(Updates with Brown proposal in third paragraph after Farmers Adapt subheadline.)
Aug. 11 (Bloomberg) -- For more than 70 years, Fred Starrh’s family was among the most prominent cotton growers in California’s San Joaquin Valley. Then shifting global markets and rising water prices told him that wouldn’t work anymore.
So he replaced most of the cotton plants on his farm near Shafter, 120 miles northwest of Los Angeles, and planted almonds, which make more money per acre and are increasingly popular with consumers in Asia.
“You can’t pay $1,000 an acre-foot to grow cotton,” said Starrh, 85, crouching to inspect a drip irrigator gently gurgling under an almond tree.
Such crop switching is one sign of a sweeping transformation going on in California -- the nation’s biggest agricultural state by value -- driven by a three-year drought that climate scientists say is a glimpse of a drier future. The result will affect everything from the price of milk in China to the source of cherries eaten by Americans. It has already inflamed competition for water between farmers and homeowners.
Growers have adapted to the record-low rainfall by installing high-technology irrigation systems, watering with treated municipal wastewater and even recycling waste from the processing of pomegranates to feed dairy cows. Some are taking land out of production altogether, bulldozing withered orange trees and leaving hundreds of thousands of acres unplanted.
“There will be some definite changes, probably structural changes, to the entire industry” as drought persists, said American Farm Bureau Federation President Bob Stallman. “Farmers have made changes. They’ve shifted. This is what farmers do.”
In the long term, California will probably move away from commodity crops produced in bulk elsewhere to high-value products that make more money for the water used, said Richard Howitt, a farm economist at the University of California at Davis. The state still has advantages in almonds, pistachios and wine grapes, and its location means it will always be well- situated to export what can be profitably grown.
That may mean less farmland in production as growers abandon corn and cotton because of the high cost of water. Corn acreage in California has dropped 34 percent from last year, and wheat is down 53 percent, according to the USDA.
Cotton planting, Fred Starrh’s one-time mainstay, has fallen 60 percent over the decade, while almonds are up by more than half.
On its own, California would be the world’s ninth-largest agricultural economy, according to a University of California at Davis study. Shifts in its production reverberate globally, said Dan Sumner, another agricultural economist at the school.
“It’s a really big deal,” Sumner said. “Some crops simply grow better here than anyplace else, and our location gives us access to markets you don’t have elsewhere.”
The success of California agriculture was built in large part on advances in irrigation that allowed the state to expand beyond wheat, which flourishes in dry climates. It’s now the U.S.’s top dairy producer and grows half the country’s fruits, vegetables and nuts.
“Water has allowed us to grow more valuable crops,” Sumner said. “Now, we have fruits and vegetables and North Dakota grows our wheat. Without irrigation, we’d be North Dakota.”
An estimated 82 percent of California is experiencing extreme drought, according to the U.S. Drought Monitor. Agriculture has been hard hit as it consumes about four-fifths of the water that isn’t set aside for environmental preservation. Some farmers are paying as much as 10 times more for water than what it cost before the drought.
Another dry year in 2015 is a strong possibility, according to a study by the University of California at Davis released last month. The same study pegs drought-related farm losses at $1.5 billion, with 17,100 jobs lost statewide.
Groups such as the California Citrus Mutual and California Farm Bureau Federation have been calling for bigger allocations from the state’s watersheds for agriculture, asking the state to add storage capacity and ease environmental regulations that set aside water to preserve endangered species.
California Governor Jerry Brown last week called for a $6 billion “no frills” bond measure for this November’s election to boost water storage, a key demand of farmers that’s smaller than what some groups want.
That puts the farmers on a collision course with environmentalists and urban advocates who say some choices -- such as a switch to almonds -- could worsen the scarcity.
California grows four-fifths of the world’s almonds, much of it for overseas markets. That has pushed the price up to more than $3 a pound, a record that has encouraged farmers to divert water from other crops.
Almonds use enough water to supply 75 percent of the state’s population, according to Carolee Krieger, president and executive director of the California Water Impact Network, which supports bigger supplies for cities. Much of the crop is exported, meaning it isn’t even feeding Californians, she said.
