SMALL GROUP IN CLASS EXERCISE: WATER (List participants)
California's worst drought on record isn't stopping the state from growing massive amounts of nuts: The state
produces over 80 percent of the world's almonds and 43 and 28 percent of the world's pistachios and walnuts,
respectively. As Mother Jones' Tom Philpott details in this longread, the state's almond market in particular has
taken off: What was a $1.2 billion market in 2002 became $4.8 billion market by 2012.
Why are the almond growth rates so...nuts? (Sorry.) One reason is that the average American now eats two pounds of
the crunchy snack per year—more than twice as much as a decade ago. But the biggest demand is coming from abroad:
The US now exports 70 percent of almonds.
The thing is, nuts use a whole lot of water: it takes about a gallon of water to grow one almond, and nearly five gallons
to produce a walnut. Residents across the state are being told to take shorter showers and stop watering their lawns,
but the acreage devoted to the state's almond orchards have doubled in the past decade. The amount of water that
California uses annually to produce almond exports would provide water for all Los Angeles homes and businesses for
almost three years.
China and Hong Kong together are the top buyers of US almonds; as Philpott writes, "Between 2007 and 2013, US
almond exports to China and Hong Kong more than quadrupled, feeding a growing middle class' appetite for highprotein, healthy food."
http://www.motherjones.com/environment/2015/01/almonds-nuts-crazy-stats-charts
a) “My fellow growers of other crops calculate that it takes about 168 gallons of water to produce a single watermelon.
And 50 gallons for a cantaloupe. That head of broccoli that you feel good about serving to your child? Thirty-five gallons.
A single ear of corn requires roughly 40 gallons.” – Brad Gleason, president of West Hill Farm Services, which manages
pistachio and almond orchards, in Los Angeles Times op-ed on March 25, 2015
b) “According to the Times, an ounce of peas takes 45 gallons, an ounce of lentils takes 71 gallons, and an ounce of
beef takes 106 gallons.” – Almond Hullers and Processors Association press release, “8 Facts about Almonds, Agriculture,
and the Drought,” April 8, 2015
http://www.vanityfair.com/culture/2015/04/california-drought-shaming-diagrammed
Barry Baker has decided to sacrifice 1,000 acres of his Fresno County almond orchard so that he can keep the remaining
4,000 acres alive. "It's a huge economic loss," said Baker, who looked on forlornly this past week as workers felled his
beloved trees. "That's probably $10 million in revenue I lost right there, but with the price of water today, up to $2,500
per acre-foot, there is no way I could have found the water this year. A lot of guys are going to have to make that
decision in the next couple of weeks." Baker is actually one of the lucky ones. He has enough well water on his property
to keep his remaining trees alive without having to break the bank buying overpriced water from irrigation districts. A
great many farmers south of the delta don't have that luxury.
The situation is also bad for dairy farmers and ranchers, according to Pete Craig, who owns a large cattle ranch near Lake
Berryessa. He said the planting of almond orchards has taken thousands of acres of grazing land away from ranchers,
many of whom are selling cattle because of a lack of feed. "My company has lost over 8,000 acres of grasslands that I
leased for cattle grazing to almonds in the last year alone," said Craig, who believes it is bad for the environment to
replace California's diverse grassland ecosystem with a monoculture. "It is impossible to compete against a very realistic
$5,000 acre net return for a tree farmer, versus a $15 acre return on native rangeland, and perhaps a $100 acre return
on irrigated ground to a cattle rancher. If you were a landowner, what would you do?"
"I have heard that between 200,000 and 250,000 acres will have significant reductions in production as a result of water
shortages," said Dan Cummings, who grows 4,000 acres of almonds in Butte, Colusa and Glenn counties. "California
produces almost 2 billion pounds of almonds. Think about it. If 200 million pounds of that is not produced, that's $700
million that doesn't go to the farmer. It's huge."
http://www.sfgate.com/science/article/California-drought-How-water-crisis-is-worse-for-5341382.php
The ongoing California drought has pitted wild salmon against farmers in a fight for water. While growers of almonds,
one of the state's biggest and most lucrative crops, enjoy booming production and skyrocketing sales to China, the fish,
it seems, might be left high and dry this summer—and maybe even dead. Some background
The Klamath River flows into the Pacific Ocean near Oregon and is naturally separated from the interior regions of
California by a coastal mountain range. But in the 1960s, the Bureau of Reclamation built an 11-mile tunnel connecting
Trinity Lake to the Sacramento River basin to send Klamath-basin water to farmers in the San Joaquin Valley. Today, the
arid valley is a major producer of the world's almonds, as well as other nuts and stone fruits, grapes and alfalfa.
But the North Coast tribal people question the fairness of a system by which crops hundreds of miles away depend on
their river water at the expense of salmon.
