What is Agricultural Water Risk?
Agricultural water risk measures how changing water availability, cost, policies, regulations, climate, and market conditions affect farming and lending financial outcomes.
What Drives Agricultural Water Risk?
Agricultural water risk is driven by a number of interrelated factors that affect irrigated agriculture. Examples include drought and climate change, environmental water policies, local regulations such as groundwater management, global market conditions that may change planting or irrigation patterns (e.g., demand hardening), development of reserved water rights, urbanization, and more.
Agricultural water risk can vary substantially within a state, region, and even within small areas. For example, neighboring parcels may have different water portfolios–some with a single water source and others with multiple sources. A groundwater district that also has senior surface water rights may share a border with a district fully dependent on limited groundwater. In Merced, California, the Merced Irrigation-Urban Groundwater Sustainability Agency (GSA) has senior surface water rights, whereas the neighboring Merced Subbasin GSA is fully dependent on groundwater.
Groundwater management rules may also vary between neighboring irrigators pumping from the same aquifer. In western Nebraska, irrigators in the North Platte and South Platte Natural Resources Districts (NRDs) have pumping allocations, whereas irrigators in the neighboring Twin Platte and Central Platte NRDs do not.
Water risks can also change over time, gradually or suddenly. For example, an adjudication may last decades. A more restrictive allocation policy may be slowly implemented over years, as was California’s Mojave Basin ramp down. On the other hand, a rule change or court decision can create immediate impact.
Factors that affect the supply and demand for crops also affect agricultural water risk. Favorable export conditions for almonds pushed prices to record highs in the mid-2010s, which drove a rapid increase in almond plantings in California. This coincided with California’s drought and a variable surface water supply, which resulted in increased groundwater pumping to offset surface water shortages. Rapid groundwater depletion ultimately resulted in the implementation of the California Sustainable Groundwater Management Act of 2014, intended to curb unregulated pumping and related impacts. Similar market-driven changes in crop mix have increased water risk across the west. Water risk is a composite of field-level, hydrologic, institutional, and global market risks.
Agricultural Water Risk Themes in the West
Several key themes emerge as top water risks to agriculture in the western United States. The importance of each theme varies in each state, region, and even at the field-level. We’ll be releasing a series of blogs to highlight top water risks to agriculture, but the following is a sneak peek at topics we’ll cover:
- Drought, Climate Change, and Long-Term Imbalance. Droughts are fairly common in the west, but under changing climate conditions, unprecedented droughts–and even permanent ones (i.e., aridification)–are more likely. Changing climate affects snowfall, runoff, and crop water demand. This may also affect dryland farming, grazing, and optimal locations for crop production. Drought and climate change exacerbate existing imbalances between water supplies and demands, where there are already more demands than there are water supplies.
- Environmental Policies. Federal and state policies–including environmental laws that require management for aquatic species and water quality–affect irrigation water supply and practices.
- Groundwater Management. New laws and policies affect the cost and availability of groundwater supplies in the west. While new groundwater management increases near- to mid-term risk, the absence of groundwater management increases long-term risk of declining well yields and even well failure due to groundwater depletion.
- Demand Hardening. The shift to higher-value specialty crops, trees, and vines that has occurred across the west increases both the value of water and water risk, as the economic damages of water stress are more severe.
- Federal Reserved Water Rights. The federal government, when it set aside land for reservations, reserved water rights to support the tribe and reservation. This can include water for reservation uses, such as agriculture, as well as instream flows for fish. These rights are senior to other water uses.
- Other Water Risks. The above are key themes emerging across the West, but several other risk factors affect irrigated agriculture as well. For example, urbanization, hydropower, transportation, flood control, and municipal water supplies can influence agricultural water supply costs. For example, urbanization, and the associated water transfers, can reduce the agricultural base, change local politics, and impact agricultural operations and costs.
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