California farms fail as land values plunge amid groundwater crisis

There was a time when the water under Nick Sahota’s Terra Bella farm was free and abundant, supporting tidy rows of pistachio trees and table grapes to supply Bay Area groceries like Costco, Food 4 Less and SaveMart.

Now water costs on his Tulare County farm have soared to about $1,500 an acre due to pumping restrictions created by California’s historic Sustainable Groundwater Management Act. A decade after the law was adopted after great controversy, implementation is ramping up — and farmers’ anxieties are mounting, fearing bankruptcies are on the horizon.

With outstanding loans of over $15 million, Sahota’s family lives in fear that it could lose the farm that took decades to build and was once proudly profitable. The value of his orchards has plummeted to one-quarter of what they were worth only four years ago.

“How are we going to pay the loans? It’s impossible,” said Sahota, 50, who farms with his 83-year-old father on the flat sandy soils of eastern Tulare County, where summer temperatures rise well into triple digits.

Sahota is among a growing number of farmers who face ruin as the groundwater law is implemented across the San Joaquin Valley, the Central Valley’s enormous southern half. Agriculture is the single largest employer in this region, so fallowed fields mean fewer jobs to support the local economy.

Last year, the value of orchards that are solely reliant on groundwater fell between 30% to 40% in an analysis of land between Sacramento and Chowchilla, according to veteran appraiser Janie Gatzman of the American Society of Farm Managers and Rural Appraisers, who tracks San Joaquin Valley properties.

“That’s a huge loss in equity for growers, who have been farming at a loss for the last three to four years,” due to climbing water costs and reduced demand for nuts, she said.

That could transform parts of the San Joaquin Valley if farms fail and acreage goes fallow. The valley is the backbone of California’s $59 billion-a-year agricultural industry, which provides over a third of the nation’s vegetables and two-thirds of its fruits and nuts.

Hardest hit are farms on the far eastern stretch of the valley in so-called “white areas,” reliant exclusively on groundwater. Ironically, water was once so plentiful here that access to imported state or federal water was thought unnecessary; now it’s a lifeline. In addition to eastern Tulare County, the counties of Madera, Fresno, Kern and Merced have large patches of “white areas.”

Historically, the value of California’s agricultural land has always been based on its access to water. “You don’t buy land by the acre. You buy it by the acre-foot” of water, said Daniel Sumner, a professor of agricultural economics at UC Davis.

By tapping into groundwater, rough rangelands could be turned into vast, lucrative and manicured orchards of almonds, pistachios and other tree nuts. According to Gatzman, grazing land is only worth $500 to $2,500 per acre; orchards, until recently, could command $20,000 an acre.

But the Sustainable Groundwater Management Act is triggering a profound change, said Sumner.

“If you previously had access to water, and now you don’t, you don’t own what you thought you did,” said Sumner.

Over time, rather than orchards, the land may support solar panels, beef cattle or wheat. But these non-irrigated uses are far less profitable.

The groundwater act, passed in 2014, aims to ensure a more sustainable use of groundwater after years of over-pumping, which depleted basins and eroded water quality in some rural areas.

Studies show that the state’s agricultural valley is consuming twice as much groundwater as nature is returning through rain and snow. According to the Department of Water Resources, it is sinking in on itself as the aquifer beneath it is siphoned off, causing roads to crack and buried pipelines to rise to the surface. Parts of the California Aqueduct have been raised to preserve flow.

Accelerated land subsidence — or sinking — was observed after the drought of 2020-2022. Groundwater levels began to partially rebound in 2023. But it will likely require several more wet years, along with a boost of groundwater recharge and reduction in pumping, to recover from decades of over-pumping, according to the state.

Local water agencies are responsible for deciding how the landowners in their jurisdictions will reach sustainability. They must set a limit or “cap” on the overall amount of groundwater that is removed.

Farms with guaranteed water will be in higher demand, said Andres Jauregui, director of the Gazarian Real Estate Center at the Craig School of Business at CSU-Fresno.

Due to the groundwater act, “you can’t drop a well to solve your water problems,” he said.

To provide time for farmers to transition by adjusting their crops or repurposing their land, SGMA doesn’t require water agencies to balance their water basins until 2040. But immediate action is required in places where there is ground subsidence, according to the California Farm Bureau’s Ag Alert.

So water agencies are using “demand reduction” strategies on their region’s growers, such as water fees and pumping allocations.

Some are doing what was once unthinkable: requiring meters on agricultural wells, and billing farmers for usage.

“We can’t survive with that cost,” said Madera County farmer Amrik Singh Basra, whose groundwater fees have jumped from $246 to $983 per acre foot to sustain his almonds and wine grapes. Despite fallowing one-third of his acreage, he must still pay full property taxes.

“We have to go bankrupt or we have to shut down,” said Basra, who worked in trucking to save enough money to buy his small farm in 1997. “And nobody is buying the land.”

Starting in 2021, the Eastern Tule Groundwater Sustainability Agency charged Sahota about $330 per acre-foot of water. He is also billed $110 per acre-foot “subsidence fee” for the cost of fixing the sinking Friant-Kern Canal, even though he gets no water from the canal.

This year, his total costs will climb to $3,000 per acre-foot, he said. If the water bill is not paid, a lien is put on his property. After spending $1.8 million to plant new trees several years ago, he is now in debt.

“I’m very close to giving up our land. People in the Bay Area want to get the fruits and vegetables on their tables, but it costs water,” he said.

Four years ago, his land was appraised for $32,000 an acre. Now it is worth an estimated $7,000 to $8,000 an acre.

Small- or medium-scale growers like Sahota are in the most perilous position, according to an analysis by Clean Water Action and CivicWell, nonprofits that work on improving equitable access to water.

Many did not know about the groundwater act’s existence until after it passed. Now there is little, if any, assistance.

“Where is this money supposed to come from?” asked Sahota.

Pumping reductions needed to reach the act’s target are expected to dry up as much as 20% of the valley’s farmland, according to a report published by the Public Policy Institute of California. An estimated 500,000 acres — a fifth of the San Joaquin Valley’s farmland — may need to be taken out of cultivation by 2040 to stabilize the region’s aquifers, it says.

Over time, there will be new uses for the land, said experts.

But “it may be too late for current growers who are in trouble. That’s a personal tragedy,” said Sumner, the UC Davis professor, whose grandfather came from Texas to California after his cattle operation was wiped out by the Dust Bowl.

“Farming is a really tough, hard business, and it’s risky,” he said. “That’s its history. These are not the first farmers to have been caught by something unexpected.”