Friday, 12 April 2013

Is Westlands Exagerrating Drought Impacts Again?

After a dry winter, it’s looking like another tough year for Westlands Water District.  The latest CVP allocation announcement was 20%, and like the 2009 drought, it has brought out claims of economic loss.  The claims of loss are higher than were experienced with the 10% allocation in 2009, so on the surface they would appear to be exagerrated.

For example, Westlands General Manager Tom Birmingham says Westlands farmers alone will lose $350 million in revenue, and total economic impact will exceed $1 billion.  In this letter (that I only read thanks to Mark Borba’s infamous rant), Congressman Costa says there will be agricultural production losses in the San Joaquin Valley of $873 million and economic impacts of $2.2 billion.  Neither statement reveals the source of the numbers.

The Westlands website (which to their credit, provides nice data) includes a page with historic water supplies and fallowing, and includes a prediction of 2013.  Their forecast for 2013 is for an all-time high of 175,000 fallowed acres.  That’s 20,000 acres of fallowing more than in 2009, when they had 100,000 af less water.  That doesn’t seem right, but maybe there is a logical explanation for it (if you know why, or have a plausible explanation, feel free to put it in the comments). 

I created some simple regression models this afternoon, and got forecasts ranging from 113,000 to 120,000 acres of fallowing for Westlands in 2013.  If I use my prediction of 120,000 acres of fallowing instead of their predicted 175,000 acres, what is the economic loss.  Baseline fallowing in a wet year is about 60,000 acres, so my prediction is that about 60,000 acres more out of production in 2013 compared to a wet year.  Of that 60,000, no more than about 20,000 could be reasonably blamed on environmental restrictions, the rest is due to the dry weather.

What will be fallowed?  If history is a guide, it will mostly be cotton.  So my quick estimate of the impact of the biological opinions in 2008 on Westlands is about 20,000 acres of lost cotton production, representing about $50 million in farm revenue.  [Of course, the farmers loss is more than that, because supplemental water and groundwater pumping is more expensive than CVP supplies.  However, Westlands cost for water transfers is another farmer’s income in the Valley.]

Across the entire San Joaquin Valley, I think a reasonable estimate would be $100-150 million in revenue losses and about 2,000 jobs due to the biological opinions in 2013. 

That’s a real economic impact that shouldn’t be ignored, but it is about 85% less than claimed by Mr. Birmingham and Congressman Costa. 

About the Author

Ethan Jacob

Author & Editor

I am Ethan Jacob Executive Director of the Center for Business and Policy Research at the University of the Pacific, where I have a joint faculty appointment in the Eberhardt School of Business and the Public Policy Program in the McGeorge School of Law..

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