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california Water Today 91 Delta pumping led many urban water agencies to pursue more aggressive con- servation measures and as many farmers south of the Delta faced severe water shortages. California water users are likely to face increasing scarcity and the need to continue adapting, as a result of a changing climate and deteriorating conditions of the state’s aquatic ecosystems (Chapter 3). The Economic Value of Water The debates on how to allocate water across sectors reflect perceptions of the underlying value of water in different activities. Some of these values are easier to measure than others. Wide disparities in the value of agricultural water use The economic value of water in agriculture—the largest human use of water— is relatively easy to determine because almost all agricultural production is sold on the market. California has the highest grossing agricultural sector in the nation, but its value is small relative to the state’s overall economy. In 2007, the value-added of crop and animal production in the state totaled $22.4 billion, or 1.2 percent of the state’s $1.85 trillion gross domestic product.14 This share nearly doubles (to $40 billion) when food processing is included and would be somewhat higher if the value of farm services and agriculture- related transport were also included. In that same year, agriculture and all related industries accounted for about 5 percent of the state’s employment (Figure 1.3). Within some regions, agriculture is far more important as a source of revenue and jobs; it accounts for as much as 15 percent of employ- ment in the San Joaquin Valley. The value of water use in agriculture varies from a few tens of dollars to thousands of dollars per acre-foot. Table 2.3 shows the estimated water use and revenue generated by major crop types for 2005, along with average revenues per acre-foot of gross and net water used. Irrigated pasture generated less than $50 per acre-foot of net water use—less than 1 percent of the average value of an acre-foot of water used to grow fresh vegetables, flowers, and other horticultural crops. The value of most “field crops” (alfalfa, rice, corn, and various grains and legumes) is also relatively low on average—ranging from $200 to $600/acre-foot 14. Value added, used to calculate gross state product, includes farm revenues from crop and livestock production and forestry and net government transfers less the cost of purchased inputs. Data are from the U.S. Bureau of Economic Analysis, gross domestic product by state: www.bea.gov/regional/gsp/. This total is lower than the gross value of farm production (such as that used to calculate crop water values in Table 2.3), which does not subtract the cost of purchased inputs.