Madam Speaker, I rise today to recognize the work by the University of California, Davis to quantify the ongoing, unprecedented drought's devastating impacts on the Sacramento Valley economy. This ravaging drought has left hundreds of…
Madam Speaker, I rise today to recognize the work by the University of California, Davis to quantify the ongoing, unprecedented drought's devastating impacts on the Sacramento Valley economy. This ravaging drought has left hundreds of thousands of acres of Sacramento Valley farmland unplanted this year, causing dramatic harm to people, fish, waterfowl, shorebirds, and other wildlife.
On August 29, 2022, researchers at UC Davis in my Congressional district published a report entitled ``Continued Drought in 2022 Ravages California's Sacramento Valley Economy.'' I encourage all Members of Congress to review this important study and work with me to help mitigate this historic drought impacting the Sacramento Valley, other parts of California, and the American West. The report reads as follows:
Drought in 2022 is severe by any measure. The 2020 and 2021
water years left California, and especially California
agriculture, damaged and vulnerable (Sumner et al. 2021,
Medellin-Azuara, et al. 2022). After a promising start, the
record failure of precipitation in January and February left
the state with such a deficit that despite some snow and rain
in March and April, levels of water tables, snowpacks, and
reservoirs have left the available irrigation water supply in
a perilous condition. The water situation for Sacramento
Valley agriculture is as bad as it has ever been. The depth
of this drought was reflected in repeated dismal
announcements during the spring of huge reductions in
projected irrigation availability.
In this report, we assess the likely economic impacts of
drought for farms and ranches on the Sacramento Valley in
2022. First, we briefly describe the economics of Sacramento
Valley agriculture in 2019, which, while still drought
impacted, was relatively ``normal'' in the water situation
and in the broader economic situation. We used data from
Sacramento Valley county agricultural commissioners' reports
for values of farm output and the IMPLAN data set on linkages
across sectors of the economy to extend implications of farm
economics of the 2022 drought to the broader Sacramento
Valley economy. The Sacramento Valley, which here is taken to
include Butte, Colusa, Glenn, Placer, Sacramento, Sutter,
Tehama, Yolo, and Yuba Counties, has a large, diverse, and
vibrant agricultural economy. Farms and ranches rely on
precipitation within the Valley as well as the surrounding
hills and mountains for production of crops and livestock.
Several key assumptions and limitations of any projections
of economic effects of the current drought must be listed at
the outset. These are important to interpret our results.
First, irrigation water availability for the rest of the
growing season and water year has been mostly determined;
however, the growing conditions that affect crop yields and
crop production as well as the market conditions that affect
farm costs and revenues are yet to play out. That means,
while we can project the economic impacts of this drought
relative to a baseline, we cannot speak with great confidence
about, for example, crop yields or market prices for the farm
commodities currently growing or yet to be planted in the
Sacramento Valley. Agricultural outcomes remain uncertain
until final crops and livestock products are sold.
Second, because our main source of data on economic
linkages across sectors of the economy is the IMPLAN data
base, we formally delineate upstream connections from farms
to purchased inputs used on farms. This limits the scope of
the modeled impacts of drought and leaves out some important
implications. When farm production falls in a region, there
also will be less economic activity downstream a step or two
from the farm and IMPLAN modeling based on farm-level data
does not capture that. For example, Sacramento Valley peaches
or tomatoes that are not produced cannot be processed or
shipped. However, there is no comprehensive data to consider
implications of farm production shortfalls for food
processing and similar industries. A dearth of detailed data
on economic linkages for many specific agricultural
industries in the Sacramento Valley limits our ability to
assess downstream impacts quantitatively for each industry.
To partially remedy this limitation, we use the data that is
available for rice and rice milling and processing, and
extend those results (on a proportional basis) where
appropriate to the rest of agriculture in the Sacramento
Valley.
Third, the simulations that underlie our projected impacts
are based on illustrative judgements about how much the 2022
drought is likely to cut crop and livestock output. As
discussed more below, we assume, based on historical data,
recent news about water cutbacks, and other assessments, the
most probable output reductions relative to a normal water
year. These current judgements are subject to revision as new
information becomes available.
