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How to Grow California Farming Operations During a Drought

July 8th, 2022

Droughts in California are becoming increasingly common – and more costly to the agricultural industry that contributes heavily to the state’s powerful economy. During these severe dry periods, many unprepared businesses experience unfortunate revenue declines and job cuts. However, there is still opportunity for savvy farmers to grow their operations if they are able to prepare and reposition during drought years.

In this guide to growing a California farm during a drought, we’ll cover:

  • How are California famers affected by a drought?
  • How long has California been in a drought?
  • How do you farm during a drought?
  • How to grow a farming operation in California during a drought
  • What loans are available for California farming operations?

Though the environment sometimes makes it tough for farmers in California, the right information and resilience can help provide a buffer during the lean years. We hope this guide helps you start or expand your next agricultural operation.

How are California Farmers Affected by Drought?

Farming and Agriculture make up a significant portion of the California economy. The state boasts the fifth-largest economy in the world, and over $50 billion per year is generated by Californian agriculture. However, ag operations in California can be significantly influenced by drought years.

Low water storage levels and cutbacks to protect the environment reduce surface water deliveries. This can even drop to zero in certain production regions. When this is coupled with inadequate rainfall, there is a decline in crop production – and the overall capacity of the farming sector overall.

Due to the increasing frequency of droughts in California, the government and well-prepared farmers have been able to predict and offset some of this risk, but it still can be quite daunting for those families who make their livelihood from farming.

How Long Has California Been in a Drought?

California’s most recent drought conditions measurably started in early 2021 after enjoying a few years of normal precipitation flow.

This is on the heels of one of the most damaging droughts in the state’s history (between 2012-2016). Because drought is a gradual phenomenon, the direct effects on agriculture play out differently during each dry period. The amount of water supplied by individual water agencies is important to diminish the negative impact – a single year of drought may not impact California agriculture or its citizens due to the state’s large groundwater infrastructure, but over time, droughts take a significant toll.

However, even in times of drought, the perseverance of farmers allows for the industry to supply California, the United States, and the world.

How Do You Farm During a Drought?

Farming during a drought in California is tougher than when water is plentiful, but modern technology and resource management practices have made it possible. A productive agricultural operation can increase soil organic matter while reducing moisture loss with no-till or reduced till, cover crops, and conservation crop rotations.

Additionally, investing in more efficient irrigation can improve drought resilience for famers. Drip irrigation or Low Energy Precision Application (LEPA) sprinklers are strong ways to reduce water loss due to evaporation or run off. During a prolonged drought, these measures can mean millions of dollars saved for farmers throughout California.

How to Grow a Farming Operation in California During a Drought

Although drought is one of the leading drivers of production risk for California agriculture, farmers can adapt by using modern technology and historical information to drive their long-term decisions.

When setting up a produce operation, farmers take into account the cyclical rainfall in the region over all periods of time. For example, almonds respond well to groundwater and surface water, and they can be used somewhat interchangeably. This means an almond farm can continue to produce during a drought and water usage cutbacks.

Similarly, producing less expensive annual crops such as corn is a great way to create a baseline outflow for a farm. From there, farmers can rotate crops depending on the water availability and the local environment during a drought.

Finally, part of running a successful business is utilizing the resources available to help. For California farmers, this means working with the government to receive Federal Crop Insurance, and forming relationships with local banks to provide financial support in dry times.

What Loans are Available for California Farming Operations?

Whether you are starting a new farming operation or looking to bolster your bank account during dry years, it is important to work with a reputable lender near you.

If you are looking to get a farm loan from a local bank, your options include:.

  1. Farmer Mac Loans: The Federal Agricultural Mortgage Company (FAMC) is also known as Farmer Mac. Since 1980, they have worked to create a secondary market for agricultural lending and to provide flexible terms and low-cost options for farmers looking to finance a project.
  1. FSA Loans: The Farm Service Agency (FSA) provides direct and guaranteed financing to farmers, and ranchers, including:

-Farm Operating Loans
-Farm Storage Facilities Loans
-Farm Ownership Loans
-Fisheries Finance Program
-Farm Labor Housing

These loans are designed to help businesses secure low-interest funding from the government and to secure lending for first-time agricultural borrowers. These loans can yield up to $500,000 in direct financing from the government to cover a wide range of farm and agriculture projects.

  1. Agricultural Home Loans: A USDA-backed program, agricultural home loans are common first-time farmer loans. They allow for mixed-use facilities such as cattle ranches or crop development facilities that also house the owner-operators and a staff.

With rising interest rates and a drought, knowing your lender is critical in order to get funding for an agricultural project. The economic opportunity remains strong for farmers and ranchers, but it takes a great team to create long-term growth. Make sure to work with reputable lenders to create long-standing financial success for you and your business.

Community West Bank Can Provide Farmers Financial Tools for Success

At Community West Bank, we’re committed to helping local businesses of all sizes prosper. We enjoy supporting California farmers and ranchers with flexible financing.

If you’re looking to secure a new financial opportunity for your farm or agribusiness, the time to take action is now. For information about available funding for land acquisitions, refinancing, or other lending options for agricultural projects, please contact us to get started.

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