Farmers, unsurprisingly, are changing to higher value crops that use less water:
"A lot of guys are saying, 'Do I hunker down and try to wait this out somehow, or do I really change what I do?' " Borba said. To be sure, Borba and other influential Valley players are pushing the state and federal governments for a Delta fix that would bring them more water in the future.Bottom Line: Farmers will survive more expensive water by using it smarter. After years of stupid-cheap water, it's a relief to see more-sensible prices -- and actions.
But Borba wouldn't have succeeded in the farm business without knowing how to adapt. So cotton and tomatoes, which need about 3 feet of water a year, are giving way to wheat and safflower, which get by on 18 inches. He's laid thousands of acres of drip irrigation. Three years ago, he replaced 750 acres of annual crops with almond trees, which yield enough revenue to justify even high-priced water.
Water has always been valuable to farmers. But at the prices charged for deliveries from government canals, it hasn't always been precious. So farmers could turn a profit even growing thirsty, relatively low-value crops like alfalfa hay and cotton, of which Borba grew 9,000 acres as recently as 1999. Next year, he plans just 900 acres of cotton.
Borba pays at least $80 an acre-foot for Delta water. [...] Borba's water price is subsidized. ... In water-short years – as 2008 is expected to be – Borba turns to more costly alternatives: groundwater and purchases of water from farmers who have alternate supplies or aren't subject to cutbacks.
San Joaquin Valley farmers planted 1.3 million acres of cotton in 1995, but just 455,000 this year, the least since 1946. For 2008, plantings in Fresno County are projected to drop an additional 25 percent to 40 percent. Wheat acreage, by contrast, is up at least 20 percent this winter, according to seed brokers. Part of that trend has to do with commodity prices, but the cost and availability of water plays a major role as well, said Borba and others.
In the drought years of 1990 and 1991, farmers in the giant Westlands Water District, Borba's area, pumped 600,000 acre-feet of water, about three times the region's sustainable yield. "This year, we'll probably do 700,000," Borba said.
Farmers don't have to buy groundwater from anybody, but it still isn't cheap. Pumping costs alone run $80 to $150 an acre-foot, depending on the price of electricity or diesel. Sinking a new well to the 1,800-foot depth often required here can easily cost $1 million.
He stops now at what is, in a seeming paradox, both one of his thirstiest fields and a hedge against water shortages: an orchard of almonds. Almonds need about 4 feet of irrigation a year. What's more, in this part of the Valley, they have to be irrigated with Delta water because the trees don't tolerate the naturally occurring boron in the groundwater.
After an initial investment of about $10,000 an acre to plant the trees and nurture them to bearing age, an almond orchard yields revenues of $3,000 to $5,000 an acre vs. $1,000 to $1,500 for cotton. That extraordinary return – the result of high prices maintained by steady global demand – justifies almonds' water use. Borba has planted a fifth of the 2,300 acres he owns to almonds. The rest of his 10,000 acres is either leased or farmed for other landowners. Even in a very dry year, he figures he can keep the orchard alive by concentrating the farm's full allotment of Delta water on the almond orchard. He'll use groundwater on the rest.
But heavy groundwater pumping can go on for only so long before the wells begin to fail. As shortages continue, more land is likely to go unplanted altogether. "It will accelerate the trend, which is to fewer acres and higher-value crops," said Richard Howitt, a professor of agricultural economics at UC Davis.[Hey, that's my adviser!]
Almonds and other so-called "permanent" plantings, including grapevines, fruit and nut trees, are generally the last crops to go unwatered. Trees and vines represent a huge capital investment, and farmers will pay extraordinary prices for water to keep them alive. Borba farms about 2,000 acres for landowners who have planted all their land to almonds. The Delta allocation covers only a fraction of the trees' needs, so Borba has already lined up 1,000 acre-feet for the crucial 6-inch watering after next fall's harvest. The price: $400,000. This fall, water for almonds elsewhere in Westlands was even dearer: $700 an acre-foot. "$700 is nuts," Borba said. But it also makes business sense. Without the late-season water, the trees' yield in the following year could drop by twice the value of the water.
As water has grown scarcer, and as the acreage in almonds has grown, a bustling market in these deals has developed.