Food Inflation Watch: California Farmers' Water Costs Surge 700% After Government Cuts Supply

Tyler Durden's picture

When we reported on the government's decisiosn to withhold irrigation water to California for the first time in 54 years, we warned there would be consequences: farmers are hit hardest as "they're all on pins and needles trying to figure out how they're going to get through this." Fields will go unplanted (supply lower mean food prices higher), or farmers will pay top dollar for water that's on the market (and those costs can only be passed on via higher food prices). Sure enough, as Bloomberg reports, farmers in California’s Central Valley, the world’s most productive agricultural region, are paying as much as 10 times more for water than they did before the state’s record drought cut supply.

 

As Bloomberg Briefs' Alison Vekshin reports,

Costs soared to $1,100 per acre-foot from $140 a year ago in the Fresno-based Westlands Water District, which represents 700 farms, said Gayle Holman, a spokeswoman. North of Sacramento, the Western Canal Water District is selling it for double the usual price: $500 per acre-foot, about 326,000 gallons.

 

The most severe water shortages are in the San Joaquin Valley, in an area from Bakersfield to Patterson and Chowchilla, said Mike Wade, executive director of the California Farm Water Coalition, a Sacramento-based group representing farmers and most agricultural irrigation districts in California.


The drought gripping the state that supplies half the fruits, vegetables and nuts consumed in the U.S. has led federal and state providers to curtail the water they distribute to farmers. That’s prompted districts representing growers to buy and sell for escalated prices from other parts of the state.

 

The drought threatens to boost produce costs that are already elevated following a December frost, according to the U.S. Agriculture Department. The price of fresh fruit is forecast to rise as much as 6 percent this year, the department said last month.

 

Dairy products, of which California is the biggest producer, may rise as much as 4 percent. After three years of record-low rainfall, 82 percent of the state is experiencing extreme drought, according to the U.S. Drought Monitor, a federal website.

 

The rising prices are “a function of supply and demand in a very dry year and the fact that there are a lot of competing uses for water in California,’’ said Mat Maucieri, a spokesman for the Bureau of Reclamation.

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Seems like it's time for The Fed to print some more rain...