Strawberry Case Study: What if Farmers Had to Pay for Water?

The strawberry, blackberry and raspberry fields of the Pajaro Valley stretch for 10 miles along the coast of California’s Monterey Bay, jeweled with fruit from April through early December. The valley’s 30,000 acres of farmland are also ruffled with emerald lettuces, brussels sprouts and varieties of kale, bringing in roughly $1 billion in revenue to the region each year.

All that abundance doesn’t come cheap.

While American farmers elsewhere have watered their crops by freely pumping the groundwater beneath their land, growers in Pajaro must pay hefty fees for irrigation water — making it one of the most expensive places to grow food in the country, if not the world. The cost: Up to $400 per acre-foot, a standard measurement equal to water covering one acre, one foot deep. The fees bring in $12 million a year, which is used to recycle, restore and conserve the region’s groundwater.

The Pajaro Valley’s unusual system — essentially a tax on water — was born of a berry-growing disaster some 40 years ago that forced farmers to act. Today, as the nation faces a spreading crisis of dwindling groundwater, stemming from a combination of climate change, agricultural overpumping and other issues, some experts say the Pajaro Valley is a case study in how to save the vital resource.

“What they are doing is cutting edge,” said Felicia Marcus, a former chair of the California State Water Resources Control Board and now a fellow at Stanford University’s Water in the West Program. While a few other regions have imposed fees on groundwater for farming, Pajaro Valley has been one of the most aggressive and effective. “They are way ahead of the curve,” she said.

Experts from as far away as China and Egypt are traveling to the valley to study the system. But replicating it elsewhere could face major challenges. For one thing, “People don’t like taxes,” said Nicholas Brozovic, an agricultural economist at the University of Nebraska. “There’s nothing mysterious about that.”

New research on the program revealed a direct connection between paying for the groundwater and conserving it: A 20 percent increase in the price of groundwater has resulted in a 20 percent decrease in the extraction of groundwater.

“Water can’t be free anywhere,” said Soren Bjorn of Driscoll’s, the berry giant.

Driscoll’s headquarters in the heart of California berry country.

One reason experts see Pajaro as a model: Despite the high price of water, agriculture in the region is thriving. It is the headquarters of major brands, including Driscoll’s, the world’s largest berry supplier, and Martinelli’s, which grows most of the apples for its sparkling cider in the Pajaro Valley.

Soren Bjorn, Driscoll’s chief executive, said in an interview that he “absolutely” sees the region as a model of water pricing that could be replicated in water-stressed regions from Texas to Portugal. “Water can’t be free anywhere, because you can’t run a sustainable water supply without pricing it,” he said. “That would apply to the globe.”

Yet, if the Pajaro Valley experiment were to be replicated across the country, it could trigger changes across the economy that affect both farmers and shoppers, resulting in higher prices at the grocery store while forcing farmers to abandon low-cost commodity crops that are needed for animal feed and other purposes, such as textiles.

While corporate growers of premium products like berries, which are shipped to the shelves of major chains like Whole Foods, Safeway and Trader Joe’s, can absorb the price of Pajaro’s water, there is no way farmers of commodity crops like cotton, alfalfa and soybeans can make the economics work, said David Sanford, the agricultural commissioner of the Santa Cruz County, which includes the Pajaro Valley.

In the years since the price on water was imposed, growers of those crops either shifted to high-priced berries and lettuces, or simply left the region for cheaper pastures.

“There’s a big public-policy argument for pricing groundwater,” said Louis Preonas, an agricultural economist at the University of Maryland. “But if you were to try something like this across the country, it would mean farmers would shift away from growing crops like corn, or leave agriculture altogether. Any way you cut it, it would likely raise food prices. But the alternative is running out of water.”

Decades ago, overpumping began imperiling Pajaro Valley farms. A strawberry field recently.

A New York Times investigation this year found that many of the aquifers that supply 90 percent of the nation’s drinking-water systems are being severely depleted by a combination of climate change and overpumping by farmers, industrial users, cities and others.

For many of the nation’s farming regions, the day of reckoning with the loss of groundwater is fast approaching. In the Pajaro Valley, it came 40 years ago.

With its loamy, sandy soil and cool nighttime breezes, the Monterey coast is an ideal climate for strawberries. But in the 1980s, disaster struck. Growers over pumped the coastal groundwater, allowing saltwater from the Pacific Ocean to seep in below their fields, up through the roots of the berry crop.

“You could see the yellow leaves, the discoloration, the stunted growth,” recalled Dick Peixoto, whose family has farmed here since 1920.

Faced with an economic disaster, Mr. Peixoto and other growers formed a local water agency with two goals: preserve the groundwater and prevent the state from taking control.

