Though California has received significant amounts of precipitation in recent weeks, the U.S. state continues to suffer one of the worst droughts in its recorded history. Even with the possibility of additional rainfall from an El Nino weather system, the three-year drought will likely continue through 2015. Officials enacted statewide water management restrictions in early 2014 to limit, if not completely remove, access to specific water resources. This will put additional pressure on alternative sources of water, such as groundwater, which are already under long-term pressure to support the region's growing population and large agricultural industry. Recently enacted groundwater legislation has the potential to mitigate future water stress but will not be implemented in time to prevent the impacts of the drought.
Because of the region's significance in the United States' total agricultural production, the short-term impact of the drought has resulted in decreased irrigated agricultural acreage in production and could be a contributing factor to rising food and other agricultural commodity prices. In the long term, more frequent droughts and increasing demand for the region's limited groundwater resources could hinder growth in the region's agricultural sector.
California is in some ways an artificial agricultural heartland. While wet winters and dry summers allow for a mild climate with an extended growing season, much of the agricultural production would not be possible without the aid of irrigation. California accounts for almost 20 percent of all irrigated cropland in the United States, which in 2012 totaled 7.9 million acres. Roughly 80 percent of water diverted from rivers or pumped from groundwater reserves in the state is used for agricultural development.
California's Water Use
The natural water resources available in the state are unevenly distributed, with 75 percent of the state's precipitation falling north of Sacramento while the population and large-scale irrigated agricultural production is located in the central and southern parts of the state. To distribute surface water, California relies on massive its engineering projects: canals, aqueducts and reservoirs. These include the State Water Project, the Central Valley Project and diversions from the Colorado River to supply surface water for demand centers, many of which are in the drier part of the state. Increasing populations and urban demand, combined with frequent droughts over the last 15 years, have significantly stressed this natural water supply.
The State Water Project is one of the largest irrigation systems in California, reaching two-thirds of the state. It stretches from Redding in Northern California through the San Francisco Bay area, the Sacramento and San Joaquin valleys and the Central Coast, into Southern California. It serves approximately 25 million people and 750,000 acres of farmland, provides roughly 3 billion cubic meters of water per year on average, and has approximately 7 billion cubic meters of total reservoir storage. The water from the Central Valley Project, meanwhile, serves 3 million acres of farmland, supplying 8.6 billion cubic meters of water per year on average for all uses, with 13.6 billion cubic meters of storage capacity. The project, however, puts the highest priority on river regulation, navigation and flood control.
On Jan. 31, 2014, the California Department of Water Resources issued a notice that the amount of water allocated from the 2014 State Water Project was to be set at 0 percent. Contracted agricultural allocations for the Central Water project were similarly cut to 0 percent in 2014. The department eventually increased these allocations to 5 percent, though the increase has done little to ease the strain and is small even in comparison to low 2013 allocations, which were 35 percent. Moreover, full allocations of water have not been received since 2006. Without the water from the State Water Project, municipal, agricultural and industrial consumers alike will have to find alternative water sources. This will be more difficult for some areas; roughly 70 percent of the State Water Project's contracted supply is used for urban demand and the other 30 percent for the agriculture sector.
Groundwater resources are often used more heavily during dry years (California also suffered prolonged statewide droughts from 2001 to 2004 and from 2007 to 2009) to compensate for the lack of surface water. Even in relatively wet years, groundwater plays a significant role in the overall water supply, with 25-40 percent of the total water supply coming from groundwater in any given year. And it is groundwater that has allowed California's agricultural sector to remain resilient throughout the current drought, as it replaces unavailable surface water. The largest source of groundwater in California is the Central Valley aquifer, which is divided into four different basins: the Sacramento Valley, the Delta and Eastside Streams, the San Joaquin Basin and the Tulare Basin.
Recent satellite imaging has shown that between 2003 and 2009, the aquifer declined by roughly 30 billion cubic meters, though the different basins did not decline at the same rate. There is far more pressure on the southern half of the Central Valley, which is drier than the northern half but still has a high concentration of agricultural activity. In fact, the water of the Tulare Basin, which is located in the south, has steadily declined since the middle of the 20th century. Continued and increased pressure on groundwater resources, brought on by prolonged or more frequent droughts in California and any reduction in available water from the Colorado River, could accelerate the decline.
