More than one-third of vegetables and almost two-thirds of fruits and nuts produced in the U.S. come from California farms. As widely reported, the worst drought in 90 years could deal a blow this year to the state’s $44.7 billion agriculture industry.
One of California’s most lucrative crops is the 1.85 billion pounds of almonds expected to be produced across hundreds of thousands of acres in San Joaquin Valley this year. That represents 82% of the world’s supply. It’s an export worth $2.5 billion a year, and 2.5 times the value of wine heading overseas. There are twice as many acres of almond trees today than 20 years ago, and prices have doubled over the past five years.
An acre of almond trees needs about 1.3 million gallons of water a year on average. About 70% of the acreage requires drip-irrigation systems that cost up to $1,200 an acre. That percentage could rise further considering that growers just learned they won’t receive water from state or federal governments this year.
One longer-term solution to the water crisis could come via the Bay Delta Conservation Plan (BDCP), a $25 billion water project that proposes building two giant water tunnels to divert Sacramento River water to Central Valley farms so they will remain fertile and productive. If approved, construction of the tunnels wouldn’t begin for another 10 to 15 years.
California’s water and agriculture challenges this year and in years ahead poses opportunities to investors. Here are three companies that are positioned for profit: