Water condition reports from the California Department of Water Resources this year indicated slightly higher precipitation in the Sacramento Valley compared to last year, and reservoirs were around 50% of historical average storage by this time of the year. However, the reservoirs in the San Joaquin Valley and Tulare Lake Basin are near all-time lows and precipitation was only 45% of the historical average. The drought impacts are especially severe because California’s population and share of permanent crops have both increased. Furthermore, the lack of water in 2015, together with impacts of additional groundwater pumping that occurred in 2014, may lower the water table levels enough to decrease pumping capacity in some areas. Every year, the state and federal water projects announce deliveries to water districts. Likewise, local water districts across the state inform their member farmers about expected water allocations. Growers, in turn, make planting decisions based on these expected water deliveries. In the early spring of 2015, ERA Economics conducted a survey of irrigation districts to assess the expected water deliveries for the irrigation season. The total water shortage is expected to be close to 8.8 million acre-feet statewide. Farmers and irrigation districts are able to partially offset some of the surface water shortage by pumping additional groundwater. Additional groundwater pumping in 2015 is expected to be 6.2 maf, resulting in a net water shortage of 2.6 maf. The map in Figure 2 shows a breakdown of net water shortages by basin. The region most affected by water availability is the Tulare Lake Basin,plastic pots large which includes parts of Fresno, Tulare, Kings, and Kern counties.

This area has the lowest precipitation and relies heavily on water imports from other basins and groundwater pumping, yet it provides more than 50% of all agricultural revenues in the Central Valley. The net water reduction of 2.6 maf in 2015 will be 60% higher than 2014 . We used the changes in irrigation water supplies and the Statewide Agricultural Production Model to estimate the crop mix and fallowing due to the 2015 drought. The SWAP model is an economic model, which simulates the response of farmers to changes in water supply. The model includes detailed information on crop acreages, values, and regional access to ground and surface water supplies. We linked the SWAP model to DWR’s groundwater-surface water simulation model, C2VSim. The C2VSim model estimates the groundwater levels and pumping capacities and feeds this information to the SWAP model. Declining groundwater levels increase the energy required to pump groundwater, and in turn the cost of using groundwater for irrigation. The SWAP model simulates the response by farmers to this increased cost of groundwater pumping. With net shortages of 2.6 maf for 2015, the SWAP model estimates fallowing nearly 564,000 acres statewide—562,000 of which would occur in the Central Valley. Other areas include the Central Coast, the South Coast and inland Southern California, which are less affected by decreased precipitation, have access to groundwater, or import water from other basins such as the Colorado River. Figure 3 shows a breakdown of estimated fallowing due to the 2015 drought. The bulk of the fallowing occurs in feed and grain crops, in addition to some field crops south of the delta. Fallowing of vegetables, orchards, and vineyards will be minimal, yet the Tulare Lake Basin may fallow some of these higher revenue per acre crops. We have conducted retrospective analyses of previous droughts and found that the SWAP model accurately estimates fallowing due to water shortages.

In addition, we can use multi-spectral satellite imagery to estimate the total idle land area using measures such as the Normalized Difference Vegetation Index . The NDVI estimates total idle land area, whereas SWAP estimates fallow land due to water shortage. In May 2014, predicted fallowing using SWAP was 410,000 acres in the Central Valley. We compared 2014 and 2011 NDVI measures and found there were an additional 450,000 acres of idle land in 2014 compared to 2011. Similar estimates by NASA Ames found around 500,000 acres of idle land. We note that SWAP estimates are directly based on water changes, whereas satellite based estimates measure all idle land. Patterns of idle land are consistent between SWAP and the vegetation index methods, and support the overall conclusion that the bulk of the fallowing occurs in the Tulare Lake Basin. During California’s periodic droughts, water shortages lead to fallowing and significant reductions in output from California agriculture. Adaptation methods include changing the typical crop mix by using water for crops with higher revenue per unit of water, substituting groundwater for surface water, water transfers, and additional use of technology. Estimated changes in water supplies were based on a survey of water districts conducted in the spring of 2015, public announcements of water deliveries from federal and state water projects, and information on groundwater tables from the California Department of Water Resources C2VSim model. We used the Statewide Agricultural Production Model to estimate the economic impacts of the 2015 drought. Our preliminary estimates of the impacts of the drought on cropping patterns were reported in Howitt et al. . We estimated an 8.8 million acre foot loss in surface water availability could be partially offset by increased groundwater pumping of 6.2 maf statewide. We used the SWAP model to estimate the additional fallowing of 564,000 acres, and a decrease in crop revenue of about $850 million. Additional losses for cattle and calves and dairies , due to reduced winter pasture and higher cost of forage crops, are also expected. The combination of these losses lowers revenue by about $1.2 billion, compared to a normal water year.

