On this special Let’s Chat Markets episode, Alyssa Badger welcomes HighGround’s own Curtis Bosma, onto the podcast to discuss the recent heavy rains in California, how the infrastructure is handling it, and how it is affecting the state’s largest dairy region.
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Transcription:
[00:09] Alyssa: Hello, everyone, and welcome to Let’s Chat Markets—your favorite dairy podcast. In the New Year, it seems that we just can’t stop talking about the weather in the dairy industry. New Zealand is too wet, Europe is unseasonably warm, Australia is experiencing floods, and here in the US, thousands of Californians are under evacuation orders and floods threaten the state as well. In 2022, HighGround Dairy’s Curtis Bosma moved back home to the central valley of California and since this has been such a hot topic for U.S. milk production, we have him on with us today to discuss some of the key issues and talking points that have come from all the rain out west. Hey, Curtis! Welcome back.
[00:54] Curtis: Hey, Alyssa—thanks for having me on once again. It’s good to be here in California and it’s good to see the rain. I know there have been a lot of questions flying my way this week with everything going on out here.
[01:07] Alyssa: Yeah, I can only imagine. So, when you moved to California last year, drought discussions were still prevalent. The snowpack was improving but we certainly weren’t expecting this—how has all this rain been out there for you?
[01:19] Curtis: Yeah, I like to think that I have some in bringing some of the midwestern weather and nice rains and brought them with me to California when I moved out here this past summer. I don’t think it’s quite that simple, though, as California has a very unpredictable climate. But, yeah, it’s been very touch-and-go for certain regions here.
[01:41] Where I am, in Visalia, it’s really not too bad. As you go further south, though, it’s typically drier so there’s not as much of an issue but for a lot of the dairies up in the North Valley—think Merced County, Stanislaus County, and especially around that Sacramento-San Francisco delta region—where you’re seeing what’s on the national news with flooding, evacuations and all of the issues that are ensuing from that.
[02:09] Alyssa: For our listeners outside of California and perhaps in New Zealand or Europe, could you walk us through some of the dynamics of water in California?
[02:19] Curtis: Absolutely. As a nerd who likes to read a lot of things about a lot of things, I have done some of my own research on everything that is going on in the state now and throughout its history. But it’s important to note that California’s water situation is very complex and there are people that know more about the topic than I do. I am fortunate enough to have been able to talk to some of those people who know a lot more about it as well.
California is interesting because the state is essentially chronically a state of too wet or too dry and it is purely random. In the last couple of years, the term “Triple-Dip La Nina” has been in the news and brought drier conditions to the Western U.S., including California. When it does rain, we tend to get an excess of rain here and a lot of that rainwater swiftly moves toward the ocean and flushes out through the various rivers and deltas. Throughout the history of California, there has always been this sort of human interaction with trying to find ways to store water and be able to make it more usable for residents within California. One of the biggest engineering marvels in the U.S. is the California water project which was developed in the 1950s and 60s. This project and mechanism capture a large amount of water throughout most of the Sierra Nevada mountain range to the mountains further north in California and uses pipelines, canals and a whole network of ways to move water throughout the state so that areas that don’t have water, get it. Realistically, if you look at Los Angeles and that greater area, it’s a desert and it really shouldn’t have as many people as it has but because of all the technological advances, it was able to expand and become the metropolitan area that it is today.
That is the outline of it, and I like to think of it as a balance sheet of supply and demand for how water gets utilized in California. There are about 200-million-acre feet of water that get brought to California each year in an average year (An acre-foot being a foot over water over the area of one acre). This includes the water that comes in from rivers flowing from other regions such as Oregon and Nevada. This year, we are likely going to see more because of the rain and snow that we’re getting. Breaking it down, roughly 50% of that water is immediately fed to the environment—that goes through streams, and groundwater basins and ultimately ends up just being evaporated or recharging water tables throughout the state. The other 50% of the water is usable water. Of that half, about half of it gets allocated for environmental purposes—making sure that all the streams and rivers, where there are fishes and wildlife, get proper water allocations—and then the other half of that is allocated between agriculture and urban usage throughout the state. So, of those 200-million-acre feet of water in an average year, just 25% of it is usable and is what’s highly argued by people in the state.
[06:00] Alyssa: Wow, you really did do your research! That’s impressive.
[06:03] Curtis: I like to think of it in a stocks-use ratio, similar to what those in the corn market refer to, to create my own kind of California balance sheet. Of course, there are some issues with it when it comes to how the balance sheet is set up because on an average year, there’s a decent amount of supply. The real issue that the state is plagued with today is the lack of storage when we have an excess of water—like we do right now. The last major update to the water storage in California was in the 1970s and the population in the state has since doubled to over 40 million. There needs to be more done to keep up with that infrastructure. All in all, when you look at the balance sheet in terms of where things are being allocated, it’s not great. But, it is an interesting thing to analyze right now.
