Statewide, in 2005 California used 82 million acre-feet (maf) of water, of which 8.9 maf went to urban uses, 32 maf went to agriculture, and 41.1 maf went to other uses including habitat. In California's Central Valley in 2005 there was 8.3 million acres of irrigated agriculture which used 25.8 maf of water. The Central Valley is divided up into two regions for our analysis, the Sacramento and San-Joaquin Valley. These represent two distinct regions separated, loosely, by the Sacramento-San Joaquin Delta.

The status of Central Valley agriculture in 2050 depends on technological changes, market conditions, water availability, and climate change. Changes in yield will result from better technology, changes in markets will result from increasing population and income, and changes in water availability will result from an increasing urban footprint in the San Joaquin valley and other parts of the state, and the need to consider environmental habitat. All of these factors will be influenced by climate change, which we discuss in turn below.

Changes in Yield

Yield improving technological innovations for California crops are likely to grow at the historic rate of 1.4% per year until the year 2020. In 2020, physical photosynthetic limits and other factors will cause the rate of growth to plateau. Taking into account the average historical rate of growth until 2020, and capping the rate of growth thereafter, suggests an average increase in yield of 29% across all California crop groups by 2050. These yield increases are independent of climate change and thus offer a significant buffer against the yield reducing effects of warm-dry climate change.

The scientific consensus is that climate related crop yield changes are expected in California, and other regions, due to changes in precipitation and temperature. Changes in precipitation will lead to stress irrigation, where crops are irrigated at less than normal needs, with varying effects on yield depending on the specific crop. Similarly, temperature increases will change the timing of the growing season and have differential effects on yield across crops. Further complicating the story is that both changes in precipitation and temperature will vary significantly between regions under climate change. A handful of studies have been conducted which take these environmental conditions into account for California (Adams, Wu, and Houston, 2003; Bloom, 2006; Lee, De Gryze, and Six, 2009; Lobell, Cahill, and Field, 2007). Climate induced yield changes will vary across the two regions of the Central Valley. Table 1, below, summarizes the expected percent change in yield by 2050 under warm-dry climate change. The effect of climate change varies by both crop and region with crops like alfalfa expected to realize an increase in yields while vineyards are expected to realize a significant decrease.

Changes in Market Forces

Market conditions for many "middle-class" California crops, including fruit, nuts, and vegetables, are characterized by inelastic demand and a positive income elasticity. In other words, consumers are not very responsive to changes in price and, additionally, are likely to buy more of these crops as incomes increase. Both of these effects are independent of climate change. Incomes in the U.S. and Pacific Rim economies are expected to grow significantly in the future, especially as China and other economies come online. At the same time, global population is expected to increase which will also lead to an increased demand for many California crops. Increasing population, income, and a muted response to increases in price suggests that California "middle-class" crops will be more profitable in the future. Additionally, this provides an incentive for growers of other crops, including rice, corn, and grains, to shift production into these more profitable specialty crops. The net effect is another revenue buffer against the effects of climate change.

In general, most crops prices are expected to increase by 2015 in real terms with a drop following afterwards. Thus rice, corn, and grain, "commodity crops," might experience price drops of 1.45%, 0.67% and 1.58%, respectively. This translates into demand shifts of -1.4% for rice, -17% for corn and -19.9% for grain, indicating that production shifts away from California. In contrast, for fruit, nuts, and vegetables, the so-called "middle-class" crops for which California has market power, population and income growth will increase demand. A U.S. population increase of 43% and income increasing by 2.5 times by 2050 translate into increases in U.S. demand for "middle-class" crops ranging from 3.44% for some field crops to 45% for vegetable truck crops (Howitt, Medellin-Azuara, and MacEwan, 2009).

Changes in Water Availability

Arguably the most important, and most popular in the media, effect of climate change is changes in water availability. In California's Central Valley, water is scarce and warm-dry climate change will put stress on water deliveries to agricultural locations as well as urban and habitat uses. For California under the climate scenario hypothesized in this paper, a reduction in precipitation of 27%, a reduction in inflows of 28%, and an increase of 15% in reservoir evaporation are expected (Medellin-Azauara, et al. 2008). In the Central Valley, groundwater inflows may be reduced by nearly 10% under this climate scenario. The expected reduction in water availability for urban and agricultural uses is summarized in table 2, below. In total, a 14% reduction in water is expected statewide, with a 21% reduction for agriculture and a much more modest 0.7% reduction for urban users.