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Southern California Agribusiness Sucks Up $416 Million a Year in Water Subsidies

From: THE
AGRIBUSINESS
EXAMINER
December 29, 2004, Issue #386
Monitoring Corporate Agribusiness
>From a Public Interest Perspective

EDITOR\PUBLISHER; A.V. Krebs
E-MAIL: avkrebs@earthlink.net
WEB SITE: http://www.ea1.com/CARP/
TO RECEIVE: Send name and address

RENEWAL OF CALIFORNIA CVP WATER CONTRACTS CENTER OF
DEBATE ON HOW MUCH STATE WATER SHOULD BE USED FOR CROPS

DEAN E. MURPHY, NEW YORK TIMES [ December 15, 2004 ]: The time has come for thousands of farmers in California to renew their water contracts with the
federally run Central Valley Project, the country's largest irrigation
system and for many years a major source of friction between the state's
powerful agricultural and environmental interests.

The farms served by the Central Valley Project cover nearly 4,700 square
miles and get about 20% of California's water supply. That has made the new
contracts, some for 25 years and some for 40 years with options to renew,
the center of a debate over how much water in the state should be dedicated
to growing crops and at what price.

When construction of the Central Water Project began in 1937, the idea was
to protect the state's farmland from water shortages and floods and provide
cheap water for family farmers. But as the state has grown in population,
there has been a growing push by cities and environmentalists to break the
farmers' grip on the water, or at least make them pay more for it.

A report to be released on Wednesday by the Environmental Working Group, an
advocacy group that has tracked federal subsidies in agriculture, estimates
that the subsidies in the Central Valley Project are worth up to $416
million a year at market rates for replacing the water. The calculation,
based on data collected by the group over 16 months, shows that the median
subsidy for a Central Valley farmer in 2002 was $7,076 a year and for the
largest ten percent of the farms, the average subsidy was worth up to
$349,000 a year.

Five years ago, the United States Bureau of Reclamation, which runs the
Central Valley Project, began negotiations on 223 water-supply contracts
with individual farmers and big irrigation districts, serving farmers from
Redding to Bakersfield. Those negotiations are expected to be wrapped up
early next year, and many critics of the bureau, including the Environmental
Working Group, are not happy that they will apparently continue supplies of
federally subsidized water for farms.

"Reforms to make details of water subsidies public, limit the amount and
value of water subsidies to large farms and encourage conservation by
pricing water at rates closer to market value are needed to end the disaster
for taxpayers and the environment wrought by the Central Valley Project,"
the Environmental Working Group report states.

Many farmers reject that analysis, including the president of Woolf
Enterprises, a family-owned farming business based in Huron, near Fresno,
which was identified by the group as the recipient of $4.2 million in
subsidies. Woolf Enterprises grows almonds, cotton, tomatoes and other crops
on about 20,000 acres in the area served by Central Valley Project.

The president, Stuart Woolf, said the land was a collection of farms owned
by members of his family, each 960 acres, the maximum allowed under federal
rules. Mr. Woolf said the family business had survived by adding more
acreage and by introducing savings through economies of scale - including
large savings on its water use.

Though he had not seen the Environmental Working Group's full calculations,
he scoffed at the suggestion that his farm had received such a huge benefit,
saying, "The numbers just don't add up."

"They would indicate the purpose of the Central Valley Project is to have
small family farms," Mr. Woolf said. "I would contend the small family farm
won't be able to survive in today's ag environment. A small family farm
can't make the investments that are needed."

Representative George Miller, a California Democrat who has long been at
odds with the state's agricultural interests over water, has accused the
Bureau of Reclamation of "rushing to put these contracts in place" at a time
when the reliability of the state's water supplies is in question. Mr.
Miller said the contracts would amount to a huge windfall for some farmers,
who under a law he helped write in the early 1990's would be entitled to
sell the water to urban water districts at marked-up prices.

"What these guys are doing is freezing in time the massive subsidies that go
to the largest and wealthiest farmers in the state, and who are then going
to sell it back to the taxpayers," he said in a phone interview from
Washington. "It is a great gig if you can get it."

Officials with the Department of Interior, which oversees the reclamation
bureau, defend the new contracts as keeping with the bureau's mission since
1902 of encouraging agricultural development in the West. Though the costs
of water supplies will remain below market value, the new rates will be high
enough, the officials say, to recover the costs of building the Central
Valley Project by 2030. Diversions for environmental purposes will continue.

"This is a big and important effort by the bureau to have contracts in place
and ensure orderly operations for the project," said Jason Peltier, a deputy
assistant secretary for water and science. As for the bureau's critics, Mr.
Peltier said, "I suppose we will have to agree to disagree." [ December 15,
2004 ]

CALIFORNIA'S FRESNO COUNTY REAPS $24 MILLION IN FEDERAL
WATER SUBSIDY PAYMENTS IN 2002

MARK ARAX, LOS ANGELES TIMES [ December 15, 2004 ]: This is a valley that wears its mistrust of the federal government proudly.

