California's crippling drought could cost – and benefit – Canadians

For Canadians who crave fresh strawberries in winter, California's devastating drought may mean having to pay more for certain produce. But the agricultural havoc in the Golden State may have a silver lining for at least some Canadian exporters.

Price of winter produce may rise but lack of rain in Golden State could help farmers export

An irrigation pipe does little to relieve the crippling drought conditions that have plagued California farms, including this one near Cantua Creek. (Robert Galbraith/Reuters)

For Canadians with a craving for fresh strawberries, the devastating drought in California may mean having to pay more for the kind of produce that is not in season here.

But the agricultural havoc on the U.S. west coast may have a silver lining for Canadian farmers, assuming they can interest the California palate in some heartier alternatives.

The drought in California has forced farmers to remove some almond orchards earlier than they normally would because they don't expect to have enough irrigation water. (Scott Smith/Associated Press)

"If Mother Nature affects one region of the world, it may actually benefit another at the same time because prices go up or down as a result of speculation," says Sylvain Charlebois, a professor of food distribution and policy at the University of Guelph.

"Thirty-eight million people [in California] will be looking for more food and this could be an opportunity for Canadian agriculture, particularly in light of the fact that our loonie has decreased in value over the greenback.

"Our Canadian products are actually cheaper to Americans than two years ago."

2013 was the driest year on record in California, and forecasts project the arid weather will continue throughout this year. More than 500,000 acres of farmland may go unplanted in 2014, which Charlebois calls "quite significant."

One estimate, according to Bloomberg News, puts the lost revenue from farming and related businesses in California in 2014 as high as $5 billion.

This in a state where agriculture is worth an estimated $44.7 billion, a noticeable chunk of which comes from Canada.

Figures from Statistics Canada show that Canada imported food products worth $2.7 billion from California in 2013, up from $2.2 billion in 2009.

Lettuce worth $262.3 million topped the import list last year, followed closely by strawberries worth $258.7 million.

More and more exports

Source: Statistics Canada. (CBC)

On the export side, Canada sent food products worth $325.7 million to California in 2013, up from $257.4 million in 2009.

"Our exports of fresh produce are growing faster than their exports for the past five years, and most rapidly in the past year, not surprisingly because the drought keeps dragging on," Armine Yalnizyan, a senior economist at the Canadian Centre for Policy Alternatives, said recently on CBC Radio's Metro Morning.

Charlebois estimates that the average Canadian buys more than $585 worth of fruit, vegetables, legumes and organic food from California each year. With the drought, he says, prices of that produce could rise 20 per cent or more.

But the exact impact at the grocery store is anything but clear as any change related to the drought won't kick in for a while. Contracts signed months ago cover the produce coming in right now, and more locally grown produce will be consumed in the summer. 

Charlebois says any hikes aren't likely to be noticed before the fall.

What's more, estimates of potential price hikes are just that, estimates. Importers aren't likely to snap up California produce if they feel it's too expensive and there are cheaper products elsewhere.

"If prices of California products go too high, they just won't buy it," says Charlebois.

So importers would look for produce wherever they might find it, with price being the guiding factor. Sources could vary, with other U.S. states having potential. Even China could get in the mix.

"China has become very competitive," says Charlebois, noting the country now produces kiwis at a much cheaper price than New Zealand.

Different tastes

"Does it taste the same? I would say not, because I've tasted it. It's just different, but it always boils down to price."

Given the volume of produce coming from California, finding substitutes would require some work, particularly for organic foods, which are harder to produce on a larger scale in Canada.

At the same time, Canadian fruit and vegetable growers could find a silver lining in the California drought, albeit a few years down the road.

A secret service agent looks over a dried-out farm field during a visit by U.S. President Barack Obama to Los Banos, Calif., on Feb. 14, 2014. (Wally Skalij/Los Angeles Times/Associated Press)

"There's a longer term issue with California. It doesn't appear the drought is going to be sorted out any time soon," says Mark Wales, president of the Ontario Federation of Agriculture and an Aylmer-area vegetable producer.

"There's getting to be a realization that they cannot continue to grow all that they grow there."

Enter the opportunity for Canadian farmers. Wales looks first to the tomato paste industry, which is driven by production in California.

Tomato growers in southwestern Ontario were devastated when H.J. Heinz Co. announced it was closing its Leamington plant in June 2014.

Conventional thinking, Wales says, suggested at first that the acres devoted to tomato production feeding the Heinz plant would be lost. (Heinz may be having a slight change of heart, with an announcement expected this week that a Canadian food processor will continue to use some locally grown tomatoes to make juice for the multinational company.)

But what if tomatoes grown here could fill the void left by lack of production in California?

Do a reality check

"There needs to maybe be a reality check," says Wales. "Those produce-growing acres really need to stay here, but somebody has to be willing to process it and take over. Can we replace acreage in Ontario in a crop like tomatoes? Can we replace California acres with Ontario acres because of water? We have water."

Canadian farmers can't compete against winter vegetable crops in California or Florida, other than what may be coming on stream in greenhouse production, he says.

Whatever changes Canadian farmers may make to be more competitive, another force they can't control, the weather — no matter how much they talk about it — will be at play. 

"I do believe that climate change is really part of the new normal in agriculture. It's something that will not go away," says Charlebois.

In response, he sees a need to better understand weather patterns, and to develop technologies to help agricultural producers cope with the changes.

"We need to make sure that we equip farmers appropriately so they can actually adjust and change their production methods, and we haven't thought that way."

No more segmenting

In years gone by, livestock farmers just produced livestock. Grain growers produced grain. Cash croppers did cash crops. And so on.

"This is how we've segmented our agriculture, but I'm not sure that model actually works anymore," says Charlebois. "We need adaptable food systems."

"The unfortunate thing is that over the years in agriculture, we've always been supply-focused and not necessarily demand-focused, so when an opportunity arises like California, for example, we're not necessarily ready for it."

Yalnizyan also sees a "really nagging problem about climate change."

"There's not enough water in the major food-producing areas of the world and we might not have enough time to change our path to more frequent and longer droughts, so paying more at the checkout counter, that's just going to be the start of change to come."