Food Grows Where Water Flows

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CFWC Blog

What can the 2015 drought tell us about the impacts of a drought in 2021?

April 8, 2021 in California Water, CFWC Blog, Drought, Fact Sheets, Farm Water & You, Food Production, Water Supply

Info Graph – What can the 2015 drought tell us about the impacts of a drought in 2021?

Taking a look back at a similar water year can help us understand what might be in store for us through the rest of this year and possibly beyond.

What can the 2015 drought tell us about the impacts of a drought in 2021?

California is in a critically dry year, the same as in 2015. Water will be extremely tight for thousands of farmers around the state, and many of them have already received notice that their water supplies are being cut by up to 95 percent.

In 2015, water supply cuts of that magnitude led to over half a million acres of land taken out of production. Had there been sufficient water supplies in 2015, the amount of land that was fallowed could have produced:

  • 8.6 billion heads of lettuce, or
  • 594 million cartons of melons, or
  • 54 million tons of grapes, or
  • 27 million tons of tomatoes. 

Instead, because no water was available, those fields produced nothing but weeds.

California is the No. 1 farm state in the nation with tens of thousands of agricultural jobs, with wages at all income levels covering all 58 counties. When farms aren’t growing food for people, it affects jobs, personal income, and their quality of life. In addition, farm-related jobs contribute hundreds of millions of dollars annually to state and local tax revenue which provide services local communities value, like police, firefighters and teachers.

In 2015, a total of 21,000 jobs were lost with an economic impact of $2.7 billion across the state.

Preparing for Drought

Farmers have been preparing for another drought and have invested heavily in water use efficiency projects, including drip and micro-sprinkler irrigation systems, soil moisture monitoring, and computerized irrigation controllers. But the savings achieved by those investments haven’t been enough to avoid wide-scale land fallowing due to the massive water supply shortages farmers are experiencing again this year.

Info Graph – Long Term Impacts on California From Water Supply Cuts

Looking long-term, continuing water shortages will have a devastating effect not only on California farms but also on the farm related jobs throughout our economy.

Long Term Impacts on California From Water Supply Cuts

The Blueprint Economic Impact Report, available HERE, indicates that over the next 30 years, water supply cuts will lead to the permanent loss of 1 million acres of productive farmland.

Fewer healthy foods will be available from California farms. The report estimates that California will permanently lose:

  • 86,000 acres of vegetables,
  • 130,000 acres of fruit-producing trees,
  • 129,000 acres of wine and table grapes,
  • 327,000 acres of nuts, and much more.

These reductions translate into the permanent loss of 85,000 jobs, half of which are off the farm, such as food processing, transportation, wholesale, retail, and ports. They also mean the permanent loss of over $535 million in tax revenue which, again, is used to provide the services local communities value, like police, firefighters and teachers.

Actions, including better flood management for groundwater recharge, improved conveyance to move water to potential groundwater banking areas, new and enlarged storage projects, and regulatory reform designed to improve in-stream flows for ecosystem benefits while protecting agricultural water supplies can help minimize the effects described above. Federal investments toward improving water supply infrastructure is essential to providing a secure water future to sustain the nation’s food supply, meet urban and suburban needs, and provide for a healthy environment throughout California.

Managing More Efficiently with New Technologies – Precipitation Forecasting

April 5, 2021 in CFWC Blog

Managing More Efficiently with New Technologies – Precipitation Forecasting

Imagine the possibilities if we knew months in advance if the water year was likely to be wet or dry – with the same accuracy as that of a three- to five-day weather forecast.  Growers could make spring planting decisions with reduced uncertainty and water agencies would be able to allocate their resources for optimum efficiency.  Is this just a fantasy or could it be a reality?

PSL Forecast Anomalies 2020/2021

Great progress is being made in improving the accuracy of snowmelt runoff forecasting, through approaches such as the airborne snow observatory technology developed at the National Aeronautics and Space Administration, but the lead time of runoff forecasting remains limited because it is based on making forecasts of precipitation already on the ground in the form of snowpack.  Answering the questions of “will this winter be wet or dry?” or “will the rest of this winter be wet or dry?” requires improving precipitation at lead times beyond that of a weather forecast.  Conventional weather forecasts are issued with lead times of up to two weeks but have limited accuracy beyond the first week.

