revenue as their benefit packages to employees soared and eventually took them on the path to bankruptcy. So, while gross revenue can make things look good, things aren't necessarily as good as they look.

They're also pumping groundwater to save themselves from the current regulation-created dry spell. Surface water is scarce, groundwater is getting deeper and deeper, aquifers are collapsing, and farmers are playing with fire. They know it, they just have little choice.

One final thought: what if farmers had actually been able to get their fair share of water during this time? What if farming/ag hadn't been able to deliver record values during this 4-year down economy? What would the economy of the SJ Valley have looked like if it hadn't been for ag? Can you imagine how much better local governments would have looked if farmers had received proper water allocations? But the real question is what will the local government budgets look like as the groundwater and surface water shortages lead to more acreage being idled.

Local governments had better start connecting the dots as they go bankrupt, as they lay off employees, as they struggle to provide basic services. As ag goes, so goes the Valley. If local politicians aren't on board to solve the water situation, they are shooting themselves in the foot.


State sets ag value record

California's agricultural production reached a record $44.7 billion last year, up 3 percent from a year earlier.

That keeps the state solidly as the nation's No. 1 farm state in terms of revenue. California's farms produced 11.3 percent of the nation's total farm revenue in 2012, followed by Iowa and Nebraska.

California also is the No. 1 dairy state in the nation.

This state alone produced a fifth of the nation's milk supply last year, though revenues slipped due to a drop in the number of herds and sliding milk prices.

That slippage was felt in San Joaquin County even though the county last year saw its total value of farm output jump 28 percent to a record of nearly $2.9 billion.

The county's milk production, which had been No. 1 in the county in 2011 with a value of $453 million, slipped to No. 3 last year with a value of $404 million.

Grapes and walnuts, No. 1 and No. 2 respectively, had a total value of just more than $1 billion.

Even with the downturn in dairy prices, California generally, and San Joaquin County specifically, enjoyed a very productive agricultural year in 2013.

Agriculture provides considerable economic ballast, especially in the state's rural areas. The importance of the ag industry to the
state is enhanced even more by how each dollar produced on the state's 80,500 farms ripples out through the rest of the economy.

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