Trading ‘Virtual’ Water

In the Imperial Valley of California, a region drier than part of the Sahara Desert, farmers have found a lucrative market abroad for a crop they grow with Colorado River water: They export bales of hay to land-poor Japan.

Since the mid-1980s, this arid border region of California has been supplying hay for Japan’s dairy cows and black-haired cattle, the kind that get daily massages, are fed beer and produce the most tender Kobe beef.

Container ships from Japan unload electronics and other goods in the Port of Long Beach, and the farmers fill up the containers with hay for the trip back across the Pacific. Since the containers would otherwise return empty, it ends up costing less to ship hay from Long Beach to Japan than to California’s Central Valley.

“Everything is done for economics,” said Ronnie Leimgruber, an Imperial Valley hay grower who is expanding into the export market. “Japan cannot get hay cheaper. The freight is cheaper from Long Beach than from anywhere else in the world.”

Water is cheap for valley farmers, too: urban rates there are four times as high. It costs only $100 to irrigate an acre of hay in the desert for a year.

But what makes economic sense to farmers may not be rational behavior for California in the third year of a severe drought, say some conservationists. At the very least, they contend, the growing state debate over water allocation should take into account the exports of crops such as hay and rice — two of the most water-intensive crops in the West — because they take a toll on local rivers and reservoirs.

“This is water that is literally being shipped away,” said Patrick Woodall, research director at Food and Water Watch, an international consumer advocacy group with headquarters in Washington, D.C. “There’s a kind of insanity about this. Exporting water in the form of crops is giving water away from thirsty communities and infringing on their ability to deal with water scarcity. This is a place where some savings could be made now, and it’s just not being discussed.”

Now, estimates of hay exports from California range from 1.5 to 7 percent of the state’s total hay production. In 2008, according to researchers at the University of California, Davis, California exported between 617,000 and 765,000 tons of hay, some of it originally brought in from other western states. Most of it was shipped to Japan. A minimum of 450,000 acre-feet of water was required to grow the exported hay – roughly what the city of San Diego uses in two years.

In 2008, the U.C. Davis data show, California exported 52 percent of its rice production, much of it to Japan. The California Rice Commission, a trade group representing 2,500 rice farmers, estimates that rice uses 2.2 million acre-feet of irrigation water yearly, about 2.6 percent of the state’s total water supply. Rice exports, then, soaked up about 1.1 million acre-feet of water in 2008, or enough water to supply the city of Los Angeles for a year and eight months.

By another estimate, with every pound of rice that leaves the U.S., about 250 gallons of “virtual” or “embedded” water used in growing and processing rice leaves along with it, according to “Water Footprints of Nations,” a 2004 study from the Netherlands for UNESCO (The report spawned the Web site www.waterfootprint.com.)

But Tim Johnson, president and CEO of the California Rice Commission, said water statistics and the notion that rice is a “monsoon crop grown in the desert” don’t tell the whole story.

“These are the same old arguments we heard back in 1990 when California had its last drought,” he said.

Rice exports help bolster Japan’s aging farm base and they provide high-paying jobs at California ports, Johnson said. Moreover, he said, rice is grown on heavy clay soil that can’t be used for other crops, and the paddies provide a habitat for more than 200 wildlife species.

“There’s no other crop that does as much for wildlife in the West as rice,” Johnson said. “The fullness of the discussion — not just how many units of water goes into an individual crop — is what’s needed.”

Research on virtual water trade is centered in Europe, where countries such as the Netherlands are dependent on crop imports from Brazil and other water-rich nations. Here, the virtual trade in water is viewed as beneficial because it can relieve the pressure on scarce water supplies in small countries and help developing countries farm out some of the cost of building new dams and aqueducts. Worldwide, studies show, the countries most dependent on imports of virtual water are the Netherlands, Jordan, Japan and Korea, in that order.

But organizations such as the France-based World Water Council caution that “countries can in some cases damage their environment by exporting virtual water.”

The UNESCO research shows that Australia, a country now in the grips of its worst drought on record, is the largest net exporter of virtual water in the world. Recently, Australia set up an independent water authority for the first time to set sustainable limits on water use in the country’s most important agricultural region. Still, no one is telling farmers what they can and can’t grow.

“That is not our role,” said Howard Conkey, a spokesman for the country’s Department of Environment, Water, Heritage and the Arts.

As the drought deepened last fall in California, the Pacific Institute, one of the world’s leading think tanks on water conservation, suggested that a shift of just 25 percent of hay and rice and other low-value, high-water-use field crops in the Central Valley to higher value, more water-efficient vegetable crops could be beneficial both to farmers and the environment.

The institute’s report, “More With Less, Agricultural Conservation and Efficiency in California,” estimated that such a shift would raise crop value by $5 billion and, at the same time, save 1.1 million acre-feet of irrigation water, an amount equivalent to what seven dams could provide.

Neither hay nor rice ranks in the top five California export crops in terms of total value. In 2007, according to the U.C. Davis Agricultural Issues Center, the state’s top-value export crop was almonds, at $1.9 billion. Rice was eighth on the list and hay was 18th, with export values of $313 million and $134 million, respectively.

Peter Gleick, co-founder and president of the Pacific Institute, believes that if the drought “gets bad enough,” politicians will start questioning how California uses its water, including for trade.

“I think it’s inevitable that the growing scarcity of water is going to force policymakers to come to grips with some of these issues like appropriate exports of water,” Gleick said. “We need someone challenging the way water rights are allocated.”

But Dan Putnam, an alfalfa specialist with the U.C. Cooperative Extension at Davis, says the institute is “dead wrong” in its analysis of potential crop shifts in the Central Valley. Vegetables are riskier than hay, a bread-and-butter crop that pays the bills and guarantees farmers a steady cash flow, Putnam said. Alfalfa improves the soil in rotation with vegetables, he said, and it has a higher yield per unit of water than, say, walnuts or lettuce. Hay also produces more nutritional value, Putnam said, because of its importance to the dairy industry.

“If you take the viewpoint that only the highest-value uses of water should prevail, that’s a policy of urbanization,” he said. “A high-rise for lawyers in Sacramento will yield more dollars per unit of water than any agricultural crop. … What does it matter whether we export hay or not? It is kind of an odd thing to ship hay to Japan, but we ship lumber around the world. We should allow farmers to make intelligent decisions about what crops to grow.”

Leimgruber, the Imperial Valley hay farmer and vice chairman of the California Farm Bureau‘s hay advisory committee, says that’s exactly what he’s doing. Hay exports help the U.S. trade balance, allow products to be brought into California more cheaply, and employ a lot of local truck drivers and loaders, he said.

“I would rather use the water to grow a product we can sell to Japan than sell to a golf course to grow grass. It’s a global market, a whole economic circle.”

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