The National Oceanic and Atmospheric Administration (NOAA) recently released a report to Congress (https://repository.library.noaa.gov/view/noaa/27408) describing the challenges and opportunities associated with improving sub-seasonal to seasonal (S2S) precipitation forecasts.  S2S forecasts extend beyond a conventional weather forecast, with lead times of up to six weeks (sub-seasonal) to a year or two (seasonal). When NOAA’s National Weather Service (NWS) conducted a California drought service assessment in 2014, the more than one hundred water managers surveyed overwhelmingly identified an accurate seasonal precipitation forecast as the high-priority service that the NWS should provide.  NWS’ Climate Prediction Center has been operationally issuing S2S precipitation outlooks since the mid-1990s, but their skill for the western U.S. has been minimal, just slightly better than predicting average weather conditions.  Forecasting precipitation at S2S lead times is a scientifically challenging problem, and one that has received little federal research support. 

This experimental forecast made in October for DWR by NOAA’s Earth Systems Research Laboratory, for example, has correctly predicted California’s dry winter.

NOAA’s report to Congress recommends a pilot project for improving S2S precipitation in the western U.S. specifically intended to support water management.  There is precedent within NOAA for focused projects designed to meet specific objectives and held accountable for meeting those objectives.  Its Hurricane Forecasting Improvement Project, for example, was designed to improve forecasting the track of Atlantic hurricanes.  The pilot project would take roughly a decade to complete and would entail significantly updating and improving existing NWS dynamical weather models.  The recommended pilot project is not currently funded; NOAA would need a new appropriation for the work. 

In the near term, the Department of Water Resources has been exploring potential approaches to improving S2S precipitation forecasting with researchers partners at NASA, NOAA, and the University of California, taking advantage of tools such as statistical models that could help inform an eventual NOAA pilot project.  This experimental forecast made in October for DWR by NOAA’s Earth Systems Research Laboratory, for example, has correctly predicted California’s dry winter.

Water Futures: A Hedge Against Potential Price Increases or Betting the Farm?

March 15, 2021 in CFWC Blog

Much has been written lately about a new water futures contract market that provides a way for individuals to profit (or lose) off of fluctuating water prices in California. Based on the Nasdaq Veles Water Index (Index), buyers and sellers are able to speculate on the future price of water to either hedge against price changes if you’re a water user, or profit off of price changes if you’re a speculator who has no other interest than making money.

Adding to the confusion is the interchanged use of the terms “water futures,” “water market,” and “water transfers.”

“Water futures” are contracts that allow a buyer to try and outguess what the future price of water will be and turn a profit if they’re right. The participants in water futures contract trading understand that tangible water will not be delivered as part of the agreements.

“Water markets” are a collection of commercial activities where actual water is bought and sold and is, by and large, regulated by the State Water Board.

“Water transfers,” also regulated by the State Water Board, provide a mechanism to balance water needs within a region or between regions, and have helped increase the flexibility of California’s water system.

Water Transfers vs Water Markets vs Water Futures Trading: On-Farm

There is a clear distinction between water transfers between willing sellers and willing buyers and water markets. Water markets, similar to water futures contracts, are often associated with third parties’ (which could be in other states or even countries) speculation on water pricing without actively engaging in the management/movement of water.

Farmers are often cited as potential beneficiaries of water futures trading because rising water prices can affect the bottom line when they’re irrigating a crop. But are farmers actually going to use this tool to help manage water costs? That remains uncertain.

The Water Futures Index

The Nasdaq Veles Water Index is based on the prices of actual historical water trades in California that include, essentially, State Water Project (SWP) and Central Valley Project (CVP) transactions, as well as sales within four Southern California adjudicated water basins: the Central Basin, the Chino Basin, the Main San Gabriel Basin, and the Mojave Basin Alto Subarea.

Contracts are sold in 10-acre-foot blocks. The index price as of March 9, 2021 for water contracts ending in June of 2021 was $597 per acre-foot. The June 2022 index price was $603, a difference of just $6 per acre-foot, however that could change significantly if water supply conditions change down the road, like if we enter another period of extended drought.

Source: Nasdaq Veles Global Indexes

For example, from March 2020 to June 2020 the index price increased from a little over $200 per acre-foot to roughly $700/ af. It has since fallen back to the sub $600 range, and again, is based on prior actual water sales for both agricultural and urban supplies.

Contracts are available for up to two years in length and are typically settled quarterly on the third Wednesday of the month.

Terms usually end in March, June, September, or December and while they have a set period, contracts can be traded at any time throughout their term.

Someone buying into the water futures market is not buying actual water. Instead, they are attempting to guess where water prices will be in the future. If you buy a June 2022 water futures contract at today’s price of $603, you’re hoping that the index price when the contract is sold is higher than $603. If the price declines, you’ll sell the contract at a loss.

