Economic Analysis of the 2015 Drought for California Agriculture

In 2015 California agriculture is facing its fourth year of severe drought. As in 2014, irrigation districts and farmers are showing more resilience to the drought than many had anticipated.

Groundwater substitution has again greatly reduced crop fallowing and job losses. Water trading and operational flexibility also have significantly reduced the costs of the drought, and preservation of the most valuable crops has helped buffer economic impacts.

However, the effects of drought are unevenly distributed over regions. In some regions with limited groundwater reserves the economic and employment impacts are very severe. In others, there is an increased cost of expanded groundwater use which is partially offset by high crop prices.

Just as the economic impacts of the drought have grown modestly since 2014, continuation of the drought to 2016 or beyond with similar intensity is likely to slowlyerode the state’s agricultural production and employment.