Price Matters - Water Conservation and the California Farm Bureau

In today’s San Jose Mercury News, Paul Wenger, of the California Farm Bureau Federation issues a caution about the limits to agricultural water conservation, citing rising prices in San Diego that are squeezing avocado farmers out of business.  The article is striking, however, for failing to mention the actual prices.  It’s worth exploring this issue a little deeper – because when it comes to agricultural water conservation, price matters.

Here’s another article, also by the California Farm Bureau Federation, from this May.  It reports that agricultural water prices in San Diego have risen sharply since 2005. Water short local agencies have decided that they can no longer provide water for local farmers at discounted prices.  Before recent increases, water for agriculture in this area cost $400 to $500 per acre-foot - very high prices for farmers in California.  Today, the CFBF reports, those costs can reach $1,400 per acre-foot.  It’s unfortunate, but not surprising, that some San Diego farmers are struggling to afford water prices that approach those for desalinated seawater.  (Remember that local residents pay those same prices.) 

Beyond any doubt, there is a price above which farmers cannot compete. But California’s water supplies have hit real limits and we need to look for opportunities to encourage efficiency in all sectors, including agriculture.   Economics is a key tool in this effort – and agricultural efficiency can provide cost-effective new water supplies. 

In recent years, California’s agricultural economy has set production and revenue records in a wide range of crops.   This industry, which represents about three percent of the state economy and consumes about 80 percent of the state’s developed water supply, is incredibly diverse.  Some California farmers are investing in high value crops and highly efficiency irrigation technology – making more money with less water than in the past .  Others grow low value crops and flood irrigate in much the same way farmers did a century ago. 

Why is this? More than anything else, the explanation is price.  Some California farmers receive highly subsidized water.  For others, water is literally free.  For these farmers, there is often little incentive to conserve.   Many efficient farmers, on the other hand, pay far higher prices – in some cases purchasing water at prices determined by real costs and an open market.   Imagine the difference in the incentive for efficiency between a farmer paying nothing for water and another paying $1,400 per acre-foot. (There’s plenty of room in between.)   Price matters.                                            

If gas were free, the average consumer would pay less attention to fuel efficiency.  Free gas would be a disaster for air quality, climate change, and our dependence on imported oil.  People instinctively know that free gas would disguise the real cost of this commodity and encourage waste.  Water isn’t that different.  In a water short state, we need to encourage agriculture to adapt and to pay realistic prices for water.   For example, the federal government should reduce water subsidies in renewed Central Valley Project contracts.  Those subsidies encourage less efficient water use and harm our environment and salmon fishing industry.  Another opportunity is for California’s Department of Water Resources to require all California farmers to meter the water they use – and to pay a price based on that volume.  

Our state can have a thriving, modern agricultural industry that uses water more efficiently.  Indeed, farmers all over the state show that.  Californians value that industry.  So tomorrow morning, I’ll bike to my local farmer’s market to pick up some California avocados.  If I’m very lucky, I’ll find some salmon there too.   One thing I’ve learned about water economics is that cheap water means expensive salmon. 

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