"It's not our fault they have orchards to water in the desert, and it's not the fish's fault, either," Hillman says. "We
shouldn't have to pay for that."
While the BOR technically has not allotted any water to farmers this year due to drought, producers in the valley whose
supplies have been cut may still purchase water from others who didn't experience cutbacks. Others may tap into the
state's shrinking groundwater reservoirs. One way or another, most fruit orchards receive the water they need each
year.
Decades ago, dams built to create reservoirs for agricultural use dented or killed most of California's salmon runs.
Relatively healthy runs of Chinook salmon still spawn in the Sacramento and the Klamath rivers, though sustaining them
involves a complex life-support system of hatcheries, transporting migrating fish in trucks and boats and constant
monitoring of water supplies.
As of Aug. 20, the BOR was pumping about 2,100 cubic feet per second of water from Trinity Lake into the Sacramento
River system, leaving just 430 cubic feet per second flowing into the Trinity River, a major tributary of the Klamath.
Many of the salmon currently at risk are stranded below the confluence of these two rivers, which means higher
releases from Trinity Lake could save them.
Janet Sierzputowski, a BOR spokeswoman, says the water currently being diverted from the Trinty-Klamath system is
intended to benefit the Sacramento River's own salmon. After all, two of the Sacramento's four distinct salmon runs —
the spring Chinook and the winter Chinook — are on the endangered species list.
In a statement released on Aug. 19, the Bureau of Reclamation's regional director David Murillo said conditions affecting
the health of salmon in the Klamath system would be "monitored on a real-time basis" and, if necessary, addressed with
more water released into the river.
UPDATE, Saturday, Aug. 23: The U.S. Bureau of Reclamation announced Friday it would increase the amount of water
released from Trinity Lake into the Trinity River, a Klamath tributary, from 450 cubic feet per second to 950 cfs. On
Monday morning, the flows will be elevated again to 2,500 cfs and maintained at that level until at least mid-September,
according to a statement from the BOR. Water diversions from Trinity Lake into the Sacramento River basin will not be
reduced, however, the BOR said. That means Trinity Lake's already diminished water supply will disappear rapidly this
summer and fall. If the current drought persists, there may not be enough water in the reservoir next year to both
satisfy farmers and sustain salmon runs.
http://www.npr.org/blogs/thesalt/2014/08/21/342167846/california-drought-has-wild-salmon-competing-withalmonds-for-water
Extracting numbers from the articles:
Value of market in 2012: $4.8 billion. Since value is a measure of the revenue, i.e., price times quantity, and quantity is
about 2 billion pounds, an assumed price at the farmer’s level is $2.40 per pound.
Two hundred million pounds is about $700 million or $3.50 a pound. Retail price is about $7/lb.
1,000 acres produced about $10,000,000 in revenues or $10,000 per acre.
Net return, i.e. net revenue, equals $5,000 per acre. One might assume that net cost is about $5,000 per acre based on
revenue number above.
One ounce of almonds has about 23 almonds. One almond uses 1 gallon to grow. One pound of almonds uses 16 times
23 times 1 or 368 gallons of water.
It takes 3.4 billion cubic meters (m3) of water a year to produce all the almonds in California, i.e., 2,000,000,000 pounds
(from first figure). One cubic foot (ft3) has 7 U.S. gallons. One gallon is 0.00378541 m3. Two billion pounds has 736
billion gallons, or 105.14 billion ft3 or 2.8 billion m3. Slightly less than what’s reported in the figure.
UNDERSTANDING THE MARKETS AT PLAY:
Draw a market diagram for almonds with an upward sloping supply curve, and a downward sloping demand curve.
Based on the readings above, illustrate using the diagram what has happened to this market over the past decade.
With a continued drought this year, what do you expect to happen to prices paid to almond growers? Use the market
diagram to explain why?
Hazel nuts are substitutes for almonds. Turkey, a major producer of hazel nuts, has been hit with its own drought that
has forced a thirty percent reduction in supply. Illustrate using the market for almonds diagram what the implications of
this reduction is. What happens to prices and why?
Is there an externality associated with almond production? Draw this externality in the diagram.
Can you place a market-value on Klamath River salmon runs using the concept of opportunity cost?
Consider the following: One cubic feet per second (cfs) is equal to 1.983471099 acre feet per day (ac-ft/d). Salmon
needed 2,500 cfs for 15 days, up from 450 cfs. Two-thousand two hundred fifty cfs for 15 days is 2,250 times 1.98
times 15 or 66,942 acre feet. At $2,500 per acre feet we need $167 million to reduce risk to salmon in Klamath
River.
What does a campaign that exposes the embodied water, i.e., water footprint, of almonds attempt to influence in the
market place? Would a market campaign exposing the almond water footprint have an impact? Explain.
How might you save the Klamath River salmon run?