Majority of Farms Adapt to Drought : Agriculture: A bank economist says growers are doing surprisingly well by using ground water and switching crops. But there are significant exceptions.

Despite early predictions of financial collapse, California’s farm economy has weathered the fifth year of drought with surprising resiliency and may ultimately fare better than urban businesses, an economist told water officials Wednesday.

But the strength of agriculture statewide masks “extreme pain” that some smaller farm communities are experiencing because of water shortages, said Frederick Cannon, a senior economist and vice president for Bank of America.

Cannon’s remarks came during a briefing sponsored by the Assn. of California Water Agencies to assess the impact of water shortages on the economy and the environment.

“Farmers have done a terrific job of adjusting to dramatic losses in water in terms of maintaining the viability of the industry,” Cannon said. “Nonetheless it’s important to recognize that . . . certain individuals and certain farms are hurting a tremendous amount.”

He said acreage under cultivation in California this year will decline less than 15% and total agricultural sales “less than that.”

Although the State Water Project is not making agricultural water deliveries this year and the federal Central Valley Project is delivering only 25% of what it typically does to farms, Cannon said many growers have been able to maintain their crops by resorting to ground water pumping.

Others, he said, have minimized losses by adjusting to the idiosyncrasies of the market. Some have switched to more profitable crops that benefit when overall production drops.

“The farmer that, for example, reduces his acreage by 10%, but because he grows melons and the price is up 15%, may do fine,” Cannon said.

Early statistics show that farmers are shying away from growing crops that are highly competitive on the international market and opting instead for planting those with strong local demand. As a result, Cannon said, production of safflower is down 49%, cotton is down 22% and wheat is down 37%. But tomatoes, “a major money-maker,” have shown almost no slump in production.

While early studies have placed agriculture’s loss due to the drought at about $600 million, Cannon said he could not estimate dollar losses.

Department of Water Resources officials, however, said their projections were that farm losses in California this year would be about $1 billion and that 800,000 acres would be put out of production because of water shortages. In 1990, California’s farm economy was valued at $17.8 billion.

Unemployment figures are one of the factors that led economists to conclude that five years of drought have not had the multibillion-dollar impact that was once anticipated. In the big farm counties of Fresno and Kern, Cannon said, unemployment during this economic recession is very similar to what the two counties experienced during the 1981-82 and 1974-75 recessions--when there was no drought.

Urban areas, on the other hand, may feel the water shortages more severely.

“I think it’s important to recognize that the urban costs of the drought are not so much job losses; it’s really the future growth of the economy that is impinged,” Cannon said.

What the drought has finally taught California is that it doesn’t have a reliable water supply and, without that, businesses and industries are reluctant to expand.

James Wickser, assistant general manager for the water division of the Los Angeles Department of Water and Power, said an unexpected impact of the drought has been its effect on water prices.

Los Angeles customers have responded overwhelmingly to demands that they conserve water, he said, only to be rewarded by a request from his agency for an 11% increase in utility bills.

Conservation “is terrific from a water supply standpoint,” he said, “but it just knocks the socks off of us financially.”