California's Drought and You: Are Higher Prices in the Wake?

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California Drought
Chris Carlson/APA water retention pond in Anaheim, Calif., filled to less then 20 percent of its capacity.
California's drought is definitely taking its toll on the country's most populous state. Gov. Jerry Brown has signed a $1 billion relief package and the U.S. Department of Agriculture has designated 55 counties as primary natural disaster areas. Water usage is being curtailed in the state and millions of residents are starting to feel the impact.

But this isn't an isolated problem for the people of California. The impact of the drought could reach its way into nearly everyone's checkbook in the next few years, and might be felt in ways you never saw coming.

California Provides More Food Than You Might Think

Many Americans might not know that, by value, California is the largest supplier of agricultural products in the U.S.

In 2013, the state supplied 10.4 percent of final agricultural output, with $48.8 billion in value created. Of California's total land area, 25.6 percent is farmland, which is lower than the national average of 40.5 percent, but it's how that land is used that creates a concern for consumers.

Amazingly, California wouldn't have much of an agriculture industry without additional water. Of the state's cropland, 76.9 percent is irrigated, compared to just 13.4 percent nationwide, and 80 percent of the groundwater and surface supply of water consumed in the state is used to grow crops. But California values its irrigated crops because many of them aren't produced in large volumes elsewhere.

One hundred percent of almonds, 91 percent of grapes, 90 percent of broccoli and cauliflower and 88 percent of strawberries produced in the U.S. come from California. The big surprise is that 18.6 percent of all dairy products also come from the state, more than from dairy heavyweight Wisconsin, which comes in second at 14.1 percent of America's output.

A drought will mean fewer people in Southern California can water their lawns, but if it continues it will also mean less irrigation to produce the products you buy at the grocery store. So, why haven't you been hit with higher food prices yet?

The Cost to Consumers Will Be Muted ... for Now

Food prices as a whole haven't jumped significantly due to the drought, but we're starting to see drought impacts for some fruits and vegetables produced primarily in California. Garlic prices are up about 100 percent from early 2014 and grapefruit prices are up about 50 percent.

From here, conditions could get worse because California farmers have been forced to leave millions of acres unplanted, and some rural regions are running out of water to irrigate fields.

But there might be a long delay between when the drought affects planting and irrigating and when it will affect your wallet. The actual product being planted now won't hit store shelves for at least a few months, and most of those items are perishable, meaning even an efficient market won't see higher prices until there's a shortage of product. So the drought won't impact grocery prices until late summer or fall for most California-produced items.

Short-term impacts may occur on only a handful of products, but the long-term impact could be severe given the state's significant agriculture production. Droughts have long-lasting impacts on the soil and therefore on planting decisions, so we'll likely see lower agriculture outputs from California well into 2016, if not beyond. Brace your wallets.

Travis Hoium is a Motley Fool contributor. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.
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