Sunday, January 10, 2010

Bacher/Carter vs. Wade on Westlands Agriculture

A few weeks ago, environmental journalistss/advocates Dan Bacher and Lloyd Carter, published some data and rough calculations about Westlands Water Districts economic contributions.

They make a good point, that Westlands is about 0.25% of U.S. agricultural production, so risks to Westlands production is hardly a national food security crisis as their supporters claim. In fact, I think this number actually overstates their national importance, because there are numerous substitution opportunities.

In the next part of their essay, Bacher/Carter overreach with some very rough calculations intended to argue that Westlands makes no net contribution to the economy.

"The US gross farm income in 2008 was $375 billion and average net income is $63.6 billion," said Carter. "In other words, the net is about one-sixth of the gross. That means Westlands actually is netting about one-sixth of its claimed $1 billion in farm revenues, or about $150 million a year."

Carter noted that if you take away the water, power and crop subsidies, you drop that true net increase quite a bit further. The Environmental Working Group estimated Westlands' annual subsidies in 2002 at $110 million a year.

"That means the true net of the Westlands, when you take away all the government giveways may be only $30-40 million," he concluded. "Now, if you subtract the anticipated costs of drainage and make Westlands pay for their own waste disposal, they may actually not be generating any true wealth out there at all, except what the government gives them."

They are trying to distinguish between output value, farm income, and the value of the crops to society (what they call "true wealth.") They are right that government subsidies and pollution costs mean that the value of these crops to society is less than the value of output. However, they aren't measuring it correctly here and overstate their case (not to mention the obvious issue of using national figures for net farm income across all crops is extremely rough, and that they round down in several places such as 1/6 of $1 billion is $166 million not $150 million). First, they should use "value added" rather than net farm income. Value added measures all the income generated by the farm and includes wages and other income payments that are part of the production expenses that are subtracted from revenue to get net farm income. Netting out the social costs from income/value added is more complex than it is portrayed here as well.

I wondered if anyone would try to respond to Carter/Bacher, and Mike Wade of the California Farm Water Coalition did in this piece. Carter/Bacher are stretching the numbers, but Wade takes numerical deception to the next level.

Carter argues that the farmers are only earning $30 million in what he calls "true net" income. By his cracked logic, that works out to about $50,000 per family, which makes one wonder how they stay in business and why Carter and Bacher are always denouncing them as millionaires.
Wade is blatantly misrepresenting their article, the $30-40 million estimate was social value, not income to Westlands farmers, which Bacher/Carter clearly state they estimated at about $150 million. Divided by the 600 farms (roughly 1,000 acres each) in Westlands, that is $250,000 in income per farm, not $50,000 as Wade claims. Of course, those farms are actually fewer and larger than Wade claims, as that would be $250,000 income per family member who owns the 1,000 acre limit, and many of these are often combined into one family farm. Of course, these numbers are awfully rough, but it isn't hard to see how one of these family farms could earn millions in income each year, and be very profitable. Westlands should show a bit more gratitude to US taxpayers and Congress for making their prosperity possible.

I won't quote here, but Wade goes on to repeat a whole bunch of other exagerrations. 1. 21,000 jobs lost from water crisis (at least he isn't using the worst exaggerations here, but still way too high) 2. that $1 billion in farm output generates an additional $3.5 billion in other business in the region (where did they get a multiplier of 4.5? it's ridiculously high) 3. Westlands production couldn't be replaced by others (wrong) 4. an irrelevant factoid that California is 4% of nation's farms and 12.8% of output (the debate is about Westlands not California agriculture as a whole, and this fact just shows that California farms are very large).

Wade ends with this
There is no question that to maintain this kind of prosperity, California has to address its water problems. Bacher and Carter, unfortunately, are not contributing to a solution.
Prosperity? Westlands is the poorest place in California even when they have water, although the landowners do quite well. Is that what he means by "this kind of prosperity." I agree that this Bacher/Carter piece didn't contribute much, but neither is Wade.

