21 Oct 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.