California growers face 5% to 7% income loss from drought

Farmers and agribusinesses continue to face drought-related losses in 2016, despite increased rainfall, according to a report from rural co-operative bank, CoBank.

California farmers and agribusinesses continue to face drought-related losses in 2016, according to  report from US rural co-operative bank, CoBank.

The report suggests a 5 percent to 7 percent loss in net cash incomes. Overall losses in agriculture because of the water shortage are expected to be between $1 billion and $1.5 billion, compared with $1.8 billion in 2015.

After four years of below-average rainfall and reduced snowpack, California saw near normal rainfall and snowpack replenishment during the 2015-16 rainy season. However, lingering effects of the drought will cause California to allocate less than 60 percent of the state’s contracted water supplies to the growers, who are expected to fallow between 300,000 and 350,000 acres of land this year, according to the report.

That is a significant improvement over the 540,000 acres fallowed by California growers in 2015.

“Although California’s cities, rural communities, and farmland are less parched today than they were a year ago, water remains in short supply,” said Leonard Sahling, vice-president of CoBank’s Knowledge Exchange Division.

High margins for tree crops and vines, and the lasting damage from fallowing permanent plantings make them less likely to see diminished production in 2015 than field crops. Field crops that require high amounts of water are more likely to be fallowed or substituted for less water-intensive crops.

“We expect a large reduction in acreage for field crops that require significant amounts of water, including corn, wheat, cotton and alfalfa,” said Sahling.

In addition to fallowing land and shifting crop mixes, growers facing water restrictions are likely to lean on an already stressed groundwater supply or seek to purchase water from senior rights holders, according to the report.

CoBank is a member of the US Farm Credit System, a nationwide network of banks and retail lending associations that provides loans for agriculture, rural infrastructure and rural communities.