It is estimated that about 564,000 acres will be fallowed because of the drought, resulting in a statewide reduction in gross crop farm revenue of about $856 million. Livestock and dairies may add another $350 million in direct revenue losses for 2015. Regional economic impacts of these cuts were estimated using the IMPLAN model for the Central Valley, and show approximately 18,600 full-time, part-time and seasonal jobs lost once multiplier effects are included. The total economic loss to agriculture is estimated to be $2.7 billion.
The 2015 drought is not as severe as initially anticipated, but worse than 2014 in terms of reduced water availability and economic impact to agriculture. Groundwater substitution, water market transfers and grower use of limited water for the most profitable crops are key factors buffering the economic and employment effects of drought. Regions with reliable access to groundwater are able to irrigate most of their land. Regions with groundwater access also benefit from small (less than a few percent) increases in some crop commodity prices because of greater fallowing in more water-stressed regions. Water market transfers allow water to move from lower value to higher value uses, which also dampen some of overall economic impacts.
California is facing another year of severe drought in 2015. Following three critically dry years, many irrigation districts have exhausted their surface water reserves, and the groundwater table has been drawn-down in many parts of the Central Valley. This memorandum summarizes a preliminary assessment of the economic impacts of the 2015 drought conducted by the UC Davis and ERA Economics research team.
The results summarized here are preliminary and will be revised as we get new information and a clearer picture of irrigation water availability, major water transfers for the 2015 season and acreage of major crops. We know how much water will be delivered from the state and federal projects, and have surveyed districts to assess local surface water supplies and groundwater substitution. But some factors remain uncertain. Many irrigation districts have not made final water allocation decisions and other districts are working to secure transfers from areas with more senior water rights. Drought impacts on livestock and dairies derive from forage and pasture estimates. Decisions of many participants in the system will change water deliveries and economic impacts; therefore our analysis will be updated in July.
https://watershed.ucdavis.edu/files/biblio/2015Drought_PrelimAnalysis.pdf