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Economic Pulse

California’s drought is squeezing farmers and threatening food prices

David Brancaccio and Rose Conlon May 10, 2022
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In California, almond trees are being removed and hundreds of thousands of acres of rice won't be planted because of the drought, says Don Cameron of Terranova Ranch. Justin Sullivan/Getty Images
Economic Pulse

California’s drought is squeezing farmers and threatening food prices

David Brancaccio and Rose Conlon May 10, 2022
Heard on:
In California, almond trees are being removed and hundreds of thousands of acres of rice won't be planted because of the drought, says Don Cameron of Terranova Ranch. Justin Sullivan/Getty Images
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As California enters its third year of drought, farmers in the state’s agricultural Central Valley, which produces a quarter of the United States’ food, say it could jeopardize an already strained food system.

“There are a lot of empty fields that aren’t being planted — something I’ve never seen before,” said Don Cameron, vice president and general manager of Terranova Ranch in Helm, California.

Cameron, who’s also president of the California State Board of Food and Agriculture, told Marketplace’s David Brancaccio that farmers are also contending with supply chain bottlenecks and price increases for crucial goods.

“All of our tractors run on diesel. So not only the cost for us here on the farm, but to get our products to the facilities for processing or to the markets has just skyrocketed,” he said. “We’ve seen [the price of] fertilizer double from a year ago. We just see all of our inputs getting more expensive — not only the inputs like that, but our labor cost has increased.” All of which could send prices higher at the grocery store.

“We grow a lot of processing tomatoes here, and for 2022 our price increased 25% — and our growers are saying that even at that, they’re barely making it,” Cameron said. “We anticipate another increase for the 2023 crop.”

The following is an edited transcript of Brancaccio’s conversation with Cameron.

David Brancaccio: I’m thinking some of your inputs are getting more expensive. I keep covering headline inflation figures, but then I start thinking about, for instance, the price of diesel fuel — you must use a lot of diesel.

Don Cameron: Quite a bit, all of our tractors run on diesel. So not only the cost for us here on the farm, but to get our products to the facilities for processing or to the markets has just skyrocketed. We’ve seen fertilizer double from a year ago. We just see all of our inputs getting more expensive — not only the inputs, like that, but our labor cost has increased. But I think the real key to our increases have been the lack of water here in California.

Brancaccio: And it must be especially frustrating for you — because you’ve spent a lot of time and energy thinking about preparing for California’s water situation and trying to build the infrastructure that would get you through the dry times — but it’s dry.

Cameron: Yeah, the state is dry from the north end all the way to the south. We’ve had record-low rainfall, and reservoir levels are unbelievably low to where the state [water] allocation for farmers is 5% of normal and the federal water allocation is actually zero. So there are a lot of empty fields that aren’t being planted — something I’ve never seen before. We’re seeing a lot of the almonds that have been planted over the years being taken out just because of the lack of water. I know in Northern California, there’s normally a 500,000 acres of rice, and we know that 270,000 to 300,000 acres will not be produced this year. So what we’re seeing is issues with, I think, food security and a lack of the things that you’re used to seeing on the grocery shelves in the future — they may be a little tougher to find.

Brancaccio: You worked on projects to, for instance, try to hold on to floodwaters when the floods come. But I haven’t seen many floods.

Cameron: No. We had flood water in 2017 and 2019, both big rainfall years. But we’re now in the third year of a really severe drought. We have the infrastructure in place for when it does flood, and I’m sure it will flood again in California, but currently it is just bone dry. In some of the water districts nearby many growers are taking the almonds out. We’re seeing lower prices due to the fact that we can’t get them through the ports and can’t get them exported. So we really have a bottleneck trying to move product out of the area, and the water situation just adds up to a really tough situation for growers.

Brancaccio: And you’ve got supply chain bottlenecks in both directions, right? It’d be nice to get your crops out to market, but also, what’s the story I’m hearing about you tried to buy a pickup truck — even that was hard?

Cameron: Yeah, we go through trucks on a regular basis, and we have a program where we try to replace a few each year, and we’re still waiting for the one we had to order about three months ago. So the supply chain has been difficult. Getting parts for the equipment that we have has been slow and really difficult to get at times.

Brancaccio: So I’m probably paying more for a tomato, then, on my end?

Cameron: Yeah. We grow a lot of processing tomatoes here, and for 2022 our price increased 25% — and our growers are saying that even at that, they’re barely making it with all the increases in prices that they’ve seen. And we anticipate another increase for the 2023 crop. So we’re already thinking about next year and what we’re going to grow, how we’re gonna grow it and how much we’ll be paid.

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