>From Bakersfield to Modesto, handmade signs planted firmly in San Joaquin
Valley farm soil call for the death of activist federal judges. Bumper
stickers shout the primacy of private property and gun rights.

But the payments that flow into the valley from Washington, D.C. --- those
are a different matter. Nearly a third of the population in this farm belt
relies on some form of federal public assistance, figures show, one of the
highest such dependency rates in the nation.

And then there is the federal support that few locals like to talk about:
the water and crop subsidies that keep the wealthiest citizens in tall
cotton.

Each year, a score of big farmers on Fresno County's west side receive
millions of dollars in price supports and subsidized water for their cotton,
nut, tomato, garlic, onion and grape crops.

A report by the Environmental Working Group, a Washington, D.C.-based
nonprofit trying to reform the agricultural subsidy system, shows that farms
in Huron and the surrounding area received, by the most conservative
measure, $24 million in water subsidies in 2002. That figure does not
include millions more in cotton and wheat subsidies.

The report comes as the federal Bureau of Reclamation is renegotiating its
long-term contracts with agricultural users in the Central Valley Project,
the nation's largest irrigation system.

The negotiations have raised concerns among environmentalists, who say that
the U.S. government is about to give farmers another sweetheart deal.
Farmers respond that the inexpensive water allows them to compete in a
global market flooded with cheap foreign crops.

The report, released today, measures the water use of each farm tied to the
Central Valley Project. The biggest farming operation in Fresno County, run
by the Woolf family, used 29,000 acre-feet of water to irrigate 19,000 acres
of crops. That is enough water to fill more than 37,000 Olympic-sized
swimming pools, the report said.

"The figures show very clearly that despite the fact that the CVP was
conceived as a way to support small family farmers, that subsidy today is
overwhelmingly going to the largest and richest farms," said Bill Walker,
one of the report's authors.

The amount of water that each farm draws from the project is a matter of
public record. The watchdog group, which each year assesses crop subsidies
to farms nationwide, calculated the value of the water by using three
different formulas. Farmers who saw only excerpts of the report didn't take
issue with the most conservative formula, which yielded the
$24-million-a-year subsidy figure.

But one formula, which based the water's value on what it would cost to
replace it in today's market, was criticized by farmers. That formula
calculated the total yearly subsidy to farmers on Fresno County's west side
at $110 million. For farmers throughout the Central Valley Project, the
figure was $416 million.

"This is a supposed analysis that is based upon false assumptions and some
hypothetical fair market value for water that doesn't exist," said Tom
Birmingham, general manager of the Westlands Water District, the biggest
irrigator in the California Valley Project. " A lot of our farmers are using
drip irrigation. They are among the most efficient water users in the world,
right up there with farmers in Israel."

The debate is hardly new. Over the decades, as the San Joaquin Valley has
grown into the most productive agricultural region in the world, politicians
and bureaucrats have grappled with the issues of water and the size of
farms. The old Jeffersonian ideal held that cheap water was a means to
develop the West with small and mid-sized farms. The Central Valley Project,
which began construction in the mid-1930s, grew out of that ideal.

But the economies of scale --- efficient big farms swallowing up inefficient
small ones --- have dictated otherwise. Reclamation law no longer prohibits
cheap federal water from going to farms larger than 160 acres. Farms up to
960 acres can qualify.
Even so, prominent farm families in western Fresno County have found a way
to obtain subsidies for even larger holdings. By dividing their 10,000- and
15,000-acre operations into 960-acre chunks, many growers in the Westlands
district have managed to receive a lion's share of the project's water ---
more than 25% in many years, the report said.

The Britz family, for example, has divided its Westlands holdings into nine
separate entities, each one receiving crop and water subsidies. In 2002 and
2003, the Britzes received more than $1 million in crop supports and nearly
$300,000 in water subsidies. The Britzes could not be reached for comment.

The Woolf family has weaned itself from crop subsidies by replacing cotton
and wheat --- crops that receive price supports --- with vegetables,
almonds, pistachios and grapes. But the family's water subsidy in 2002 was
at least $710,000, the report found.

Stuart Woolf, president and chief executive of Woolf Enterprises, said his
family has spent millions of dollars to convert from flood irrigation to
more efficient drip irrigation.

"This study gives the impression that we're big water wasters," Woolf said.
"The reality is, we don't have enough water to use, and we have to manage
every drop."
"The Environmental Working Group is raising some good questions, but I would
encourage them to come visit our farm and learn a little bit about the
careful way we manage water resources. We're good stewards." [ December 15,
2004 ]