We estimate groundwater pumping costs could increase by $600 million in 2015 as a result of higher pumping volumes and lower groundwater levels.Figure 1 shows disaggregated losses. Based on data through late May, our SWAP model estimates that the Sacramento Valley, extending from Shasta County to the delta, will face revenue losses of over $200 million in feed and grain crops while maintaining most vegetable and orchard production. More recent data on water availability and planted acreage are likely to raise these estimates. The northern San Joaquin Valley, from south of the delta to just north of Fresno County, has relatively small losses and even revenue increases for some crops due to slightly higher crop prices for vegetables, orchards, and vines. Other areas, like the Central and South Coast, may also see slight revenue increases. As shown in Figure 1, we estimate that the Tulare Lake Basin will face severe revenue losses totaling about $620 million across all crop categories. Based on crop fallowing,planting pot seedlings about 8,550 direct full-time and part-time jobs could be lost, 7,670 in crops and nearly 980 in livestock and dairies. This estimate incorporates the fact that about two seasonal jobs equal one full-time equivalent job. Most employment losses occur in the Tulare Lake Basin. Changes in field crops and grains account for nearly 6,840 of the direct job losses. Impact analysis allows us to trace expenditure patterns in a regional economy caused by an economic event. When agricultural crop revenues are reduced due to water shortages, expenditures on agricultural-related sectors such as fertilizers, agrochemicals, or farm consulting services are also reduced. These indirect economic impacts cause the direct on-farm impacts to ripple through the economy. Moreover, those households that rely on agriculture and agriculture-related sectors for income spend less on consumer goods and services; these induced effects also ripple through the economy, reducing economic activity and jobs further. The sum of direct, indirect, and induced effects is often referred to as the total or multiplier effect of an economic event on the region’s economy. Howitt et al. uses this type of analysis to show the direct and total effects of the agricultural drought in the California economy. Multiplier effects on employment, sector output, and value added are examined. Employment represents full-time and part-time jobs; sector output refers to sales from agriculture and all other sectors in the economy; and value added is a measure of net gain in economic value after netting out any double counting across sectors. Value added includes salaries, self-employment income, other property income and indirect business taxes. Preliminary estimates in Howitt et al. show that indirect and induced effects from the 8,550 direct job losses and their spillover effects result in a loss of about 18,600 jobs in California in total. Likewise, direct agricultural revenue losses of about $1.8 billion generate a loss of $2.7 billion in state value of output across the whole economy. We estimate a loss of farm value added of $420 million and an overall loss of $1.25 billion in California value added. Despite the recurrence of droughts, California’s $45 billion agricultural economy has grown in recent decades, as it has shifted to commodities generating more revenue per acre and per acre-foot. This includes an increasing proportion of cropland devoted to tree and vine crops. Many of the expanding crop groups in California, including orchards, berries and vegetables, are more labor intensive than the more mechanized field crop categories. Impacts of the drought in the context of changes in overall farm employment merit careful examination.

For example, Howitt et al. estimated that the drought would cause a loss of about 7,500 direct farm jobs—almost 2% of about 400,000 farm jobs in California. Recently released annual data show that farm jobs in California rose by about 4,000 jobs, or about 1% from 2013 to 2014 . This result does not contradict losses due to drought and reinforces the point that labor-intensive agriculture has, in fact, been growing, and job growth would have been larger, but for the continuing drought.Figure 2 shows that while agricultural jobs grew in aggregate, that growth was in the fall and winter months of the 2013–2014 water year, in what is considered the non-irrigation season. The jobs associated with the main irrigated crop production period in the Central Valley, from April to September, showed no change in employment. Figure 3 shows that where irrigation availability declined most in the San Joaquin Valley, irrigation-season jobs fell in total—especially for contract workers. Figure 4 puts the 2014 employment data into perspective. Agricultural jobs have grown in California in each of the last five years from 2010 to 2014, especially in the non-irrigation season. Growth was faster in the two predrought years and 2014 was the second lowest. Much of the non-irrigation season employment occurs in coastal regions with year-round employment in berries and vegetables—crops that are minimally affected by the drought. Irrigation season employment, which is important in the Central Valley and is affected by drought, failed to grow in 2014—the only time in this five year period—after substantial growth in every year except 2011. These data are consistent with substantial drought-induced job losses for some of the most vulnerable workers in California in 2014 and again in 2015. The severe drought that California has been experiencing for several years has idled hundreds of thousands of acres of cropland, reduced crop yields, cut the cattle herd on pastures throughout the state, and reduced farm production value by billions of dollars. Nonetheless, despite the fact that California is the most important farm state in the United States—leading the nation in production of major commodities such as milk, tree nuts and many fruits and vegetables, and supplying about half of U.S. fresh produce—most consumers have seen no sign of the drought in the cost of food. This article lays out the facts and economic logic for why this is true. The previous articles in this issue have sketched the severity of this drought and what it has meant for irrigation water costs and availability, crop planting patterns, and production. This article takes the story through to food consumers.As the previous articles in this ARE Update issue document, the California drought is likely to reduce acreage by close to 10%. But, almost all that reduction in acreage is occurring in the Central Valley and among the major forage, grain and other field crops, for two reasons. First, in normal years, Central Valley agriculture relies on surface water deliveries from major government-owned or regulated projects.