Drought Economic Impact May Exceed $2 Billion

Researchers at UC Davis have updated their analysis of the potential impact of the drought on agriculture and the California economy. The results were based on several water supply and land use models and economic impact forecasting models. The study found that the 2014 drought will result in a 6.6 million acre-foot reduction in surface water available to agriculture. The loss in surface water supply may be partially replaced by increased groundwater pumping by 5 million acre-feet. The resulting shortage of 1.6 million acre-feet will result in significant fallowing of farm land and economic losses to farming and other sectors.

The researchers estimate that the drought will cause losses of $810 million in crop revenue and $203 million in dairy and livestock value, plus additional groundwater pumping costs of $454 million. The total statewide economic cost may be $2.2 billion, with a total loss of 17,100 jobs.

Some of the other findings include:

• The 2014 drought is responsible for the greatest absolute reduction in water availability for California agriculture ever seen.
  
  
• Groundwater will account for about 53 percent of total agriculture water supply this year, compared to the average of 31 percent.
  
  
• Most of the impact will be experienced in the Central Valley, with about 410,000 acres being fallowed, compared to about 19,000 acres fallowed in the coastal areas and Southern California.
  
  
• Annual crops such as corn, beans, cotton, and alfalfa will see the largest reduction in acreage, with a total reduction in fruit, vegetable, and nut acreage of about 51,000 acres.
  
  
• The drought is likely to continue into 2015 with further depletions of groundwater and mounting economic losses for agriculture and the state’s economy.

Several public and technical policy improvements were suggested by the researchers that could enhance California’s ability to deal with future droughts:

• Increased groundwater management
  
  
• Facilitating water trading and the development of a water trading clearinghouse to provide information and standardize trading
  
  
• Requiring that environmental impact reports be filed with water transfers
  
  
• Development of a remote sensing system to monitor water use and land fallowing
  
  
• Improve water data collection, management, analysis, and modeling
  
  
• Provide assistance to affected rural communities

The report makes no mention of the need for more water storage or more aggressive urban conservation as necessary measures to reduce the impact of future droughts.

The analysis was conducted by staff associated with the Center for Watershed Sciences and the Agricultural Issues Center (AIC) at UC Davis. A complete copy of the report can be found at the web site: https://watershed.ucdavis.edu/.