Housing prices only ever go up and wells never go dry.

Over on Mother Jones, Tom Philpott writes about hedge funds investing in almond orchards.

But massive financial interests—banks, pension funds, investment arms of insurance companies—are moving rapidly into the nut trade. Take TIAA-CREF, a New York-based retirement and investment fund with nearly a half-trillion dollars in total assets under management. The firm, which owns 37,000 acres of California farmland, claims to be one of the globe’s top five almond producers. On its website, TIAA-CREF says its California holdings produce more than 18 million pounds of almonds, or “enough to circle the world more than nine times.” In a report last year, the firm had one word for investors: nuts. It cited the rise of the nut-hungry Asian middle class and a global land base that’s “vanishing” because of urban sprawl, water scarcity, and environmental degradation. Almond orchards, said TIAA-CREF, were an “attractive long-term investment theme” with the potential to combine the steady income of bonds with the growth potential of stocks—a kind of investor’s holy grail.

Then there’s Hancock Agricultural Investment Group, a subsidiary of the sprawling Canadian insurance and financial services giant Manulife Financial. It manages $2.1 billion worth of farmland, mainly for large institutional investors like pension funds. Individuals can buy in—for a minimum investment of $5 million. HAIG owns at least 24,000 acres of almonds, pistachios, and walnuts, making it California’s second-largest nut grower. In a recent report to investors, HAIG reported that its nut holdings delivered more than 30 percent in total return (income from crop sales plus land appreciation) in 2013, far outpacing gains from its other crops like wine grapes, apples, cranberries, corn, and soybeans.

Did you guys read The Big Short, by Michael Lewis? The book is mostly about three characters who foresaw the housing market collapse and shorted it. But he also spends some time discussing why ratings companies missed the enormous risk of total collapse. If you recall, mortgages were bundled into batches and sold in tranches. Rating companies applied historic default rates for mortgages to a tranche to value it. But their models didn’t include the possibility that something could happen that could make every mortgage in the tranche default, rendering the entire package valueless. When the housing market collapsed, it made all the mortgages underwater at once; what made one mortgage valueless to the loan holder made the rest of the mortgages valueless at the same time. Defaults on mortgages were not independent events.

The same is true for these almond portfolios. The event that makes one almond orchard die or become valueless will hit all of the other almond orchards as well. Several readily foreseeable events could cause that: a drought like this year but a couple years longer. A groundwater basin failing (or being adjudicated) would hit every overlying orchard simultaneously. The nice people in Los Angeles and San Francisco could pass an initiative amending the California constitution to say that it isn’t a reasonable use of water to overdraft a basin or drain rivers to provide pleasant snacks for the world. The SWRCB could do that themselves.

When this level of almond production fails, the orchards will die in tandem. If I were a county or the state, I would get some laws on the books now. I would pass the Dead, Abandoned, Blightful, Nuisance Orchard Law, that says that if anyone abandons more than 1,000 acres of orchards in the county, they must pay an extortionate fine in cash money. Dollar dollar bills, y’all. Pass the law now while hedge funds somehow believe that almonds and groundwater are magically immune to climate change and patiently bide your time. The day will come.

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New American Dustbowl, Mr. Heathcock (1 of 3)

I am very impressed with Mr. Heathcock’s longform piece on how growers are responding to this year’s drought in the San Joaquin Valley.

I commend him for:

Focusing on the growers and their attitudes. The two major drivers in California’s water system are climate and people. A detailed article about the people for whom we move water shows us the forces (primarily their emotions and influence) behind how we got here.

Going the distance. Mr. Heathcock visited some obscure places and put in the driving hours.

Writing a beautiful and specific article that gives me enough material for commentary.

He did make some common outsider mis-steps, which I only noticed because he tells us about them.

He writes that he is surprised at the lack of talk about the weather. Heh. Why would we talk about the weather? From May to October, I can tell you exactly what the weather is going to be: hot, dry, clear. There’s nothing to talk about.

