Less than $5B/year, I presume.

The drought in California, the top U.S. agricultural producer at $44.7 billion, is depriving the state of water needed to produce everything from milk, beef and wine to some of the nation’s largest fruit and vegetable crops, including avocados, strawberries and almonds. Lost revenue in 2014 from farming and related businesses such as trucking and processing could reach $5 billion, according to estimates by the 300-member California Farm Water Coalition, an industry group.

That estimate of lost revenue, $5B, could be larger when the higher costs of power are added in to the additional power required to move substitute water. But let’s look at those rough numbers. Five billion dollars is 11% of $44.7B.

By the end of this rainy season, we are likely to have gotten twenty to thirty percent of average annual precip. For a 70% to 80% decline in the availability of a major input, our ag sector predicts lost revenues of 11%. Is that failure? Is that reasonable? What is a reasonable alternative, that we have enough infrastructure to perfectly buffer variable precip? In a drastic drought, should ag only have predicted lost revenue of 2% or 3%? What should we pay for that? Why should droughts be perfectly buffered by infrastructure? Why shouldn’t droughts be perfectly buffered? By whom?

UPDATE 2/14: The California Farm Water Coalition has increased their prediction of lost revenue to $11B. That’s 25% of an annual revenue of $44B.

Is a 25% reduction in revenue for a 75% reduction in precip too much? Who chooses? What are the alternatives? How do we want the system to work?

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2 responses to “Less than $5B/year, I presume.

  1. The grimmer question is what happens in the long run when we lose the ability to keep mining groundwater.

  2. jaylund

    Just playing with some numbers (calculating out loud): If farmers fallow 500,000 acres of land due to the drought, this is about 6% of irrigated land in California. If farmers are smart (and they are) they will tend to fallow their least productive and profitable crops first. So less than 5% of state agricultural production would be lost from fallowing (some local impacts will be considerably higher). 5% of $44B is $2.2B. This seems an upper bound effect on farm revenues, unless groundwater pumping costs and yield reductions on non-fallowed land are tremendous. Losses to agricultural processors, etc. could be more. Time will tell, in some months, what production reductions and losses turn out to be. The drought is not fully defined yet – we know it is not good, but it is unsure exactly how bad it will be.