Higher Food Prices From California Water Restrictions?

After hearing about the new water restrictions in California, I wondered if Americans wouldn’t be seeing higher food prices (particularly on items from that state) at the grocery store as a result. Marco della Cava reported on the USA Today website yesterday:

California farmers and winemakers are not likely to feel the pinch from Wednesday’s new statewide water restrictions. Gov. Jerry Brown’s mandatory push to cut water use by 25% in the coming year is aimed largely at water-hogging homeowners and businesses.

“Water allocations to farmers have already been set for the year, so these new measures won’t really impact them,” says Doug Parker, director of the California Institute for Water Resources. “But the new rules will require increased reporting on water diversions and water use.”

(Editor’s note: Bold added for emphasis)

della Cava noted:

Roughly 80% of California’s water is used by its vast network of farms. More than half of California’s agricultural crop value comes from fruit and tree nut production (around $5 billion annually) and about a quarter from commercial vegetables ($6 billion annually), representing more than 60% of total U.S. fruit and tree nut farm value and 51% of vegetable farm value, according to the U.S. Department of Agriculture…

(Editor’s note: Bold added for emphasis)

That’s an awful lot of agriculture that’s getting punished by the ongoing drought. The food garden I’ve started to put together is starting to sound that much better in light of what’s happening.

Adam Nagourney added on The New York Times website Wendesday:

Owners of large farms, who obtain their water from sources outside the local water agencies, will not fall under the 25 percent guideline. State officials noted that many farms had already seen a cutback in their water allocations because of the drought. In addition, the owners of large farms will be required, under the governor’s executive order, to offer detailed reports to state regulators about water use, ideally as a way to highlight incidents of water diversion or waste.

Because of this system, state officials said, they did not expect the executive order to result — at least in the immediate future — in an increase in farm or food prices

(Editor’s note: Bold added for emphasis)

Heesun Wee chimed in over on the CNBC website on March 30:

Sectors that will be hit significantly include agriculture and food processing, said Troy Walters, a senior economist at IHS. Beyond those two categories, the impact will be minimal in the near term. “We’re not going to see any food inflation into 2015 beyond normal as a result of the water situation,” Walters said.

Looking at some California crops specifically, 2015 regional hay prices may not soften as they are expected to in the rest of the country. There’s a good chance there will be less rice acreage overall. And tree nuts including almonds will feel more of the drought’s impact, said Brandon Kliethermes, a senior economist at HIS…

(Editor’s note: Bold added for emphasis)

The consensus seems to be no food price spike due to the new water restrictions.

But considering the enormity of California’s agricultural output, should arid conditions keep dragging on…

It might not be a bad idea to plant more fruits and vegetables than I originally envisioned.

Next week’s Home Grown Food Summit couldn’t have come at a better time.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

della Cava, Marco. “Farmers not as impacted by Brown’s new drought measures.” USA Today. 1 Apr. 2015. (http://www.usatoday.com/story/news/2015/04/01/california-drought-measures-governor-jerry-brought-farmers/70786968/). 2 Apr. 2015.

Nagourney, Adam. “California Imposes First Mandatory Water Restrictions to Deal With Drought.” The New York Times. 1 Apr. 2015. (http://www.nytimes.com/2015/04/02/us/california-imposes-first-ever-water-restrictions-to-deal-with-drought.html). 2 Apr. 2015.

Wee, Heesun. “Amid drought, some California farmers in near ‘survival mode.’” CNBC.com. 30 Mar. 2015. (http://www.cnbc.com/id/102527195). 2 Apr. 2015.

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