Why California’s Drought Is Bad News for Your Budget

Justin Sullivan/Getty Images

Justin Sullivan/Getty Images

California’s record drought, now in its fourth year, isn’t getting any better. So far, 2015 is the driest winter on record in the Golden State, according to California’s Department of Water Resources. That’s bad news for Californians from Crescent City, near the Oregon border, to San Diego. But the lack of water isn’t just a problem for the state’s residents. It could eventually mean higher prices at the grocery store for people across the country.

California is an agricultural powerhouse, producing avocados, almonds, strawberries, dairy products, and other items that make their way to store shelves and produce aisles around the U.S. and the world. In 2013, the state’s agricultural exports were worth $21.24 billion, according to the California Department of Food and Agriculture. In all, it produces half of U.S.-grown fruits, nuts, and vegetables, including virtually all almonds, walnuts, dates, and raisins.

As it gets more expensive for California’s farmers to produce certain crops, consumers can expect to eventually see that reflected at the supermarket. “Owing to higher production costs, insufficient water, or both, producers may opt to reduce total acreage, driving up prices not just this year but for years to come,” says the U.S. Department of Agriculture (USDA). But the cost of a pint of strawberries or a pound of tomatoes won’t go up right away, and the increase may not be dramatic, at least not at first.

Source: Thinkstock

Source: Thinkstock

Currently, the USDA is predicting that 2015 food prices will be about 2% to 3% higher than they were in 2014, in line with normal rates of food inflation. A strong U.S. dollar and lower fuel prices should keep the cost of your fruits and vegetables from spiking.

Yet if the drought persists (as many experts believe it will), consumers might start to feel the pain in the checkout aisle. “Depending on its continued severity, the drought in California has the potential to drive prices for fruit, vegetables, dairy, and eggs up even further,” the USDA warns.

Source: U.S. Drought Monitor

Source: U.S. Drought Monitor

California’s agricultural production is concentrated in the central part of the state, an area where drought conditions are exceptionally bad. For now, those farmers are finding ways to cope despite the lack of rain. With surface level water from the state’s snowpack and rivers extremely limited, growers are tapping groundwater to feed their thirsty almond trees, pistachios, and other crops. Yet the groundwater has been drained so quickly that there’s not much left. What happens when that water runs out is anyone’s guess, but predictions aren’t encouraging.

“Clearly, if this sort of unprecedented lack of water continues, then each year more cropland and more crops will face reductions in supply and prices will be more affected,” Daniel Sumner, of the Agricultural Issues Center at the University of California Davis, told Marketwatch. “The bottom line is farmers are scrambling to efficiently use what water they have.”

Using less water is hard to do when so many of California’s most lucrative crops are also big water hogs. It takes a gallon of water to produce a single almond, but farmers are growing more of them than ever. California’s production of almonds had nearly doubled since 2005, Mother Jones reported, as increased global demand has turned them into a valuable commodity.

Almonds

Source: iStock

The solution to California’s water problems isn’t clear. Gov. Jerry Brown has ordered mandatory water restrictions across the state, with the goal of cutting use by 25%. But farmers aren’t subject to those restrictions, even though they use 80% of the state’s water. That has some up in arms. “The order does not deal with the fact that farmers are accelerating the planting of water-intensive crops, primarily for export, at the same time residents are being required to reduce their water by 25%,” Jonas Minton, a water policy adviser for the Planning and Conservation League, told ABC News.

Water politics in California are complicated, as anyone who’s seen Chinatown knows. Farmers want water for their crops. Residents want water for their lawns, swimming pools, and golf courses. People in the rest of the U.S. want affordable produce year-round. If the California drought continues, something will have to give, and it may well be consumers who end up paying the price.

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