“Farmers should be profitable, but it can’t come at the expense of urban water ratepayers,” she said.
The U.S. Interior Department’s Bureau of Reclamation, which supplies water to a third of the state’s irrigated farmland, cut off California water distribution to some areas, while leaving others with 75 percent or less of their normal allocation.
Shawn Stevenson, who grows 1,200 acres of orange and olive trees outside Fresno, is in a zero-allocation area.
Unable to obtain affordable water for his trees, he hired a bulldozer to uproot about 400 acres of orange trees. He called his farm the “canary in the coal mine” for California agriculture, part of the 500,000 acres being abandoned this year, according to the University of California at Davis.
“We’re going to deliver 25 percent of our volume this year,” Stevenson said over the crunch of bulldozed branches. “That impacts the packing house, the people who sell the fruit, the people that we buy pesticides and fertilizers from.”
“If this persists in the next year, the devastation we will see here and across the state will be biblical.”
Faced with chronic dryness, farmers have been figuring out ways to adapt. Starrh’s drip-irrigation system was pioneered in Israel and is now widely employed across California, cutting water use by supplying plants with smaller, targeted amounts.
“Farmers have done a remarkable job, scrambling around to get every piece of water they can,” Sumner, the University of California economist, said. “They’ve taken water out of rice, out of alfalfa and moved it into onions and carrots and kept the trees and vines alive.”
Will Terry grows peppers and strawberries in Ventura County, a region 60 miles west of Los Angeles that produces about $700 million of the fruit annually. The farm he runs with his father now uses about two-thirds of the water it used 20 years ago.
“People will try to grow the same things, but they’ll have to change how they do it,” said Terry as workers draped string across fields with which to hold up pepper plants.
Brad Scott, a dairy producer near Riverside in the Los Angeles suburbs, supplies his farm with treated municipal wastewater. The chlorine makes his ranch smell a bit like a swimming pool, but it has allowed his property to disconnect from the city water supply.
The disruption is worthwhile: Dairy prices reached an all- time high of $24.31 per hundred pound in April as export demand pushed dry-milk shipments to a record.
The drought has put special pressure on ranchers raising livestock, drying out pasture land and making it more costly to cool the herd by spraying the animals with water.
Brian Medeiros, a 26-year-old dairyman near Hanford, about 30 miles south of Fresno, is replacing the fields of corn and wheat he grows to feed his cows with sorghum and triticale, a heartier wheat and rye hybrid better suited for drought.
Medeiros drives past a shed containing almond hulls and distillers’ dried grains -- the byproduct of ethanol and brewery production -- and citrus pulp, all of which he buys from nearby vendors to feed his cows. Leftover pomegranate has been a herd mainstay, though less so as the consumer craze for anti-oxidants has faded, reducing the number of suppliers.
He’s also working with an engineer to create a cow-motion sensor. The system, deployed in his animal stalls, would change how animals are sprayed with water to keep them cool, ensuring that water only sprays while a cow is present.
“You have to look at everything,” Medeiros said between conversations in Portuguese with his father, who founded the farm, on his mobile phone.
A warmer climate is forcing Cindy Lashbrook to phase out cherries on the organic farm where she also grows walnuts, blueberries and other fruits and tree nuts near Merced, about 100 miles southeast of San Francisco.
Her cherries require 1,000 hours of temperatures under 45 degrees (7 degrees Celsius) between November and February, an amount her farm hasn’t seen for several years. “We don’t get the fog like we used to.”
Howitt, of the University of California, said the drought means the state’s farmers will have to permanently reduce water usage.
“California needs to rebalance its agricultural portfolio in response to this drought,” Howitt said. “You will see more fallowing of land. We have to reduce our water footprint.”
That means drip-fed trees for Starrh, a cotton-grower since when his family arrived on 30 acres in 1936 who now focuses on nuts.
And solar panels.
The Starrhs are leasing 480 acres to a sustainable-energy company on land that may never be watered again.
“It was good land for production,” he said. “But reality dictates.”