The Pajaro Valley Water Management Agency, still locally run today, got to work. Its first project was installing meters to measure how much groundwater growers were using. In 1993, it started charging farmers a modest fee of $30 per acre-foot to cover the cost of managing and reading the meters.

Dick Peixoto: “You could see the yellow leaves, the discoloration.”

A well pipe capped years ago to stop saltwater intrusion.

The water agency hired hydrologists and other consultants, who concluded that the aquifer was severely overdrawn and could be lost entirely to saltwater. In response the agency built a $6 million project to capture and divert excess rainwater from a creek near the ocean and pump it into a storage basin, where it percolates into underground wells and is eventually used for irrigation.

Next came a $20 million water recycling plant, which cleans approximately five million gallons of sewage each day and sends it through a network of purple pipes to farm fields. The purple signals that the water inside is recycled.

Now the agency is building an $80 million system to capture and store more rainwater to be used for irrigation. Some of the cost of the agency’s projects has been covered by federal grants and loans, with the rest from the groundwater pricing system, said Brian Lockwood, who has been the general manager of the Pajaro Valley Water Management Agency for 18 years.

“These projects are millions of dollars, and without this source of revenue they could never come to be,” he said.

As the ambitions of the water agency increased, so did the price of the water. It is scheduled to reach $500 per acre-foot by 2025.

In the early years, farmers chafed under the rate increases. “The pricing was really difficult, when the water used to be, you know, free,” said Thomas Broz, who has farmed about 75 acres in Pajaro since 1996.

Eventually, a group of growers challenged the water agency in court and were able to drive down the prices for a few years, and even forced the agency to refund about $12 million to farmers between 2008 and 2011.

A new reservoir to capture rainwater.

But then, from 2012 to 2017, California was struck by its worst drought in recorded history, parching farmland and devastating the rural economy. Growers across the state, particularly in the Central Valley, reached a deal with the state to sharply restrict their water use and fallow their fields.

In the Pajaro Valley, water became more expensive, but at least it was still flowing. To save money many Pajaro farmers invested in precision irrigation technology to distribute carefully measured water exactly where it was needed. Gone were the days of sprinklers that drenched fields indiscriminately.

In the midst of the drought, the then-governor of California, Jerry Brown, signed a law requiring every part of the state to devise a plan to conserve groundwater. Miles Reiter, then-chief executive of Driscoll’s, spoke in support of the law.

Suddenly, Pajaro was a model.

“Now, we’re seen as these pioneers who showed the way,” said Mr. Lockwood. “We get calls from all over the state. How did you get this going? How do get the growers to agree to it?” He partly credits local control of the resources, saying, “This is better than the county or the state coming and taking control. And by now, this is something that’s solid, it’s been tried, it’s survived lawsuits.”

The last time the agency raised rates, in 2021, there was almost no resistance from growers, said Amy Newell, who chairs the Pajaro Valley Water Management Agency Board of Directors.

Brian Lockwood: “We’re seen as these pioneers who showed the way.”

The Pajaro Valley water treatment center.

Mr. Broz, who paid $20,000 last year for water, said he has come around to accepting the system.

“The farmer has very little flexibility to build in the cost of water, so it means we have to price it into our product — it means we basically can’t be as competitive,” said Mr. Broz, who grows lettuces, berries, apples, and other vegetables. “But the pricing has allowed us to put in place the kind of measures that will help us have a sustainable system for the long term, if we want to keep the resource.”

In the central California valley’s Westlands water district, where many farmers fought the groundwater-management law, the board of directors will soon vote on a plan that would allow growers to pay for credits to use groundwater above a certain allocation. They could buy and sell the credits, starting at about $200 a credit. A handful of other water districts in California are implementing similar measures.

Many farmers worry about the beginning of such a trend.

“The concern is that any kind of pricing scheme or market based mechanism that tries to manage or distribute this resource is likely to privilege a certain kind of producer — a multinational corporation — at the expense of small-scale independent farmers,” said Jordan Treakle, program coordinator for the National Family Farm Coalition.

And in some parts of the country, pricing groundwater could spell an end to current crops altogether. For example, some experts said that could be the case for producers of Texas cotton, a commodity crop that relies almost entirely on groundwater from the depleting Ogallala aquifer.

Mr. Bjorn of Driscoll’s said Americans should be ready to face just that outcome.

“We can’t get away with producing something for which the resources do not exist,” he said. “We would be fooling ourselves to keep growing low-value crops in places in the desert.”

“Overcoming the hump of the politics is the hardest part,” Mr. Bjorn said. “After that it’s just managing the resource.”