He mistakes “four hundred thousand to eight hundred thousand acres left idle, or 1,250 square miles of land on the high side” for a lot of land. Longtime readers here know there are about 9.5 million irrigated acres in California (round up to 10M irrigated acres if you want to do easy math). So he’s talking about 5% to 9% of California irrigated acreage idled this year, a year that received about 30% of its snowpack.

He traveled a ton of distance, so I can’t fault this one bit, but he missed that there are different (and occasionally rival) sets of farmers in California. Some century-old farms are in no danger up in the Sac Valley. Others in the Delta are specifically threatened by the actions of the south San Joaquin Valley growers.

This detail surprised me; I don’t think someone with a long familiarity with CA water rights would have included it.

Russ and Jim check on his well. His orchard is only hundreds of feet from the Kings River, which would naturally replenish his well if the river wasn’t dry.

If the Kings River is replenishing the well, the well is not sucking groundwater. It is taking the sub-surface flow of the Kings River. Unless the well owner has an appropriative right to Kings River water (with diversion method specified as “well”), that is straight up water theft. I would have left that out of an article meant to be kind to the well owner.


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New American Dustbowl and not giving a damn. (2 of 3)

Mr. Heathcock writes:

From what I’ve seen and heard I’m confused why the human tragedy has largely been ignored. It’s puzzling why a valley of such agricultural importance is shown so little respect. I post photos on Facebook, one of a vast field of withered grape vines, one of unfarmed land not far from the Wakefields’ home. Though I know many of my Facebook friends are the eco-conscious types the folks in this valley claim are pining for their demise, I’m convinced the photos will receive unanimous sympathy.

The comments on the photos begin as expected, folks thanking me for covering the story, outraged because they had no idea things were so bad. Then the first negative comment pops up. On the picture of the unfarmed land a “friend” posts: “Just saying — these must be really shitty farmers.” Another comment follows saying that one person’s tragedy and is another person’s call for change. The next claims this is what happens when you “over-farm” land. Yet another suggests my story isn’t about a water crisis, but about a “failed colony”.

There are two reasons that Mr. Heathcock’s friends (and urban food consumers in general) don’t care, both fascinating to me.   I am assuming that his friends’ reasoning is like mine. OK, really I am explaining my own reasoning here.

Why should we care?

Mr. Heathcock’s reason for expecting sympathy isn’t directly spelled out, but I believe it to be: “these people deserve sympathy because they are hurting. Have some compassion, you snarling beasts.” He doesn’t give any other reason they deserve sympathy besides the fact that his photos make the damage to farms visible to people who haven’t seen it before.  My reply is that climate change is impoverishing us all, and why should this group get more sympathy than any of the other groups that are hurt by it? Are farmers in the SJV more deserving of my sympathy than the failing restaurateur down the street being squeezed by food prices? He and his family work 14 hour days too. Do they deserve my sympathy more than Syrians drawn into a civil war started when Syrian farms started failing from drought? Do SJV farmers deserve my sympathy more than migrating birds that are starved of food and resting places as they migrate this fall?

Here’s the one that always gets me. Mr. Heathcock could have written a story exactly like this about the salmon industry. You could do rugged resource extractors on boats that their grandfathers built, idled by drought, pulling up to some nostalgic ice cream parlor in the Delta. The story could be the exact same, only with mournful ship bells clanging for atmosphere. That group is the direct competition for water with growers, equally picturesque and endangered by climate change and manly and shit. Why care about one and not the other? I will go to my grave wondering why one gets profiled and the other doesn’t.

So, of all the groups that hurt under the new climate (basically everyone, some worse than others), why should I have sympathy for SJV farmers? Because they are such careful farsighted stewards of the resources they care about? No. They’ve drained and polluted their groundwater for decades. They treat labor like it’s disposable. Because they are such considerate stewards of the resources I care about? No. The subsidence caused by their groundwater overdraft is breaking public roads, overpasses, buildings, canals, and I won’t even bring up the rivers and fish I would like to keep healthy in the state because then I would be “radical”. Reading that they generalize about my tribe as much as I do about theirs, and are intermittently hostile and suspicious of outsiders doesn’t make me more inclined to be sympathetic.

We don’t interact in a system based on mutual caring.

