21 October 2008

Trading Grass for Carrots

A reader sent me this tidbit:
I am looking at property trends in the Antelope Valley. For farmers, I'd say it looks grim. One of the by-products of the impending changes in canal water deliveries is the land boomlet in the Cuyama Valley. The carrot companies are paying a major premium to purchase land that they have rented for decades and buy-out the remaining alfalfa farmers. Controlling ground water is the driving force.
Put differently, scarcer water is being redistributed from low value (alfalfa) to high value (carrots) uses via land purchases.

I am not sure what "impending changes in canal water deliveries" means, but if it means that water deliveries are going to fall, then property turnover probably reflects the desire of those who are going to lose water (carrot farmers) to get water from those who will still have it (alfalfa farmers).

Bottom Line: Farmers get it: As water supplies grow more scarce (expensive), they change their behavior.

4 comments:

  1. "Canal water deliveries" probably refers to the State Water Project. "Controlling groundwater" refers to the ongoing basin adjudication proceedings.

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  2. I don't have any first hand knowledge of what's going on in the Antelope Valley, but can offer a little more perspective on this interesting post. Carrots require sandy ground, which is not good alfalfa ground. So, even though alfalfa is a very valuable crop these days, the economics of growing it on unsuitable soils and in high water cost areas are probably lousy. Moreover, the big carrot boys, like Grimway, have probably hundreds of millions invested in packing and shipping facilities, and need to be sure they have a ready supply of carrots. Even if they *lose* money growing the darn things sometimes, they make it elsewhere in their business. I'm not suggesting it's a bad thing that they're doing, just that the "high-value/low-value" dialectic is more complex than it might seem.

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  3. One aspect of the Antelope Valley groundwater adjudication that you might be interested in, Dave, is that some of the alfalfa farmers are proposing the severance of the their groundwater rights from the land, making them freely tradeable without reference to the land. At least, freely tradeable within the basin.

    From some perspectives, that allows the market to put the water where it is most valued, and that's a good thing. It certainly is for those alfalfa farmers' pocketbooks.

    But from the agricultural perspective, it would be a disaster. The overlying groundwater right, just like the riparian right, is an appurtenancy - meaning that the water is connected with the land. If you sever it and make it tradeable, the result is a clustering of water rights (in the cities, probably, thereby facilitating urban growth in the desert) and a fallowing of broad swaths of land.

    In other words, a lot less green landscape, and more of a desert landscape in which cities bloom (because they buy the underground supply) but they are surrounded by a suppressed landscape. That means the loss of not only ag, but habitat (for creatures other than people).

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  4. I think one solution to the problem that the Cap'n points out is to have some limits on the amount of water that can be transferred that freely. After all, we have already talked about the necessity "carriage water"; that being the quantity necessary to carry water down a watercourse to the next proximate user. A water sale that took away carriage water would be protested vigorously by the persons damaged. Fallowing is usually a bad practice; at best is only moves the pie, instead of, in W's inimitable phrase, "making the pie higher". A well ordered water sale ought to result most of the time in the selling entity staying in business, albeit with perhaps a different crop mix, improved infrastructure, and the like; all made possible by the revenue from water sales. I think the "all-in" auction process might well produce this sort of result.

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