A recent roundtable in Davis, California brought together 30 experts—including researchers, lawyers, agency managers, and growers—to discuss the development of groundwater markets under the Sustainable Groundwater Management Act (SGMA) and their impact on small farmers. The event aimed to identify both challenges and opportunities for small-scale agricultural producers as these markets evolve.
The group discussed equity concerns related to how groundwater pumping rights are initially allocated. UC Davis Professor Eric Edwards noted that allocations are often based on historical use, which can disadvantage those who have used less water in the past. “Can farmers be compensated to achieve equity goals? Could regulators distribute a greater share of allocations to those that are small/disadvantaged so that they possess an asset? What are the pros and cons of allocating non-tradable pumping rights to those using only a small volume of groundwater with the goal of preserving small farms?” These questions guided much of the discussion about how market design might affect small farming operations.
Participants also considered differences between multigenerational family farms and corporate or investor-owned operations. Family farms were described as focusing more on long-term sustainability and providing community benefits through local purchasing.
UC Davis postdoctoral researcher Sandy Sum presented research suggesting that groundwater trading could shift production toward high-value crops like berries and vegetables, potentially increasing farm employment due to higher labor needs for these crops. However, her model also predicts a reduction in the number of farms overall, indicating that some small farmers may exit agriculture as a result. Participants acknowledged limitations in modeling employment impacts on family-run farms and debated tradeoffs between regional farm profits, total employment, and maintaining a large number of independent farming operations.
Ellen Bruno from UC Berkeley Cooperative Extension analyzed California’s Mojave groundwater basin—the state’s most active groundwater market—as a case study. She highlighted issues such as transparency, transaction costs, and potential price manipulation by larger players if trading is not anonymous or formalized. “If trading is not anonymous, it enables the possibility of coordination by large players, further disadvantaging small sellers.” Participants suggested that centralized matching algorithms could help reduce manipulation risks.
Matthew Fienup led discussions on practical implementation challenges based on experiences from Fox Canyon and Mid-Kaweah GSA water marketing strategies. He emphasized stakeholder-driven market design and accurate water accounting but noted possible conflicts between landowners and tenant farmers over allocation of pumping entitlements.
The event concluded with consensus that while water markets can increase economic efficiency compared to across-the-board cutbacks, benefits may not be distributed equitably unless initial allocations and governance rules are carefully designed. Accurate accounting systems and anonymous trading mechanisms were identified as important safeguards against market manipulation.
The roundtable was organized by Ruth Dahlquist-Willard, Ngodoo Atume, and Ellen Bruno with support from UC Agriculture and Natural Resources’ California Institute for Water Resources and funding from the USDA Secure Water Future grant (Agriculture and Food Research Initiative Competitive Grant no. 2021-69012-35916). Liz Saunders and Prema Narasimhan assisted with hosting duties.
“Ellen Bruno is an Associate Professor of Cooperative Extension in the Department of Agricultural and Resource Economics at UC Berkeley. She is an economist who evaluates the potential for and effectiveness of different policies for managing water resources. She can be reached at ebruno@berkeley.edu.”
