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How much is ag water worth?

There was a classified ad in the Fresno Bee recently under the heading “land for sale.”

The seller was offering 40 acres in the 600,000-acre Westlands Water District on the West Side of the San Joaquin Valley. Westlands is the largest irrigation district in the nation; 40 acres is a postage stamp block in Westlands.

Nevertheless, the ad soon disappeared, the land presumably snatched up by an eager buyer because the vast irrigation district and many more just like it in California are facing the biggest water crisis ever in the wake of a federal court ruling to protect Delta smelt. It could conceivably cut off the flow of water to Central and Southern California. The ruling could impact the water supplies for 25 million people and three million acres of farmland.

Water has never been a more coveted commodity in California agriculture, as growers wait, hoping for a wet winter to offset the judicially-imposed drought. Even if it is a normal winter; it is possible that water will not flow south from the Delta to save schools of tiny minnows that have a lifespan of less than two years.

The “land for sale” ad in the newspaper did not talk about land quality or crops it could grow. Its selling point was that there were wells on the property “plumbed” into the Westlands Water District supply system.

In the arid West, land values have long been inextricably linked to water. Without irrigation water, farmland would be virtually worthless.

The “land for sale” ad basically says the water — at least in 2007 and likely beyond — is more valuable than the open land. It is likely that the well water would be worth more than any row crop that 40 acres could grow.

Westlands is actively seeking water for sale south of the Delta from any source to supply farmers, many of whom are growing trees and vines which will die without water or have contracts for high value crops. Many farmers in Westlands and other districts have access to groundwater, often from wells drilled during drought years. However, many do not and must rely on irrigation districts to deliver surface water.

Some of next season's irrigation water will come from wells like those on the 40 acres. These wells are controlled by the landowners and can be fed into the canal systems like those operated by Westlands and many other larger San Joaquin Valley irrigation districts.

Growers are already talking about laying out lower value crops like cotton to sell the water normally used to grow those crops. The water would offer a greater return sold on the open market than would a cotton crop.

Water auction prices of $500 or more per acre foot during the 10 days the state and federal water agencies shut off the Delta pumps last summer have more than a few farmers penciling away.

No one can realistically expect to be paid $500 per acre foot for water, but everyone knows the cost of water will go up because the supply will surely be limited.

Westlands farmers believe the cost of water from the district could easily double next season, since it is highly unlikely Westlands will receive its full allocation of water, yet it still must pay its bills like all other districts. Growers who receive whatever water the district can deliver must be charged enough to cover operating expenses and with less water available, bills must go up to cover costs.

Water will go to the highest value crops. First that will be trees and vines and second, it will go to the highest value field crops, like processing tomatoes, garlic and vegetables. Peter will likely be robbed to pay Paul. The lowest value crops will lose out to higher value crops for the available water supplies.

Alfalfa is certainly not the lowest value crop in the state with prices being as strong as they are. That is not expected to change in 2008, with growing demand from dairies. However, alfalfa is the largest acreage field crop in the state with a little less than one million acres planted from the Oregon border to the Arizona border.

As such, it is the biggest water user in the state, consuming about 4.5 million acre feet of water to produce 70 million tons of hay valued at $1 billion.

Blake Sanden, University of California Cooperative Extension farm advisor in Kern County, is heading up a statewide study to attach a value to the water used to produce that hay and the impact of deficit irrigation on stand life.

Sanden has no answers from his statewide study on stand loss from deficit irrigation, but he did acknowledge holding water off Imperial Valley black dirt when temperatures reached 140 degrees in the field, creating definite stand loss.

On the other hand, in Siskiyou County in far Northern California, growers can get the same amount of alfalfa, regardless of whether they irrigate or not.

Overall, Sanden said in the heart of California alfalfa country, the San Joaquin Valley, it requires about six inches of water to produce a ton of alfalfa hay.

If a farmer is getting $200 per ton for high quality dairy alfalfa, an acre foot of water is worth roughly $400 to the producer. A bid of less than $400 per acre foot to a grower with water available likely would not draw much interest.

If hay prices fell to $100 per ton, a $400 offer “would definitely be worth listening to,” according to Sanden, who spoke at a recent University of California alfalfa field day at the Kearney Agricultural Center in Parlier, Calif.

Last year when the Delta pumps were shut down for 10 days, it set off a bidding frenzy for available water. If the worst case scenario many are painting comes true, extended water shutdowns may send cities in search of water supplies in a bidding war that would make the ag water auction look like a flea market sale.

If the Department of Water Resources shuts down the Delta pumps to save the smelt next summer, Sanden said cities could come knocking on farmers' doors with money in hand for water from agriculture. This could mean growers would be compensated for yield losses and the results of Sanden's study could play a key role in establishing that compensation. These likely would be tied to evapotranspiration/water rates for different crops.

As a comparison to what farmers pay for water, the Metropolitan Water District of Southern California estimates the average consumer pays the equivalent of $1,200 per acre foot for water, according to a MWD spokesman.

MWD is a consortium of cities and water districts that deliver water to 18 million people in Los Angeles, Orange, San Diego, Riverside, San Bernardino, and Ventura counties.

MWD delivers an average of 1.7 billion gallons of water per day to a 5,200-square mile service area.

Currently, MWD pays about $250 per acre foot to acquire “new water,” according to the district spokesman. This is about equal to what the district pays for recycled and conserved water.

These numbers represent an average water year for MWD, which gets water from both the California Aqueduct, which is fed by the Delta pumps, and the Colorado River.

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