Drought Cast Big Shadow As Ag Prices Zoom Higher

January 25

Gloom Meets  BoomWatch out;Tulare County is being whipsawed by events out of its control, some of which are both scary and potentially exciting. Try on this little stream of consciousness:

 

No Water?: Friant GM Ron Jacobsma says it is likely Friant contractors get “no water” this year. We are talking about an empty Friant Kern canal! That would leave vulnerable small water districts and the Tulare County farmers they serve with no surface water supply for their trees.  A number of those districts, including some municipalities who use it for drinking have very limited or no ground water wells.“Even if the Exchange Contractors (north of Fresno) take San Joaquin water (stored behind Friant Dam), I don’t know if the Bureau can find  enough water for them.” Friant members have been lobbying the Bureau to allow about 20,000af in Millerton scheduled to be released through February for fish enhancement under the San Joaquin River settlement – to be retained by Friant for now. But Jacobsma says NRDC would have to approve it – unlikely he fears. There would be no Joaquin River releases for Restoration after February because of the drought.

But that is a small amount compared to 200,000af of water that could be shipped to the Exchange Contractors since they have a priority for the water prior to the construction of Friant Dam.

It is worse in terms of acreage on the Valleys westside where groundwater is more scarce. Here the Bureau of Reclamation is being lobbied to allow water pledged to the water district like Metropolitan (Los Angles) sitting in San Luis Reservoir to be traded to other needy districts. MET has planned for this drought – extracting other people’s water critics suggest – with a Metropolitan official stating recently” “We’re at record storage throughout our whole system.”

New Dust Bowl?

Westside farmer Ceil Howe says he “has never been so discouraged“ about prospects for farming and the weather with the “dirty gritty sky due to lack of storms only making it even more depressing.“

“I think we can keep our (small amount of ) trees alive with groundwater this year but all field crop acreage will be low or nonexistent.This is the driest 13 months in history” adds Howe who farms about 25,000 acres at Westlake Farms near Stratford and expects no Kings River water.

”It is reminding me of the dust storms we used to see out here” adds Howe. Could we see a California Dust Bowl this summer?

“There is plenty of talk moving water around but not much water to talk about” says Visalia civil engineer Dennis Keller. The good news is that “there is more than 3 months when we typically get rain.”

Gloom Meets Boom

If there is panic on the one hand – farmers who sell the Central Valley’s produce, nuts ,meat and milk are all enjoying record high prices and booming export markets.

It’s like they are getting a red light and green light at the same time.

Chicago commodity market reported a record price for block cheese Friday Jan 24 at $ 2.31/lb,eclipsing a 2008 record. Milk powder prices  are $2/lb and butter, enjoying new popularity, is close to that; all at near record highs.

What a turn around for an industry here (our largest) that seemed on the ropes and destined for collapse a year ago.

Of course dairymen are getting some welcome relief on the feed front in 2014, likely thankful this year they import much of their feed with our drought in California and plentiful rainfall in the Midwest. Corn prices are down from $8 a bushel in the summer of 2012 to $4.35 today.

Milk Processing News

With milk production rebounding,suddenly there is activity on the processing front – an industry who some had feared would soon up and leave the state.

In Turlock last week Hilmar announced it would build a new powder plant this to take advantage of booming demand in China for our products.

In Tulare this week CaliCheese got the green light to move forward on their $250 million cheddar plant project offering to pay $10,000 to Tulare for extra staff time to process their delayed purchase of 60 acres from the city. But they say it will happen.

In Visalia, not only is California Dairies expanding – an unnamed dairy foods company has 110 acres in escrow in the Visalia Industrial Park in a deal expected to close in March.

Domestically there is continued decline in fluid milk sales – down 1.3% in 2013 while organic milk sales climbed nearly 19% says CDFA.

Valley cattlemen can’t find enough foothill grass to feed their stock but  are being encouraged by record high beef prices and export demand  to places like Japan – up 48% year to date the USDA reports. Sales are up 71% to Hong Kong and 82% to Taiwan.

Milk demand is helping to drive cattle prices up with one market report saying this week ”Dairy producers are likely filling their barns with as many cows as possible, and heifers are precious. #1 Holstein springers averaged $1,900 at the Tulare Livestock auction last Saturday, up $300 from a month ago.”

If milk prices are high now – what happens when there is even less water this summer and milk production declines?

History says if the price rises too much – the consumer will balk and look elsewhere to fill their stomach.

Dairies around here have been shrinking as a number of family owned enterprises  went out of business in the past few years. But now Curti Dairy in Tulare looks to expand their herd by over 70% according to a air board permit. Other dairies are making a switch from Holstein to Jersey cows (black to brown) to increase butterfat production.

There is some good news form those who drive those big dairy milk rigs to the plants around the Valley everyday. Ruan Transportation and others have completely overhauled their truck fleets to cleaner burning trucks and fuels including some natural gas and is even considering biogas fueled trucks.

Then there is nuts were farmers are enjoying another record year even as they are extremely nervous about having enough water. Walnut prices are are in the $2 range (up from 60 cent per/lb a few years ago) and tonnage is up this market year. Pistachio shipments to date are also at record highs.