For the simulations in this report, we attribute the
following output impacts to the 2022 drought relative to the
2019 base: Rice: -50%; Fruits and tree nuts: -10%;
Vegetables, other grains, and all other crops: -20%; and
Livestock and livestock products, including apiary services:
-10%. Of course, some farms will have much larger cuts than
others, and some specific commodities within a category will
face larger water cuts leading to increased output reduction.
Our results are roughly proportional meaning, as data allows
better projected output impacts, the economic impacts can be
readily adjusted. The drought in 2022 is likely to reduce
direct farm and ranch value of output in the Sacramento
Valley by about $950 million, or more than 20%, in aggregate.
These losses will cost the Sacramento Valley about 5,000 on-
farm jobs and reduce the value added generated from farming
and ranching by about $560 million. The impact of these farm
losses and their upstream impacts to the Sacramento Valley
economy are a loss of more than 9,000 jobs and almost $1
billion in economic value added. A fuller accounting,
however, takes account of the impact of lost farm production
on farm processing, marketing, transport, and related
downstream implications. We do not have data for detailed
calculations of these implications. However, using data from
rice farm production and rice milling as a guide, we have
made the best assessment available. We project that the 2022
drought impacts on farm production are likely to cause a loss
of about 14,300 jobs and about $1.315 billion in economic
value added in the Sacramento Valley.
In 2019, the region produced about $4.83 billion of direct
farm revenue. Table 1 lists agricultural value of output by
commodity category for the Sacramento Valley based on data
from County Agricultural Commissioners. Tree nuts, primarily
almonds and walnuts, are the leading category of farm
commodities, having recently grown to more than one-third of
the value of output. Grains account for almost one-quarter of
output; rice accounting for more than 80% of grains or almost
20% of the value of Sacramento Valley farm output. Other
grains include corn, wheat, and grain seed crops. Fruits,
especially wine grapes, olives, prunes, peaches, and other
tree fruits, are important as are vegetables, led by
processing tomatoes. Other crops include hay, pasture, and a
variety of seed crops. Livestock include beef cattle, a few
dairies, some poultry, and eggs and, importantly, products
and pollination services from the apiary industry.
Table 1 also includes direct farm and ranch jobs, which
totaled about 34,000 in 2019, and the upstream jobs tied to
farm and ranch output through indirect and induced effects.
Indirect jobs are those tied to farm production because they
are employed in industries that supply farm inputs and
services and the jobs for input purchases that ripple out
from there. These jobs include such services as farm
equipment repair, veterinary services, or crop consultants.
They also include jobs in industries that supply farm inputs
such as feed processing, fertilizers, or farm equipment.
Induced jobs are those caused by expenditures by proprietors
and employees included in the direct and indirect impacts.
So, for example, induced employment includes that generated
by expenditures of farm operators and employees and the local
businesses and employees from whom farms and ranches buy
inputs.
As noted above, the standard approach to estimating
economywide impacts using multimarket relationships is to
only consider impacts from upstream linkages in order to
avoid double counting and related errors. For example, local
supermarket jobs are not linked to farm output within the
local region, even though supermarkets certainly sell some
products derived from local farms. This is appropriate
because people buy the same amount of food whether it is
grown locally or not, and most food consumers live farm from
where their food is grown.
However, in important cases, upstream economic activity and
jobs really are tied directly to local farm production. That
is especially true for the shipping and processing of bulk
farm commodities. For example, rice grown in the Sacramento
Valley tends to be dried and milled in the Sacramento Valley.
Likewise, tomatoes are almost always processed near where
they are grown. These facts mean that, just as with the
impact of rice production on rice milling and shipping jobs,
Sacramento Valley tomato processing jobs fall when Valley
tomato acreage and production declines. Below, when we assess
Sacramento Valley economywide impacts, we include some
downstream economic activity when we are confident that it is
tied closely to local farm production quantities.
