Spared Drought’s Wrath, California Farms Prosper

While farmers in the drought-stricken Midwest watch helplessly as their parched crops wither and die, many growers in California are looking forward to a robust year of sufficient water and inflated profits.

Unlike the Midwest, where agriculture depends heavily on rainfall, most California agriculture is irrigated and was spared the drought’s first wrath. In fact, times are so good for some California wheat and corn growers that federal farm price and income support programs may now be restraining profits.

In return for minimum price guarantees for their crops, farmers who participate in support programs must agree to keep a portion of their land idle. The drought in the Midwest has now pushed market prices for grains so high that some California growers say they would have made more money had they dropped out of the programs and planted all their acreage.

“Unfortunately, one man’s loss is another man’s gain,” said Kip Brundage, a Gilroy farmer who grows mostly grain.

“As the prices go up, the amount of subsidy goes down,” said George Tibbitts, drought information coordinator for the California Farm Bureau Federation.

“One farmer says he actually has been losing money as prices go up (compared to what he could be making) because a lot of his land is out of production. . . . So a lot of growers next year are talking about not participating in the farm programs.”

So far, the only significant drought victim in California agriculture has been the cattle rancher, who has watched pastures turn to dust, watering holes evaporate and cattle prices plummet.

“Now when you go out and look at our pasture, there’s just bare dirt,” said Jan Smith, a cattle rancher in Madera County. “There’s nothing out there for the cattle to eat.”

Most of the ranchers and farmers who depend on rainfall rather than reservoirs or wells are located in the foothills of the California Coast Range and the Sierra Nevada. For them, the drought has been painful. But “at least 90%” of California agriculture is irrigated and that important sector of the state’s economy will enjoy a “robust” year, according to Bill Tracy, deputy director of the California Department of Food and Agriculture.

Gross farm income in California this year will reach $16.1 billion, about 2% more than the $15.8 billion reported for 1987, according to a recent study by Bank of America. Expenses such as feed, water and energy will rise 0.5% but cash receipts and gross income will rise faster, and net farm income will rise for the fourth straight year to $5.2 billion in 1988, compared to $4.95 billion in 1987, the bank reported.

“It’s a good year so far,” said Bill Allison, manager of the Fresno County Farm Bureau. “It’s just been steady for most people. . . . Last year was a good year and this year, all things being equal, it could be a little better.”

Grape Farms Doing Well

State agricultural officials say fruits and vegetables, like grains, are profitable this year, mostly because of good weather. “The tree fruit (farmers), they are having an excellent year to date,” Allison said. “The prices seem to be very firm. The grape market has been steady.”

While most California farmers are expected to have enough water to get them through this second consecutive dry year, the situation varies greatly from region to region and a third dry year could be disastrous for many.

About one-tenth of California’s 9 million irrigated acres receives water from the Colorado River, which has an abundant 60 million acre-feet of storage. “If it never rained another drop, the people who have the Colorado River as the source of their supply would be OK theoretically for four years,” said William I. DuBois, director of natural resources for the California Farm Bureau Federation.

Other irrigation districts in California, including those in the San Joaquin Valley, are in “fairly good shape” because of large ground water supplies, DuBois said. “The San Joaquin Valley ground water basin is a very, very, very good storage basin,” he said. “It will last a long time, but it will be very expensive to pump. When you lower your water table another foot, you have to pay for more electricity to lift it out another foot.”

For Jim Erdman, a farmer in the Sacramento Valley, the Midwest drought may be beneficial. Prices for the wheat and corn he grows are rising, and his farm is located in an irrigation district where water is plentiful. He is considering withdrawing from federal farm support programs to take advantage of the higher prices, he said, and California weather will have only a “slight effect” on what he decides.

Yields Called Normal

“Our yields appear to be normal and our prices appear to be better than in past years, so we are either going to make a little money this year or lose less money than we have in past years,” Erdman said.

Gilroy farmer Brundage is also encouraged by the rising grain prices, but his water supply will strongly influence whether he participates in federal support programs next year.

“I just planted some peas, and I got halfway through the irrigation and the well started sucking air,” the farmer said. “My neighbors just looked at me and said, ‘I would love to help you but I’m about ready to suck air too and I’ve got to save what I’ve got.’ ”

Cattle prices plunged recently because many ranchers in the Midwest and California, faced with little water and feed, sold their stock early. Those California ranchers who did not sell have had to spend substantial sums to keep their cattle alive. Ranchers are packing their cattle in trucks and hauling them to Oregon and Wyoming to feed on rented pastures for the summer or purchasing expensive grain feeds to supplement barren pastures.

“Up until the drought started to take effect and cause grain prices to rise substantially in late May or June, the prices of cattle were the best they had been for a long time,” said Darrel Sweet, business manager of Sparrowk Livestock in Clements, about 20 miles east of Stockton. “Now the decline in price is very dramatic. In mid-May, our steer that was going to slaughter was worth as much as 78 cents a pound. And then three weeks later, it had dropped down to 65 cents a pound.”

Cattlemen predict that prices will soon rise again, possibly by next winter. “There’s a good possibility that prices will go up because so much is being unloaded right now that we’re going to see a reduction of what goes to market down the road,” said Tibbitts of the California Farm Bureau Federation.

Price Hikes for Hay

Ed Parish, who farms Quail Valley Ranch in Lookout with his wife, Yvonne, grows hay and raises cattle. He said the price hikes for hay will more than compensate for the price drops for cattle. “This will be one of our better years because we’re in the hay business,” the Modoc County farmer said.

Vernon Knoch, general manager of Lyneta Farms Inc. in Altures, 30 miles from the Oregon border, said his hay crop has been hurt by erratic temperatures, but the year still will be “slightly above average” for him because of higher prices.

“The drought so far has not been a factor--except the prices are better,” said Knoch, who farms 10,000 acres of hay.

Although state agricultural officials say the dairy business in California remains healthy, dairy farm owners are in fact feeling the squeeze of higher feed prices. Richard Matteis, executive vice president of the California Grain and Feed Assn., said feed represents 55% of the cost of production for dairies, and prices have risen as much as 28% in the last 30 days. He said California historically has been able to meet only 40% of its feed needs and relies for the other 60% on states hit hard by the drought.

“I know that feed manufacturers are very concerned about the fiscal health of many of their customers,” said Matteis, whose organization represents manufacturers and suppliers of feed.

The drought in the Midwest has also put unusual pressure on the middleman. Matteis said those who supply feed to dairies and poultry farmers must decide when to buy grain in highly fluctuating, speculator-driven markets.

“It’s really scary to see the market go up and down 20 and 30 bucks from one day to the next, but that’s what’s happening,” Matteis said. “It’s difficult to know when to buy and when not to buy because the markets are so unstable.

“Every bit of news causes the prices to go one way or another, and little environmental changes can have big effects. The people who bought on the day it rained did much better than the people who bought the day before it rained. It can cause some sleepless nights.”