Addendum 1/11:

It looks like Aquafornia posted this high on their scroll, and it's getting quite a few hits. I guess Mondays are slow for water news. Please recognize that this is a blog musing I typed while watching the NFL playoffs yesterday afternoon, hardly a research piece. In particular, my comments on the Bacher/Carter piece are a little off.

The point about value added is that income generated for people by Westlands farming is more than net farm income, and that trying to come up with some comprehensive measure of the total contribution of Westlands ag. to the economy is a lot more complicated than what they are doing here. On a second reading, it looks they are trying to assess whether Westlands would be profitable without government help. But this concept is confused with "true wealth" and income, the numbers are so crudely estimated, it is all a bit confusing.

The capital costs of the Central Valley Project are a sunk cost (but are a big part of the subsidy Bacher/Carter mention). This is a legitimate distributional issue, but we can confuse the question of "should we have built the CVP in the first place?" with "should we continuing farming on the westside today?" Very different questions. Similar to comparing should we have built a dam at Hetch Hetchy, to should we tear it down now that we have done it.

Wade's piece isn't much more than a clumsy attempt to make Carter/Bacher's numbers seem wrong, and a repeat of the usual exaggerated economic points made by Delta water exporters.

The point about the national share of output shouldn't be construed as indifference. The same can be said for any of us. University of the Pacific could shut its doors tomorrow, and U.S. education would hardly notice. That doesn't mean it wouldn't cause a lot of pain locally. The only reason this point has to be made is that some are asserting that cutbacks in westside agr production is a national security threat, U.S. citizens will be poisoned by chinese food, food prices will skyrocket, and other crazy assertions. This is a local economic problem, not a national economic threat.

Bottom line, I recommend ignoring both of these articles. I probably should have followed my own advice and ignored them too.


  1. Thank you for clarifying and otherwise keeping the record straight, especially on the national security rhetoric.

  2. Why is a 21,000 jobs lost number for farmworkers because of reduced water deliveries so difficult to accept? I realize that it is much higher than your guesstimate of 6,000. Yet, when a three-member research group of UC Davis professors provide the higher number and, at the same time, surface holes in your research methods, well…it makes it hard to accept your findings and comments as valid. Anyone interested in how University of California agriculture economists conduct a study on farm unemployment can get a glimpse at:

  3. Mike,

    A little chronology on the dueling jobs estimates.

    First, as you certainly know, this UC-Davis group published estimates ranging from 35,000 to 80,000 lost jobs in the Valley. To anyone who follows Valley employment, the numbers were obviously wrong. I questioned it publically, and tried to replicate it with the UC-Davis estimates of crop loss in $ and couldn't do it.

    Second, we published what you call a "guestimate" of 6,000 in August that made it obvious they were wrong.

    Third, in response to questions our report raised, the UC-Davis guys admit they made serious errors when they double checked their work, and quickly put together an alternative assessment using entirely new methods. That is the 21,000 study you linked above.

    Fourth, we looked at our estimate again, taking into consideration some useful comments from the UC-Davis guys. We upped our "guestimate" (your word) to 8,500; and discussed why 21,000 is still too high. The result is here:

    People can read the two reports and the history of accuracy and judge for themselves which is more credible.

    As for credentials, we have 3 folks in our research group too. We have Ph.D.'s and study Valley employment on a daily basis.

    The UC-Davis researchers are agricultural production economists and engineers. They know a lot of very useful, detailed things I don't about irrigation, crop yields, etc. They have no history of studying agricultural employment, and their initial jobs reports were based on numbers handed to them by the State Water Resources Control Board, not their own modeling.

    Thanks for the comment, and please read our updated report that addresses the technical aspects of some of these issues directly.

    And as for how University of California agricultural economists look at the issue, I would recommend you to the UC-Berkeley study paid for by Delta water exporters. I think that is a pretty good study, and the numbers are much closer to mine.