The drought in California is hurting the agriculture industry there, but it could be a benefit to agriculture in Arizona. Farmer Jim Boyle will talk about the issue.
Richard Ruelas: Good evening and welcome to "Arizona Horizon." I'm Richard Ruelas in for Ted Simons. The drought is California is hurting the agriculture industry there, but could it be a benefit to farmers in Arizona? Maricopa County Farm bureau president and dairy farmer Jim Boyle joins me now to talk about the issue. Thanks for joining us.
Jim Boyle: Good afternoon.
Richard Ruelas: How bad is it in California?
Jim Boyle: It's quite bad. It's essentially a 100-year drought in California. It's as dry as anything they have seen in essentially a century. It's part of a bigger drought. The entire Southwest has been in for a while. Just seems to have hit California particularly hard this year.
Richard Ruelas: We are seeing the pictures of sort of those like farmers are just abandoning --
Jim Boyle: They are in some ways. Some of that's planned in the sense that in that water will move to different users depending on if you have one farmer retires some land or let it lay fallow for the summer and shift that water another crop. You will see a reduction of acreage and farming in California because of this drought. Recently they have gotten some rain but unfortunately it didn't impact the overall picture so much because what they really rely on is the snowpack in the Sierra Nevadas which was almost nonexistent this year.
Richard Ruelas: So let's look at Arizona. Are we going to benefit? Are we going to be hurt? Is it a mix of both?
Jim Boyle: It's a mix of both. And that's because the agricultural farming systems in California and Arizona are both very large and very diverse. You will find some farmers with wine, grapes, or nuts or fruits and vegetables so farmers are retiring their alfalfa acreage and shifting that water to another type of crop. And then they're going, the users of the alfalfa, the cattle ranchers and the dairy farmers, are going to places like Arizona, Nevada, Idaho to bring alfalfa in.
Richard Ruelas: If you have alfalfa planted in Arizona your price just went up.
Jim Boyle: We have seen prices rise throughout the winter. Probably starting about December, and weekly prices have been increasing. Most of that hay going to California and dairy farmers and cattle ranchers in Arizona are having to compete with those prices.
Richard Ruelas: Like what prices we talking about? What was is in December and what is it now?
Jim Boyle: Good quality first cutting alfalfa we were talking about perhaps it would go ballgame as low as $200 a ton delivered into the Mesa area where I primarily dairy farm. Right now that's gone up to $285, there's some talk of it going higher. And --
Richard Ruelas: And I imagine there's a trucking company that benefits by taking it.
Jim Boyle: The truckers definitely do. And the dairy farmers in California, they are buying this hay, are having to add, pay $70 and $80 on hauling on top of that. While we are feeling it's bad for costing us $285 in Arizona, it's costing the central valley in California $350 and they are prepared to pay $400. They think that's where it will go. That hay will go up -- come up in different parts of the west.
Richard Ruelas: If you are an alfalfa farmer in Arizona, this is a great win for you.
Jim Boyle: Yeah.
Richard Ruelas: If our dairy farmer in Arizona you are suffering because now you are competing.
Jim Boyle: Exactly.
Richard Ruelas: With the California ranchers.
Jim Boyle: That's a big issue. And there's -- some of other farms that seem to be, that will probably benefit in certain things, the fruit and vegetables. Arizona fruit and vegetable market has been strong. I was talking to a cantaloupe farmer on Friday in Maricopa. And they felt that they should get a very good price for their crops.
Richard Ruelas: Because the supply, no one, few people probably have you this drought coming to this magnitude.
Jim Boyle: Right.
Richard Ruelas: It wasn't like Arizona overplanted expecting this.
Jim Boyle: That's one of the major issues is why agriculture as a whole in Arizona probably won't be able to take advantage of it. For example, a lot of California's crops just can't be grown in Arizona. Or if they can, they take years to prepare and be ready to send to market. For example, nut trees. Pistachios, pecans, almonds, a huge market in California. And we have some of that in Arizona. But it takes, once you plant a tree over three years until you get a crop off of it. It doesn't benefit to try to plant a nut tree in hopes of getting some profits off of the California drought.
Richard Ruelas: But the fruits and vegetables, they will be in the same situation as the alfalfa farmer where they have a supply that suddenly has --
Jim Boyle: Yes. And even though that the fruit and vegetable guys in California can often pay more than, say, alfalfa farmers or wheat farmers in California for water, the drought still stresses the plants out, makes them more susceptible to pests. There's also been, it's been surprisingly warm there, which is also caused a greater amount of pest damage on some of these crops. And so transfer there's definitely a lower supply even if they get water. So there's an opportunity there for some --
Richard Ruelas: The cantaloupe farmer in Maricopa you spoke to, he is going to see a little more money because the prices go up.
Jim Boyle: Yes, we think so.
Richard Ruelas: The cantaloupe eater in Phoenix, say, will also see their prices go up. How much stress are we going to see on the market?
Jim Boyle: I think a lot of it's already built in. We are in a period of rising commodity prices in general. And that comes back to some of the basics of the world economy, is that there's billions of people in the world that are not making any more farmland. We have seen over the last few years rises in almost all agricultural commodities and that's mainly driven by demand. So some of that price is already increasing. So it's built into the system a little bit.
Richard Ruelas: Meaning that this incident, although it's a major incident to California, a major incident with Arizona farmers seeing some increase for the consumer, we are not going to see a huge spike in citrus or vegetables?
Jim Boyle: If you do see individual things, it's often related. There might be individual commodities that may have a slight impact. But in general, I think there's just, we are in a period of rising commodity prices. And so I think everyone kind of feels that when they go to the grocery store. Some of that might be affected by the California drought but it's also affected by demand in China, droughts in Mexico, all of these other things.
Richard Ruelas: One more stressor on an already bad vagues. And again, you think of that alfalfa farmer or buyer in California, the rancher, that has to be built into the price of the hamburger or steak down the road, too. Are we going to see beef prices increase?
Jim Boyle: Beef prices are at a very high level now. That goes back to a series of events. Mainly droughts that started occurring eight or nine years ago. We saw a large drought in Texas followed by a drought a couple years ago in the Midwest, all large cattle growing areas such as this year. Ranchers have had to cut back the size of their herds because they didn't have the grass to feed the cattle. That created a smaller pool of cattle to choose from, which then coupled with relatively high demand as the economy has kind of improved and everybody wants a steak on their plate, you suddenly have a situation where that beef cattle inventory, which right now in the country is the smallest since late 1940s has suddenly caused meat prices to go high. While California is a small portion of that it's certainly not helping the beef price.
Richard Ruelas: Are we going to see this extend through next year? Are farmers in Arizona thinking that this is going to continue and maybe changing what they plant or the production level?
Jim Boyle: Well, we hope not. Despite the fact that at some segments of agriculture will benefit from this, this drought isn't a California issue solely. It's also an issue for Arizona and the entire Southwest. Our drought this year wasn't as severe as California's was but we are nearing a point where the Colorado river is potentially going to be a declared an official drought. There will be an official drought on the Colorado river which will impact agriculture first in the state of Arizona. Agriculture is the first industry that takes water out of the Colorado. We have the lowest right, so essentially that we will be cut off first before it impacts any municipality, any tribal group, any other user of Colorado water. So we fear another dry year for us or California could result in the lower Colorado river flow and us having less water to use ourselves.
Richard Ruelas: We will hope and pray for rain because now you are scaring everybody.
Jim Boyle: Well, we need rain, yeah.
Richard Ruelas: Absolutely. Jim, thanks for joining us. Good luck in the marketplace.
Jim Boyle: Thanks.