In the practical sense, how would a water futures contract benefit a farmer? Most of the published examples go something like this:

A farmer buys five contracts (50 acre-feet total) at $600 per acre foot for a cost of $30,000. Under the assumption that the index price of water rises to $800, the farmer is set to make $200 per acre-foot X 50 acre-feet for a total profit of $10,000. That profit could then be used to buy water at the actual price when it is needed for the irrigation season.

The reality is, during a shortage, local agricultural water prices could easily be $400 an acre-foot. When the farmer actually needs water, the $10,000 profit from the index transaction, at $400 per acre-foot, would buy 25 acre-feet of water, enough to irrigate about 10 acres of tomatoes or roughly 7 acres of almonds. The same amount of water could be enough to supplement 25 existing acres of production with an extra one acre-foot per acre. Thinking bigger, under this same scenario, water futures contracts intended to supplement 250 acres of farmland would cost $300,000 up front and there is no guarantee of a profitable return.

The Index also provides a mechanism for purchases on a 10% margin, meaning the up-front investment could be considerably less, $30,000 in the prior example. However, the risk is considerably more if cash reserves aren’t available when the contract matures and prices have declined. That kind of risk led to a few people jumping from buildings after “margin calls” during the stock market crash in 1929.

It is hard to imagine water futures operating at a scale that actually works for agriculture. Perhaps protecting a high-value crop with supplemental water (if it’s available) is worth the high price of purchasing one or more water futures contracts. But farmers are risk-aware by nature. Is it reasonable to think they’re likely going to gamble a lot of up-front capital under the assumption that water prices will rise?

The Magic 8 Ball would likely say, “Don’t count on it.”

Delta smelt remain on the brink of extinction – We can change that

January 12, 2021 in CFWC Blog, Endangered Species, Endangered Species, Invasive Species

Recent fish surveys confirm what many biologists, ecologists, and water experts have known for some time – Delta smelt remain on the brink of extinction. Zero Delta smelt were found in the California Department of Fish and Wildlife’s recent Fall Midwater Trawl Survey. Even the Enhanced Delta Smelt Monitoring Program, which is specifically designed to capture the tiny fish, only successfully caught two Delta smelt from September 8 to December 11, 2020.

Improving the health of native species like Delta smelt is an imperative, as it is critical to the health of our environment and the reliability of our water supplies. As an indicator species, the Delta smelt’s absence tells a grim story about the health of the Delta ecosystem, making these recent findings all the more concerning.

These results are not surprising, when California has made slow progress on actions like habitat restoration that are essential to restoring native fish populations.

Photo: US Fish and Wildlife Service

For many years flows, meaning pumping from the Delta, have been blamed as the primary cause for the decline in Delta smelt. As a result, restrictions on pumping from the Delta have been the default approach to protecting these fish.

The fact that Delta smelt populations are still desperately low – despite years of restricted pumping – confirms that a flows-only approach isn’t effectively protecting Delta smelt populations.

Equally concerning is the fact that a flows only approach has at the same time had a detrimental impact on the agriculture industry and the communities that rely on surface water, not only in the Central Valley but for anyone who buys and eats food grown there.

In fact, there are a multitude of stressors on native fish populations – including invasive and predatory non-native species, loss of habitat, contaminants, and changes in food availability and quality – and restoring the health of Delta smelt requires a broad-based approach that includes targeted actions to effectively address all these factors.

Let’s use another analogy: Responding to the near-extinction of Delta smelt by relying on pumping restrictions alone is as effective in restoring their overall health as responding to the COVID-19 pandemic by relying on bar and restaurant restrictions alone. Can some data-based restrictions be a lever for change? Absolutely. But aggressive, austere restrictions that are not supported by the science cannot be relied upon to solve the entirety of the crisis – particularly when there are severe economic consequences associated with the restrictions, too.

Ultimately, we must pursue a combination of functional flow and non-flow measures, including habitat restoration and adaptive management, to meet the needs of native fish and wildlife species. Without a more holistic approach, the Delta smelt will go from endangered to extinct.

A New Year Will Bring Opportunities for Continued Progress

November 30, 2020 in CFWC Blog

Much has been written in the last few weeks about the impact an incoming Biden administration will have on the war of lawsuits between California and the Trump administration. Unfortunately, because conflict is often more interesting to write about than cooperative progress towards joint goals, these articles miss a lot of the positive work underway in our state.

California and its leaders understand that we all need water – cities, towns, farms and the environment. It is also clear that uncertainty does not benefit any water users and that working together to meet the needs of all is the best path forward.