The larger reason that urban food consumers do not care about the San Joaquin Valley farmers is that we do not interact in a system based on caring. Instead we interact through a market. For growers, this means distributing their crops in the manner that gives them the highest profit, no matter where it goes. If a primary market for their sudan grass is in Japan and they make the most profit from it, that works fine so long as they don’t need their purchasers to give a damn about them personally. That connection is just too attenuated for Asian buyers to care about them. And I, their potential Californian consumer who might be close enough to care, have no connection because they aren’t selling me lovely fall pears. Likewise, Vidak’s quote rings true to me:

“No,” Vidak counters. “People in New York or Boise, Idaho, don’t care where their produce comes from.” The valley of farmers could go away, and so long as the product came from elsewhere no one would care.

One flat of onions looks just like the next in a grocery store in Delaware. Why would people in Delaware care about the grower in California? Interacting through a market system means that it is entirely appropriate for the seller to care primarily about profit and the buyer to care primarily about price.

We could choose a system that is based on caring, or at least is based explicitly on values besides profit and price. The state could choose “stable, egalitarian farming community” as a value, reform its water rights and subsidize growers through droughts. It could choose “food security” in return, so that growers first grow staples for direct human consumption, even if that doesn’t earn them as much as almonds do. For higher food prices, farm labor could have better living standards. In this system, farmers would also care about us, the urban consumers. Nowhere in Mr. Heathcock’s piece did I see a grower ever consider the notion of what food producers could do during a drought for the people who purchase their food.

I do care about them!

The last reason I find this question fascinating is that I do care about growers and have been writing on their behalf for years (although I doubt they’ve appreciated my advocacy). I don’t care about them in the way they want, which is to prioritize their water use above the other ways that California could put water to use. But I have warned them here for years that climate change is coming, that their best bet is to get out while they can still extract some capital. I have said here and elsewhere that there will be much less water available overall and much less irrigated acreage, that the transition will fucking suck for the farmers who have optimized to the old climate. They will fall gentle or they will fall hard, and if we gave a damn, the state has the resources to cushion that fall. So far as I know, no one has ever given serious thought to what managed retreat would look like in the San Joaquin Valley. Mr. Heathcock has written a great article on what unmanaged retreat does to the Valley.

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New American Dustbowl and Resilience (3 of 3)

Mr. Heathcock laments that his Facebook friends are unkind to the growers.

On the picture of the unfarmed land a “friend” posts: “Just saying — these must be really shitty farmers.”

I would not have said that these are shitty farmers. But I will say that they are not farming in a way that is resilient to drought, which is more frequent under the new climate. In some ways, the farmers themselves have noticed it. One farmer points out the yellowing leaves in all the pistachio orchards they pass. Another (Mr. Sihota) cannot pay for the cost of water to keep his vines alive this year, so he sells the land. If that land hadn’t been in permanent crops, he might have held on to it by growing nothing this year; at least that wouldn’t have cost him the money to buy water. Growing permanent crops locks them into a brittle system with fewer options: they can procure water at any cost or they can sell the land. The growers who were in row crops (Wakefields, cotton) have been able to sell piecemeal. That may not save their farm either, but it has extended their tenure on their farm.

The most interesting thing I see in this article is that wealth is not acting to create the resilience I’d expect. Rather, if my association of wealth with greater farm equipment or permanent crops (very expensive to plant) holds true, it seems to be making total failure more likely. I generally think that wealth buffers against poor periods, but in Mr. Heathcock’s story, the resiliency appears to be highest in the least wealthy and lowest in the most wealthy. The garlic pickers who are contemplating moving to Washington and Oregon (yes! good choice on their part if farm labor is their goal) have a mobility the others don’t. The growers in row crops can rent their land for the drought year (Barlow, cotton) or only farm the sections they have water for (Allen, cotton). It is the growers in permanent crops that are in all-or-nothing situations. I’d have thought they were the wealthiest, but their wealth hasn’t been kept in a form that can buffer them against drought.  They should be holding it in accessible form so they can get through dry years without farming.   I’ll have to think about this more.


