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Drought, shortages could mean big payoff for state rice growers, but not such good news for water agencies looking for water transfers

Posted by: Aqua Blog Maven on May 19, 2008 at 5:58 am

From the San Diego Union Tribune:

In one of the most volatile years of their farming experience, California’s rice growers eagerly planted a new crop this spring that could reap record profits. Drought in Australia, food riots in Egypt and a shortage of other food grains such as corn because of the move to ethanol are just a few of the complex global ingredients roiling the global market for rice, a diet staple for half the earth’s population.

The immediate fallout has brought surging prices, sporadic panic buying and limits on exports by some countries. Whether those responses are permanent or a temporary reflex will not be known for some time. “There’s no asking the guy who was here before you what it was like and what happened next. We’ve never seen this,” said Tim Johnson, president of the California Rice Commission.

These market shifts also may have broader policy implications as some countries rethink their opposition to genetically modified rice and U.S. taxpayers question why they should subsidize corn, wheat and rice at a time of soaring commodity prices.

At the Richvale Cafe, a tiny diner that substitutes for the backyard fence in the heart of rice country, about 70 miles north of Sacramento, growers are understandably excited. “We’re going to get some returns we’ve never seen the likes of,” said Frank Rehermann, who has been farming for 36 years.

Yes, rising prices for rice is good news for the farmers, but bad news for Metropolitan Water District and others who had hoped to purchase water for urban localities:

Southern California water agencies, shopping for extra water to import from Northern California, also are finding a tighter market. Sacramento Valley rice farmers are positioned to drive harder bargains as long as rice prices remain attractive.

The Metropolitan Water District this year lost deals for more than 23,000 acre-feet, enough water to meet the needs of at least 46,000 households a year. The Los Angeles-based wholesaler paid about $200 an acre-foot for the water it did get, compared with historic prices of closer to $125 to $150.

The San Diego County Water Authority was relieved to be able to lock in more than 20,000 acre-feet at $200 each from rice growers. “We expect the price of Northern California transfers to be higher and supplies more difficult to obtain next year,” said John Liarakos, a water authority spokesman.