The University of California, Davis has released information detailing agricultural losses and the potential future impacts of the drought, and has warned groundwater reserves cannot be treated as an 'unlimited savings account'.

The state is experiencing its worst drought in decades which last year led to a total economic cost of US$2.2 billion.

A new study released by the university's Davis Center for Watershed Sciences presented new data on California's coastal and southern farm areas, and forecast the drought's economic fallout.

The study found that the drought, the third most severe on record, is responsible for the greatest water loss ever seen in Californian agriculture, with river water for Central Valley farms reduced by roughly one third.

Groundwater pumping rates have more than doubled over the previous year, most notably in the San Joaquin Valley and the Tulare Basin, and the resource is expected to replace most river water losses.

Davis Center director Jay Lund said while the water reserves made California economically resilient to droughts, more work needed to be done to ensure their sustainability.

"California's agricultural economy overall is doing remarkably well, thanks mostly to groundwater reserves," said Lund.

"But we expect substantial local and regional economic and employment impacts. We need to treat that groundwater well so it will be there for future droughts."

In 2014, direct costs to agriculture were expected to reach US$1.5 billion, of which two thirds came from revenue losses and the rest from additional pumping costs.

This net loss revenue is roughly 3% of the state's total agriculture value.

In addition, 428,000 acres of irrigated crop land are going out of production from central and southern California, with the Central Valley being the hardest hit.

Additional dry years in 2015 and 2016 are forecast to cost Central Valley crop farming an estimated total of $1 billion annually.

The study also said the drought was likely to continue through 2015, regardless of El Niño, but consumer food prices would be largely unaffected.

Groundwater Depletion

If the drought continues for two more years, the study stated that groundwater pumping ability would slowly decrease, while costs and losses would gradually increase. California is also the only state without a framework for groundwater management.

By 2016, pumping costs are forecast to increase by an additional 5%, primarily because of falling water tables.

Agricultural and resource economics professor Richard Howitt described the groundwater reserves as a 'slow-moving train wreck' due to them not being fully replenished during wet years.

"A well-managed basin is used like a reserve bank account," said Howitt.

"We're acting like the super rich who have so much money they don't need to balance their checkbook."

California produces nearly half of U.S.-grown fruits, nuts and vegetables and nearly a quarter of the nation's milk and cream.

Across the country, consumers regularly buy several crops grown almost entirely in California, including tomatoes, carrots, broccoli, almonds, walnuts, grapes, olives and figs.

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