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Why do their trees hold us hostage?

I’ve seen this story a few places in the last couple days. It has a catchy hook: water flowing back uphill! I understand it as a story about withdrawing groundwater from the Kern Water Bank in the southern Valley and pumping it back up the California Aqueduct (against a slight rise) to the middle western Valley.

My impressions:

    • It is more conceivable that water should flow back uphill than that a part of the Valley that has no water at all in drought years (that will become increasingly common) be zoned “not for permanent crops”. There is no such zoning today, but reversing gravity at the cost of energy and engineering scramble is considered do-able, but requiring that lands that are entirely dependant on the State Water Project, which cannot meet demand in a drought, not be planted with permanent crops is completely taboo.
    • Hey! This water is for tree nuts owned by Paramount Farms (the Resnicks). And they are in Dudley Ridge Water District. Dudley Ridge! The wholly unaccountable water district! The district with no residents, a few corporations who own the whole place and make up the Board of Directors, and the consultant engineer for a district manager. We haven’t talked about them since the last drought, when Sandridge sold away their water rights and pocketed the money. I thought that was the lead rat abandoning the ship, but apparently almond prices are so high that Paramount Farms is trying to hold on.
    • This effort is to run 30,000 AF of water 30 miles uphill for $6 or 7M, paid by the growers. Fine. Normally, I’d say that would water 10,000 acres of almonds for the year, but if they’re just applying a bare, tree-saving minimum and not trying to bring in a crop, perhaps it’ll stretch to 20,000 acres of almonds. As a reminder, there are 840,000 acres of almonds in the state. This kind of effort is for 2% of the almonds in the state.
    • The part of that story that bothers me most is this quote:

      If it doesn’t rain much next winter, the districts might seek to continue pumping the water backward in years to come, Melville said.
      “Ideally we would hope it’s a one-time thing,” he said, “but it would be worthwhile to have this as an insurance policy.”

If this is not a one-time thing, what the fuck are you doing planting trees there? We are all pretending that because this is a one-year, extreme drought and trees are so capital intensive, it is understandable to go to any length to keep trees alive for this year. If there is the likely prospect that our new climate includes more intense and frequent droughts, that land cannot sustain trees. We cannot normalize overdrafting groundwater, using public infrastructure for wholly private profits and dropping environmental protections if this is going to happen frequently. It may be appropriate to assume that land in Dudley Ridge can field row crops in wet years or even normal years. But if we actually believe that climate change is real, those trees will not see out their thirty years. They shouldn’t be there.



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I drove up the 5 on Sunday.

I knew that almond acreage had expanded since the 2006-2009 drought. I knew that almond acreage went from 825,000 acres of almonds in 2010 to 940,000 acres in 2014. But it was still striking to see all those new trees. I thought some things.

a. I heard a completely unsubstantiated rumor that during the 2006-2009 drought, growers in Westlands deliberately didn’t plant acreage close to the 5 and even harrowed that soil so that it created more of a dust storm. I couldn’t support that rumor one bit, but I did muse that planting almonds all the way up to the freeway would make similar image management more difficult in this drought.

II. Westlands made a big fuss about all the acreage it fallowed in the 2006-2009 drought. This comparison of irrigated acreage was a big deal at the time.
2006 irrigated acreage, Westlands
Red is irrigated, 2006.
2009 irrigated acreage, Westlands
Blue is fallowed, 2009.

These new planting of almonds mean that some time in between 2010, the first wet year after the drought and 2012, our last wet year before this drought, the farmers in Westlands thought to themselves: Boy howdy, people sure are getting some nice prices on almonds. I want some of that so bad that I will invest nearly $1M/acre in capital in almonds, backed by my surety of getting water every single year for the next twenty to thirty years. Surely drought like the one that happened two years ago could never happen again, despite widespread predictions that climate change will bring about a more variable climate. Why, what could predictions mean to me, here in our second wet year in a row since a three year drought that caused substantial fallowing in this exact location?
IMG_8273 (I had to squint, but I think those might have been pistachios. Almonds in the background, of course.)