1. Helping struggling fish populations

Dutch Slough, Sacramento-San Joaquin Delta (DWR)

Keeping the ecosystem healthy is important for a secure water future and the latest science shows that in order to reach that goal, we must pursue a more holistic approach than in the past. That’s why farmers, scientists, conservationists, and government agencies have teamed up to address the multiple issues impacting fish.

Millions of dollars are being spent on projects throughout the state to improve habitat, food source and predator control for fish. A large project just completed by the Department of Water Resources and Westlands Water District in the Sacramento-San Joaquin Delta as a part of California’s EcoRestore initiative restored and enhanced approximately 2,100 acres of cattle pastures into tidal marsh and habitat that will provide new sources of food and shelter for native fish, including smelt and salmon.

However, that is just one of the many projects underway that will depend on continuing cooperation among stakeholders to be successfully completed and provide benefits to all California water users.

2. Supporting multi-benefit projects

The goal of various stakeholders coming together is furthered when projects have multiple benefits that achieve a variety of goals. One example of such a project is the proposed raising of Shasta Dam.

The completion of this project will increase water storage, enlarge the cold-water pool and improve water temperatures for fish, reduce flood risk in the region, provide additional hydropower with an existing renewable and carbon-free resource, and improve water supply reliability for farms, families and the environment.

3. Replenishing depleted groundwater reserves

Flooded vineyard (Terranova Ranch)

California’s 2014 groundwater legislation, the Sustainable Groundwater Management Act (SGMA), charts a course to protect the state’s largest water storage source, underground aquifers. Farmers again have partnered with scientists, and conservationists to experiment with flooding fields in winter, building recharge ponds on their farms, and restoring and expanding floodplains. These measures not only help recharge groundwater, they offer flood protection and wildlife habitat.

It’s important to note that this groundbreaking legislation is based on the concept that local stakeholders from each region must work together to find solutions that make sense for their area. The law’s passage not only recognized the importance of preserving groundwater, it also recognized that the era of one-size-fits-all, mandatory top-down solutions are not the best path forward.

4. Moving ahead with the Voluntary Agreements

Furthering the idea of local cooperation embraced by SGMA, the Voluntary Agreements on water are the next logical step in that progression.

These agreements represent the best hope for California’s environmental future. They could end the cycle of lawsuits, bring reliability to water users, utilize new science as well as provide annual funding for environmental projects.

5. A secure water future for all Californians depends on cooperation

Sacramento-San Joaquin Delta (USFWS)

A change in administration does not need to be a source of conflict. As California has shown, working together produces results that benefit the entire state. President-elect Biden ran on the pledge to reunite the country. Picking winners and losers is not the path to achieving that goal. As he said in his commentary earlier this year, we’re hopeful that Governor Newsom will move to complete the Voluntary Agreements and that the incoming Biden administration will embrace the spirit of cooperation that is moving all water interests forward.

Correcting the Record

October 14, 2020 in CFWC Blog, Farm Water in the News

LA Times columnist Michael Hiltzik recently published a column that contained an outrageous statement related to California’s water supply that is completely out-of-touch with the reality that California farmers live every day.

He stated, “Central Valley growers often talk as though only their water needs should count in California. . .” He’s either been living in a cave or is so wrapped up in his own bias he’s not able to factor in the truth.

California farmers have been leading the charge on water conservation as well as connecting updated science to water policy and protection of the environment.

As noted by the Public Policy Institute of California (PPIC) agricultural water use in California is down 15 percent since 1980 while production is up more than 60%. That’s an incredibly efficient water use by any measure. And, as Californian’s concern for safe, locally grown food increases during the pandemic, it’s also of critical importance.

In addition, California farmers have contributed to more than $800 million on studies over the last decade, working to identify science-based water policy that works for farms, people and the environment.

These studies build on investments in science-based projects that are helping heal the California environment. The Butte Creek Salmon Recovery Project turned a population of about 100 Chinook salmon returning each year to Butte Creek into 10,000 over the course of about 20 years. And the science at the heart of this project continues to be used today to implement additional projects in various parts of the state.

Other projects are in place to restore floodplains which not only provide critical water storage, they benefit struggling fish populations as well. The largest public-private floodplain restoration project in the state is at Dos Rios Ranch in Stanislaus County. River Partners, a non-profit that manages the project says, “Our floodplain reforestation projects are biodiversity hotspots and climate-protection powerhouses.”

California farmers have always taken care of their neighbors – and that includes the wildlife with which we share the land. Much of California’s most important wildlife areas exist alongside some of the state’s most productive farmland and farmers are a key part preserving this valuable habitat.

Mr. Hiltzik likely celebrates Earth Day every April and probably misses the fact that on the farm, every day is Earth Day.