Additionally, the historical lack of regulation on groundwater rights has encouraged the unsustainable use of the resource. However, recent legislation, which will take effect in January 2015, allows local governments to restrict groundwater pumping and impose fines with some level of state oversight. But because the legislation does not require immediate compliance (plans for sustainable use are not required until 2020), the benefits of this new regulation will not be seen during the current drought. Moreover, water overdraft is likely to continue throughout the drought, especially as the agriculture sector continues to use groundwater to offset the lack of surface water deliveries.
The Drought's Short-Term Effects
In the short term, the drought will significantly affect Californian agriculture, which is an important contributor to the U.S. agricultural sector. California accounts for roughly 14 percent of agricultural sales in the United States. The state is responsible for more than 90 percent of Pima cotton production, 21 percent of rice production, 25 percent of vegetable production, 20 percent of milking cows and 90 percent of tree nut production. California also accounts for roughly 15 percent of agricultural exports by value, exporting more than $6 billion in tree nuts, $955 million in dairy products and $619 million in rice in 2012.
Furthermore, California is an intensive agricultural zone for international exports, especially for higher value goods. Currently, Canada, the European Union, China, Hong Kong, Japan, Mexico, South Korea, India, the United Arab Emirates, Turkey and Taiwan are the top destinations for the state's exports, accounting for 69 percent of the United States' 2012 export value. The percentage of total production being exported is highly crop dependent, but significant amounts of specific crops are destined for the international market; for example, 64 percent of almonds, 55 percent of cotton, 24 percent of dairy and related products and 52 percent of rice are exported.
Thus, limited access to water resources can have a profound effect on agricultural production, especially since many of the crops listed above are water-intensive and require irrigation. The production of tree nuts, for example, is vulnerable to variations in water conditions because the orchards can take more than five years to mature and require consistent water availability. For many of these high-value crops, production estimates for 2014 are expected to be down from 2013, though no official data is currently available since the harvest season is still wrapping up. Researchers at the University of California, Davis, estimate that the drought will have a total direct cost of $1.5 billion to agriculture (with $800 million lost in crop revenue in the Central Valley alone). Nearly 430,000 acres, or 5 percent of total irrigated land, will not be used and more than 17,000 seasonal jobs will be lost.
There will be more demand for the higher value agricultural products that California provides as dietary patterns shift accordingly.
Additionally, national crop prices may be affected. The U.S. Department of Agriculture revised its food inflation forecast upward for fruits and vegetables in June, though the California drought is only one of a number of contributing factors. Still, the impact of the drought on agricultural production and prices is ultimately unknown and might still be minimized or delayed. For instance, California's drought in the early 2000s did not impact produce until 2005 and 2006, after the drought had begun to ease.
Long-Term Competition for Limited Resources
While California's drought is a short-term strain on limited water resources, broader overuse of the state's water will have long-term implications. The irrigation required to maintain many agricultural production areas will likely keep water demands for the agricultural sector high for the foreseeable future. Simultaneously, agriculture will also have to compete with municipal and industrial demands for limited water resources. California is expected to gain 15 million residents between 2010 and 2060, expanding the demand for water. We are likely to see increased conservation efforts and efficiency increases on the demand side, especially in light of the current drought. Additionally, coastal areas are also likely to turn toward desalination and water recycling to better service urban areas in the future. However, despite recent advancements, desalination continues to be an energy-intensive process, which in turn raises electricity consumption in the state. California's growing population and any future droughts will put additional stress on the state's natural water resources.
California's continued water stress could also have regional consequences. If groundwater resources in the region continue to decline and the availability of other sources of water, such as the Colorado River, remains uncertain, the overall viability of the region's agricultural production could be threatened. Growing stress on California's internal water sources will make it more difficult for the state to consider renegotiating agreements regarding allocation levels with the other states in the Colorado River Basin. Therefore, the current allocation system will likely stay in place. In this system, the United States has an advantage as an upstream nation, while Mexico, as the downstream nation, has fewer options to improve its access to the waters of the Colorado River.
Finally, California's continued overexploitation of water resources could have global implications. In the coming years, growing worldwide demand for agricultural products will continue to affect the U.S. agriculture as a whole, California included. As urbanization levels and the middle class grow internationally, there will be more demand for the higher value agricultural products that California provides as dietary patterns shift accordingly. With increased demand, a corresponding increase in prices may occur, especially in years in which outside stressors like drought negatively impact production.
This is the second installment of an occasional series on water scarcity issues around the world that Stratfor will be building upon periodically.