Thursday, January 27, 2011

Do farmers really plant almonds because water is expensive?

Matt Jenkins' reporting on agriculture and water is generally good, but I have to quibble with his recent article that uncritically repeats the claim/theory that high water prices caused farmers to plant almonds.  He does note the paradox of scarce water causing one to plant permanent crops, so one wonders why Mr. Jenkins wasn't more skeptical of the argument.

Almonds plantings have increased rapidly following the price of almonds and expansion of demand for the crop.  Almond plantings started growing long before water became scarce, and almond plantings have also grown in areas where water prices have not increased.  In fact, I suspect if water was a factor, it might have been that west siders had thought their water supplies had gotten more secure a few years back.

If input prices/scarcity had something to do with the move towards almonds over cotton and vegetables in the past decade, I wouldn't be surprised if labor costs/scarcity were as important as water.  We also had low long-term interest rates that made capital investments like planting orchards more profitable.  I would also advance the theory that cows don't eat cotton, and the growth of the Valley's dairy industry and rising prices for animal feed may also have something to do with shifts out of cotton.  I don't have any studies to prove these, but they seem like more plausible stories behind crop shifts than expensive water.

My favorite quote in the article was the suggestion that banks were taking on big risks loaning to agriculture.
 "Listen, any banker who stays in this ag thing ought to have their head examined," Borba says, and laughs."
I'm glad Matt had a good quote from an actual banker "You can't take a brush and paint the whole San Joaquin Valley with one color,". I talk to Valley bankers enough to know that they all would like to make more ag loans as they are their best performing assets by far. 

To be fair, a lot of Mr. Jenkins' new article is very good, much better and more in depth than typical journalism on the topic.  The discussion of how tomato production shifted around is excellent, much better than 60 minutes playing ridiculous sound bites of Westland farm owners predicting that the price of pizza and spaghetti sauce was going to shoot up because of the Delta Smelt. 

I must also complement him for not repeating the still too common claims that the 2009 idled 500,000 acres, cost billions of dollars and tens of thousands of jobs.  It looks like he got these numbers from the Pacific/Davis report on our webpage (I talked to Matt back in 2009 about the then differing estimates, so it is good to see he has been following the numbers and using the most recent stuff). 
In 2009 ... farmers were forced to idle, or "fallow," about a quarter-million acres of cropland because of drought and pumping restrictions, which cost them somewhere around $350 million in losses.
P.S.  I have an issue with the title of the article too, "Where Westlands water flows, California’s agriculture follows".  It's just plain wrong, but I know enough about journalism to know that Mr. Jenkins didn't write the title. 


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