Using 2019 as the recent base for a ``normal'' year, we
apply our drought induced projected losses to the 2019 data
to simulate 2022 drought impacts. Our assessments of the
likely direct impact of the 2022 drought on output are based
on past drought consequences and the cost to farms of making
acreage and yield adjustments (Sumner et al. 2021a, band
Medellin-Azuara 2022). The tree and vine crops tend to have
the smallest acreage or yield adjustments of any crops, as
farms typically try to avoid permanent adjustments to what
may be a temporary water shortage. Additionally, tree and
vine crop operators tend to be willing to pay extra to pump
groundwater or to transfer water from annual crops. We
project a 10% cut in tree and vine crop output to reflect
additional culling of older vineyards and orchards as well as
some yield reduction that follows from reduced water
application rates.
Annual crop cutbacks for grains, oilseeds, hay and silage,
vegetables and other crops are much larger than we expect for
tree and vine crops, but still less severe than the reduction
for rice. Higher prices for vegetables and harvested forage
crops will offset some of the revenue declines caused by
reduced acreage and yields. Historically, fallowing rates are
moderate for these crops; even in the San Joaquin Valley
where drought cuts usually have been more severe. The USDA
Prospective Planting report, released on March 31, 2022,
indicated only slight reductions in intentions to plant
wheat, feed grains, and hay in California relative to 2020
(NASS, USDA). Rice was the exception to moderate intensions
to reduce acreage planted. California rice growers indicated
a 30% planned reduction in acreage.
Based on the June 30 USDA acreage planted report and local
report from the industry and water district personnel, our
judgment is that rice acreage will be down by about 50%. The
water situation turned out to be even worse than growers
expected during the survey period of mid-March. Also, most
rice acreage is eligible for indemnities from prevented
planting provisions in crop insurance policies when severe
irrigation water cutbacks imply there will not be enough
water to support the crop. Therefore, some of the loss to
growers will be mitigated. Moreover, if rice acreage is left
unplanted, some water that would have otherwise been used for
rice can be transferred to other crops on the same farm, on
nearby farms or to farms outside the Sacramento Valley.
Finally, we estimate that livestock output will decline by
10%. The drought affects irrigation for pasture and forage
crops as well as the feed value of rainfed pastures. In
addition, honeybees represent a significant livestock
industry in the Sacramento Valley. The revenue from
pollination services has been already earned. Honey yields
are lower in drought years because bees have less forage,
which contributes to our projected livestock losses. Only
small reductions due to drought are expected for the
(relatively small) Sacramento Valley dairy and egg
industries.
Table 2 shows the results of applying these assumptions to
the 2019 farm and ranch revenue data. The bottom line is that
direct farm output is likely to be lower by about $950
million or about 20% from 2019. The projected direct revenue
loss is larger because farms and ranches will make many
adjustments and incur higher costs to keep production losses
to a minimum. Notice that more than half the overall loss of
direct farm value of output is for grains, most of which is
due to rice acreage left unplanted.
The output losses discussed in Section 3 translate into on-
farm job losses. The job losses are roughly proportional to
output reductions within an industry. However, some parts of
agriculture are more labor intensive than others, so they
have larger influence on overall farm labor use. For example,
fruit farming is much more labor intensive per dollar of
revenue than is grain farming. The first column of Table 3
shows the 2019 farm and ranch jobs in the Sacramento Valley
for each industry sector and for the total, which is taken
directly from Table 1. We note that other crops are labor
intensive because many of the farms are small, part time
family is included in the totals.
The projected farm and ranch agricultural jobs in 2022 are
listed in the second column of Table 3. For example, we
project 14,313 jobs in the tree nut industry and a total of
28,780 farm and ranch jobs. These are lower than the jobs in
2019 because of the impact of
drought. The losses in direct farm and ranch jobs are shown
in the third column. We project a direct loss of more than
5,000 jobs on farms and ranches in the Sacramento Valley due
to the 2022 drought. Of course, the losses to the broad
economy from drought in agriculture go much deeper than the
direct losses of jobs. Table 4 summarizes economywide losses
in the Sacramento Valley caused by drought in agriculture for
value of output, employment, labor income and value added.
(Value added is the measure of economic activity that removes
any double counting across industry segments and is used for
economic aggregates such as national, state, and regional