Tags: MarketWatch | Weidner | California Drought | Food Inflation

MarketWatch's Weidner: California Drought Could Kick-Start Food Inflation

By    |   Tuesday, 07 April 2015 01:21 PM EDT

If the California drought continues, U.S. food prices eventually could skyrocket, according to MarketWatch columnist David Weidner.

Weidner questions the conventional wisdom that California’s drought will not lead to inflationary pressures on food crop prices.

In fact, he predicts that water — not the Federal Reserve’s ultra-easy monetary policies — will drive inflation higher.

“Remember, California is the biggest farm state in the nation, producing more than Iowa, Nebraska and Minnesota combined,” he wrote in a MarketWatch column.

“Consider that food represents nearly 5 percent of gross domestic product, 13 percent of household expenditures, 9.2 percent of U.S employment and 14 percent of manufacturing jobs. California’s annual agriculture receipts come in at $21.4 billion.”

Weidner noted agriculture uses 80 percent of California’s water, but that the state water system expects to deliver only about 20 percent of the water it promised for 2015.

He reported some economists are predicting hefty price hikes of 28 percent and 34 percent for crops including lettuce, berries, broccoli, grapes, melons, tomatoes, peppers and packaged salads.

“The water being pumped in many parts of the state is 10,000 to 30,000 years old, and the ground is sinking. A study by the U.S. Geological Survey of the nation’s underground water reserves was discouraging enough, but its examination of California aquifers found that levels were at record lows — and that was in 2008.”

Weidner said prominent economists argue that California food crops represent a tiny portion of GDP compared to housing and gasoline prices.

“Perhaps. But we don’t buy and sell our homes every year and we can adjust our fuel spending. On the flip side: Everyone has to eat,” he wrote.

Californian Carly Fiorina, a former Hewlett-Packard CEO and potential GOP presidential candidate, told the Blaze Radio that liberals and environmentalists are to blame for the state’s water shortages, Politico reported.

She noted the House passed a bill last December that would have pumped water to Southern California from further north in the state, but environmentalists claimed such a step would harm endangered fish species and the Obama White House threatened a veto.

“That’s the tragedy of California, because of liberal environmentalists’ insistence — despite the fact that California has suffered from droughts for millennia, liberal environmentalists have prevented the building of a single new reservoir or a single new water conveyance system over decades during a period in which California’s population has doubled,” Fiorina said.

“There is a man-made lack of water in California — and Washington manages the water for the farmers.”

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If the California drought continues, U.S. food prices eventually could skyrocket, according to MarketWatch columnist David Weidner.
MarketWatch, Weidner, California Drought, Food Inflation
Tuesday, 07 April 2015 01:21 PM
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