[06:57] Alyssa: Yeah, and it sounds absolutely necessary given everything going on now. Well, getting into politics then, there has been a lot of chatter in the news regarding the political issues surrounding water in California, can you shed some additional light on that?
[07:12] Curtis: Yeah, absolutely. There are a lot of things going on here in California politically. Going a couple of years back, one of the biggest things was the passing of the Sustainable Groundwater Management Act or SIGMA. SIGMA is a bill that says that California has to be able to regulate itself and become sustainable with its groundwater usage. It might be surprising to a lot of people that California didn’t have anything like that in place, especially because many surrounding states like Arizona and Nevada, already have the tools and regulations around water allocation. California was truly the wild west when it came down to it and unfortunately, a lot of these things were implemented during a severe drought which made it difficult for farmers to make sense of how it could get back to a level that allows everybody to operate in the state. Thankfully, now that we’re in a wet year again, some of the systems and mechanisms from that plan are in place and farmers can take some of the water that’s coming off the mountains and use it to recharge the aquifer and water table beneath them. With that, I’ve never farmers so excited about putting water on dirt right now. It’s difficult to explain that level of excitement to farmers in the Midwest.
And this week there was a new bill proposed by my congressman here in the Central Valley, Congressman David Valadao, called the Working to Advance Tangible and Effective Reforms for California Act. It sounds like a very long-winded bill name but it’s a beautiful acronym because it stands for WATER. The WATER for California Act, as it’s known, has some provisions to expand water storage and was highlighted on the Shasta Dam in Northern California, which is a project that has been talked about for a long time but that starts to explain the underlying political issues that kind of come with this. Alyssa, have you seen the movie, Thank You For Smoking?
[09:24] Alyssa: Oh yeah, of course.
[09:26] Curtis: It happens to be one of my favorite movies. For our listeners who haven’t seen it, Aaron Eckhart plays a lobbyist for a big tobacco company and has some quite questionable ethics throughout the movie. One of my favorite scenes is when his son is asking him about an essay prompt that he was given in school that asks the question: why is the American government the best government in the world?” Aaron Eckhart’s character goes on to explain it is because of our endless appeals process and that the beauty of any argument is if you argue correctly, you’re never wrong and you can keep arguments going on forever.
I see a lot of parallels in the way that California is handling a lot of these water issues because when we look at the balance sheet, there are obviously some imbalances between supply and demand but over the last couple of decades the focus has been on restricting demand and adjusting how much water people can use and how all of it gets allocated. Opposite that, there has been very little done on the supply side to correct things there. The argument, of course, has two different ideas on how to correct the imbalance but the funny thing is, both sides have lawyers with mortgages and those lawyers are going to keep the lawsuits open as long as they can.
[10:38] Alyssa: Oh boy. Yeah, that’s a great explanation, that’s perfect. Last but not least, one of the most important things to discuss here and I’m sure a lot of our listeners are curious: what has this impact or what will this impact have for dairy farmers in California? Are we going to see a cutback in milk from the region because of this? Will it improve? What kind of lasting impacts will we see?
[11:01] Curtis: The key thing that we’ve been focusing on with the HighGround team regarding the whole water situation and how much has come down here in California are the top five milk-producing counties in the country, which are all here in the Central Valley, including Tulare Country, where I live. I mentioned before that here in Tulare County, things don’t seem to be too bad. As you go a little further north, into Merced and Stanislaus County, there are much more issues. There are some dairies there that have been dealing with flooding in surrounding areas and issues related to that. We haven’t heard anything in terms of where there have been issues with trucks getting in and out, so it seems like things are all still operational as it stands today, on January 13th. We also must keep in mind that there’s another storm on the way and potentially more in the future and as we continue to see rain, we are on the brink right now of where there could be some real problems. After talking with some producers, though, it seems like everyone has gotten their generators up and running and was able to deal with power outages. It has been a little touch and go and we are seeing some issues in those areas with evacuation orders in effect, especially in making sure that labor is available. Again, where we stand right now, it seems like everything is ok and there hasn’t been much of a major interruption, but it we continue to get rain there could be some problems right around the corner.
[12:29] Alyssa: Very informative. Thanks so much for the conversation, Curtis. We are glad that you and your family are safe as we know it’s gotten quite scary in some parts of the state.
[12:38] Curtis: It is crazy with California’s way of getting either a lot of water or not enough water and it seems like things are never balanced here. I definitely feel for the families right now in California that has to deal with this craziness and we hope that everyone is staying safe.
[12:54] Alyssa: Absolutely. We hope you enjoyed this episode and be sure to subscribe to our podcast so that you don’t miss a beat in the dairy markets. The U.S. markets will be closed on Monday, the 16h, in observance of Dr. Martin Luther King Junior Day but we look forward to coming back to work Tuesday for a Global Dairy Trade event and a week of price forecast discussions as the team will be pushing out or 18-month price outlook in a couple of days. Have a great rest of your day. Cheers!
