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Monday, Oct. 05, 2009

Uncertainty looms for west-side farmers

This time of year, farmers on the Valley's west side usually have a fairly good idea what they will be planting next season, and if they will be getting a loan to pay for it. But this is not a normal year.

Uncertainty looms for west-side farmers who were forced to fallow thousands of acres in the wake of a third dry year and a dismal water allocation. The situation has put some growers in a holding pattern.

Lenders are worried about farmers being able to pay back loans. And without an adequate water supply, more acres may be fallowed and the problems of high unemployment may get worse.

"I am just kind of waiting to see what my bank has to say," said Todd Allen, a third-generation farmer in the Firebaugh area. "I really can't move forward without it."

Allen is typical of many farmers in the Westlands Water District who were left high and dry this year. The 600,000-acre district provides water for about 600 family-owned farms.

This spring, a lack of rainfall resulted in a zero allocation of federal water, and reduced water pumping to protect dwindling fish in Northern California rivers further cut supplies. Although the allocation was later bumped up to 10%, for many it was too little, too late.

Allen was planning to farm wheat, safflower and cantaloupes on 600 acres. But with a limited water supply, he only harvested 40 acres of wheat, a low-value crop.

Crop insurance helped him limp through the year. It wasn't enough. Now he worries about how he will make a large payment on a drip irrigation system he installed two years ago.

Allen submitted his loan package recently, and he is waiting to hear from his lender. The process used to take several days, but this year it has taken several weeks.

He hopes it's not a bad omen.

"I want to be able to produce crops so I can stay in this game, because right now I am just barely hanging on by a thread," Allen said.

Richard Matoian, executive director of the Fresno-based Western Pistachio Association, said many of his members are evaluating their options for water. Some have been able to bank water they received earlier this year. Others have drilled new wells. Some are making plans to buy water.

Growers of permanent crops like pistachios and almonds face the added pressure of making sure they can keep their trees alive.

"I think every grower is going through that decision-making process right now," Matoian said. "And it's not easy."

Woolf Farms in Huron is planning for another zero water allocation next year.

To stretch its limited water supply, the company bulldozed 450 acres of almond trees at the end of this year's harvest and will shift 250 acres of processing tomatoes outside of the Westlands Water District and into Madera.

"We are budgeting for a worst-case scenario and hoping for the best," said Stuart Woolf, of Woolf Farming. "At this point, we just don't know where the politics will fall on this issue, or what Mother Nature will allow for."

Woolf said lenders also are scrutinizing growers plans and are asking tougher questions about farmers' water sources.

Lenders agree that the uncertainty over next year's water supply is playing into lending decisions.

"We want to have a good understanding of the resources a grower has available and the quality of water they have," said Roger Sturdevant, executive vice president of the agribusiness division for Bank of the West. "The challenge is coming up with what makes sense from a business standpoint."

Growers with adequate wells, water that has been stored or the financial ability to buy water from other sources are in a good position.

"People who have a high debt load, limited acres of production and high water costs are going to be in a real tough situation," said Tom Brown, CEO of Fresno Madera Farm Credit.

At Rabobank, Bob Dingler, agribusiness division manager, said that while the bank is scrutinizing growers' loan requests, it has not denied a loan to anyone because of the water situation.

Dingler said the bank makes of point of talking with its borrowers all year long.

"Like most financing situations, we like to be a partner, and if we are going to be a good partner, we need to be informed," Dingler said. "Surprises are the last thing we want."

Pistachio grower Steve Moore doesn't plan to give his lender any surprises. He is shoring up his plans for next year by drilling a new well on his ranch south of Huron.

The new well cost $1 million.

"We are locked into these trees, and we have to give them water," Moore said. "At this point, we have to hold on and pray for big rains."