3. Here is an article about rising food prices due to drought.

American consumers are already feeling the pinch of rising food prices, and they will likely experience more—courtesy of California’s devastating drought.
“I would expect a 28 percent increase for avocados and 34 percent for lettuce,” said Timothy Richards, a professor of agribusiness at Arizona State University who conducted research released this week on probable crop price increases stemming from the ongoing drought.
In a phone call with CNBC.com, Richards added that the price increases would also include foods including berries, broccoli, grapes, melons, tomatoes, peppers and packaged salads. The higher rises should be felt in the next two to three months, he said.

Those prices are rising because growers are fallowing their row crops to protect their trees. I understand that in any single year of drought, given that they have invested so much in their orchards, they must do that. But, since growing row crops for American consumption only happens on perhaps a third to forty percent of Californian irrigated acreage, there is no need for this. If it were the first priority of Californian growers to hold American vegetable prices steady, they could grow all the produce they ever do, even in this drought. These increased food prices are a result of Californian growers choosing to gamble for high nut profits from China.

People who believe in markets believe this is fine. Allowing Californian farmers to trade Californian rivers, fish and aquifers and American produce prices for higher monetary profits is generally thought of as underpinning a strong agricultural economy, which is thought of as inherently good. Fine. If that is the thinking, then farmers and growers are behaving like reasonable market actors. But they cannot have it both ways. They cannot be hardheaded market actors and also our noble sources of food that should be supported by drought emergency measures. They cannot be our food producing buddies that we take care of during droughts AND people who are intentionally shafting us by fallowing produce acres so they can maximize almond profits in a couple more years (which must always be wet years). If they are hardheaded market maximizers, let them fall from their gambling on climate reliability and their political strength.

• Since when are we a colony of China? We wreck our natural resources and increase food prices to our own people to keep China stocked in tree nuts? Really? I get that lots of Africa is being bought by China and now some of the Arctic. But I have a real hard time accepting that Chinese tree nut demand and grower greed is reason enough to harden water demand such that we must sacrifice our own environment in dry times. (I especially resent grower greed for tree nut profits because everything in ag is fetching great prices as climate change knocks other growing regions down as well. That’s why ag land prices are soaring.)(I don’t mean to be jingoistic about China. I am indifferent about to whom we ship nuts. But there is a meme that the growing Chinese middle class will create a practically infinite demand for tree nuts, such that oversaturation and price collapse won’t happen. This justifies ever more trees.)

{I will likely come back to this for more editing and formatting. Just so you know.]


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The only stronger law is that you must say “lifeblood” when you discuss CA water.

Dude. These are as true as any words ever written:

It’s often said that California is the only state that doesn’t regulate groundwater, but that’s not exactly true. In California, one rule always applies. Though unwritten, it exists in the form of dogma more powerful than words graven in stone: Any official, at any level, whenever speaking of groundwater, must assert emphatically that local control is the best of all possible alternatives.

Does one have to be a tenured professor, primarily in another field, to call this out? It is so true, despite the abundant evidence that local control has well and truly fucked up groundwater management in many places. In other places, local control has done a nice job. But local control of itself is no guarantee of a good outcome. Now, I am a bureaucrat deep in the state and effectively haven’t been out in the field in a decade or so. It is possible that with the perspective of distance, I would understand that state-level control is hamhanded and that in fact, we do create nonsensical regulations like “every groundwater basin must pump no more than 57.683AF/year” regardless of the unique regional character of each precious snowflake basin. Maybe. Maybe state regulation is the worst of all possible worlds, such that a fervent commitment to local control in every utterance is the only possible way to ward it off.

But from here, local control often appears to be strongly preoccupied with short-term self-interest, with local politicians too closely embedded with their neighbors to create structures that will be beneficial in the longer term but painful at first. Local control seems too oriented to maximum growth. It may have deep local knowledge, but not the staff capacity to create complex governance structures. Local control has some inherent drawbacks, especially for common good problems. I hear local control supported at the time, but it never comes with a precise explanation WHY it is the best possible alternative, just like I never hear WHY regional differences mean that the state can’t possibly issue relevant regulations.


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