Source: Forbes

California Gov. Jerry Brown announced mandatory water restrictions on April 1 that will have a major impact on the state’s agriculture sector. The new restrictions call for a 25% reduction of users of water for lawns, golf courses, commercial entities and agriculture, according to Jerry Gulke, president, Gulke Group.

According to Gulke, the dairy industry is important to California’s ag economy and despite the negative ramifications of regulations, EPA requirements, labor issues, etc., dairies has been able to compete due to their ability to grow ample roughage locally (feed stuffs like alfalfa/hay). Hay and alfalfa require more water generally than vegetables and tree products.

“Water restrictions will leave dairies with the choice of buying/importing feed needs or reduce their herd size (production). Importing from other states affects the cost of doing business that may or may not be able to be passed on to higher milk prices. Reducing herd size promises to impact wholesale and retail dairy prices as other producers cannot quickly absorb increase herd supplies. It will take time for non-Californiaproducers to adjust. Once market share is lost, the long-term effect to rebuild California dairy will have far reaching negative implications on labor (farm workers), transportation and other aspects of doing business. The short-term implications of yesterday’s decisions will be severe. The effects on dairy can be repeated for the livestock meat industry, vegetables and nuts and they will be similarly significant. Let us not forget the wine industry which already appears to be 2-3 weeks ahead of schedule (quality issues) due to difficulty of water availability already in place,” Gulke says.

The lack of moisture and snow pack this winter, which is normally the wet season, was partially due to the lack of the La Nina weather phenomenon, Gulke says.

At Gulke Group’s spring commodity outlook conference this week in Chicago, Leon Osborne of the University of North Dakota remarked, “The actions of Gov. Brown are appropriate, but I believe difficult to enforce. California will struggle far more before conditions improve. While there is a good chance for some limited precipitation over the next couple of weeks, the sand in the hourglass is rapidly running out for appreciable moisture this spring. Best opportunity for improvement will be if El Nino continues into this fall and next winter, as suggested by the latest IRI/CPC ENSO forecast. However, the strength of the ENSO will have to increase dramatically to provide real benefit. So, until late this calendar year it will be an ever increasing struggle and likely will need for even harsher mitigation measures. Longer term … even with a moderate or strong El Nino, this will be but a brief respite in the current challenge, as what is occurring now is much bigger than what one El Nino can correct.”