A recent op-ed in the Wall Street Journal describes what happens in an industry that suffers from a plethora of subsidies and a dearth of free markets. Water experts Peter Culp and Robert Glennon write:
In 2012, the drought-stricken Western United States will ship more than 50 billion gallons of water to China. This water will leave the country embedded in alfalfa--most of it grown in California--and is destined to feed Chinese cows. The strange situation illustrates what is wrong about how we think, or rather don't think, about water policy in the U.S.
You can read about the historical background to this "strange situation" in an essay I co-authored with Peter Hill. Basically, irrigation water in the Western states is heavily subsidized and--unlike most commodities--is not easily traded in open markets. The result is a great deal of waste, economic inefficiency, and negative environmental consequences.
Here is some of Culp and Glennon's discussion of the perverse results of big government water policies. (Keep in mind that "water rights" for farmers has come to mean "rights" to hugely subsidized water).
Alfalfa is a water-guzzling crop and the water embedded in the alfalfa that the U.S. will export to China in 2012 is enough to supply the annual needs of roughly 500,000 families.
Southern California's Imperial Irrigation District gets its water from the Colorado River, 82 miles to the east. Alfalfa farmers in the district use as much as 50% more water than growers in other areas of the state due to scorching heat, salty soil and, perhaps most important, their legal rights to an enormous quantity of cheap water. This single irrigation district controls more than 20% of the total annual flow of the Colorado River. Remarkably, the district's water rights are 10 times higher than that of the entire state of Nevada.
The perversity of a situation in which California taxpayers must spend tens of billions to protect the water supplies of vital farms and cities even as California farmers convert tens of thousands of irrigated acres to feed cows in China reflects the growing incoherence of domestic water and agricultural policy. Antiquated Western water laws often block intrastate or interstate water transfers that could satisfy changing domestic urban, agricultural and environmental needs.
In many Western states, moreover, farmers who conserve water by modernizing their irrigation systems don't get to use, lease or sell the water they save . . . Even when a transfer is possible, complicated regulatory procedures mean that final approvals can take years. Interstate transfers typically fare even worse.