California rice farmer: Drought may make us 'quit'

Mardis Coers | Getty Images

Rice harvest in the Sacramento Valley, Calif.

California's ongoing drought is claiming another victim: the state's rice crop.

Nearly 25 percent of California's $5 billion rice crop will be lost this year due to lack of water, say experts. And while analysts say the loss is not a crisis just yet, at least one rice producer is ready to call it a day.

"If we keep going through this drought, it may make us quit and sell the ranch," said Sherry Polit, who grows organic rice with her family on 1,500 acres in the Northern California town of Maxwell.

"We had droughts before, but this is like the third bad one in a row," explained Polit, who also grows organic olives.

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With surface water sources drying up from lack of rain, the problem for rice producers is having enough water available to fill rice paddies, said Jim Morris, communications manager for the California Rice Commission. It's not a case of the crop being damaged, he said, so much as it's been reduced as farmers cut back on planting.

To try and make money, some California rice producers have turned to selling their water sources, rather than planting a crop this year, said Bruce Linquist, an agricultural researcher at the University of California, Davis. While some farmers could afford to leave their land unplanted, others have opted to just sell water rights.

Higher prices likely

California grows most of the country's medium-grain rice. It also grows most of the short-grain rice used for sushi in the U.S. The state exports about half of its crop, mostly to Asia, and employs around 25,000 people.

But even with the drop-off in rice production in California, it will likely have little effect on the global markets, said Leslie Butler, a professor of agricultural economics at UC Davis. Rice is a crop that's easily stored, and there's "plenty" still in storage from previous years, Butler said.

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However, Butler did say consumers will like pay more for rice in the months ahead, if they haven't already.

Water affecting farmland sales

Both UC Davis' Linquist and the Rice Commission's Morris said that contrary to public belief, the water used in rice production is no more than what's used for other crops like broccoli or oranges. But the drought is putting water at such a high premium in California that it's affecting the sale of farmland there.

"It used to be location, location, location when it came to sales, but now it's water, water, water," said Rick Schuil of Schuil & Associates, an agriculture real estate firm in the Northern California town of Visalia.

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Schuil said he's seen a 15- to 20-percent increase in prices this year for farmland with available ground water and surface water sources, and those sales are booming.

"We still have local farmers purchasing land but it's mainly the bigger farms buying to expand their property," he said. "It seems contradictory with the drought, but there's still a profit to be made here in farming."

Polit said her farm left quite a few acres for rice growing empty this year. The farm had to buy water to keep up with the current rice crop it has. That's because the family was unable to get the usual amount of water from the water district due to cutbacks.

"Water's expensive," she said. "We have two wells of our own but it's not enough. We tried to put in a third well, but it didn't work out."

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As for the future, Polit said it looks bleak for her and her family unless the weather changes.

"We've been rice farmers for 31 years and growing olives for five," she said. "But we just can't take this anymore. We've got to get some rain or this could be over."

Polit's plea may go unanswered as the state suffers through its third year of drought. Winter forecasts of rain in California for this year and next have been lowered and 58 percent of the state remains in "exceptional drought"—the highest level of drought set by the U.S. Drought Monitor.

—By CNBC's Mark Koba