June 9, 2023

#10: How Farmland was Financialized…for Groundwater

Agricultural land can only be turned into a commodity or asset if it has water beneath it. Writing on the legal restructuring that allowed institutional investors in California to financialize groundwater, anthropologist Julia Sizek covers a subject that has been thoroughly neglected in the literature on the finance-driven land rush. Sizek’s account underlines the entangled nature of land and water speculation, and how the state of California has helped create a market for water—and land—speculation.


The post-2008 rush in financializing farms meant that firms began incorporating farmland into their institutional investments. As firms began with these new investments, they had to contend with land’s unruly nature, its status as an “uncooperative commodity” [1]. Geographers have shown how farmland investors have not necessarily succeeded in making land into an asset class even as they have performed it [2][3].
Of course, the financialization of farmland was never only about the land itself: scholars often describe post-2008 investment through the intersection of food and financial crises. As the financial market crashed, the world all over was already suffering from rising grain prices [4]. The land rush, then, was not only a good investment because of a need to fix floating capital when returns on bonds and stocks were poor, but also a way to invest in other sectors, including energy and agriculture.
It is here that the financialization of land intersects with that of water. Without water, as signs plastered across California’s Central Valley remind I-5 drivers, there is no food [5]. Yet, as I’ve found in my research in Southern California, investments in agricultural land can be about securing legal water rights—and more specifically, groundwater rights—from the land. In the words of Kelly Kay or Tania Li, it’s not only the land itself that matters, but the bundle of rights or affordances that come with it [6][7]. In California, groundwater is an essential part of this equation, driving investment in farmland not for crops, but for what lies underneath them.
Since the 1990s, some have understood the relationship between groundwater and farmland through the concept of “virtual water,” or the export of water from one country to another through the export of water-intensive crops. Rather than consuming its own groundwater, a country instead gets ‘virtual’ water from crops grown elsewhere, solving its own “water resources balance equation” [8]. Saudi Arabia is often the paradigmatic example of a virtual water importer, and the practice is encouraged by their government and sovereign businesses. One place where they get this water is the United States, where comparatively lax water regulations can make water-intensive crops cheap. Through growing water-intensive crops like alfalfa in areas like Southern California and Arizona, they export water to Saudi Arabia, prompting considerable backlash from American media [9].
This strategy is essentially a form of legal arbitrage: by taking advantage of the legal affordances in the United States, the Saudis—or other virtual water importers—don’t need to pay the high costs of producing alfalfa or other water-intensive crops and exhausting their own groundwater supply. Like global wealth chains that use different nation’s laws in order to turn a profit [10][11], these water regimes also depend on finding cheap—often agricultural water—somewhere, and moving it elsewhere [12].
Virtual water—or moving water that “belongs” to farms—is nothing new in California, I’d argue, where the state has been intimately involved in facilitating the transfer of groundwater across districts. By moving “cheap” agricultural water to “expensive” municipal uses, water districts can turn a profit. While arguably California has long been a “hydraulic society” [13][14], the state has also “rendered nature investable” through changing groundwater regulations [15]. State-regulated groundwater transfer in the 1980s helped to facilitate what was called a groundwater “crisis” in the 2000s and 2010s, and helped to shape a market in land that was actually a market for water.
Here, I draw attention to the entangled nature of water and land speculation through a case with which I’m intimately familiar: that of Cadiz Inc. Cadiz Inc is a forty-year-old resources investment company that has historically used agriculture as a means of access to groundwater in California, as I’ve argued elsewhere [16]. Their story, which I have tracked through regulatory documents, media, and interviews, is a bellwether of market trends.
Cadiz Inc’s story begins with the California drought of 1977-1978, which was the first drought to occur after the construction of modern water projects in the 1940s and 1950s [17]. This drought forced the State Water Project in the Central Valley to dramatically reduce their delivery to contracted users by 60% (agricultural users) and 10% (municipal users) [18]. When faced with restrictions on agricultural use, San Joaquin Valley users instead turned to groundwater, drilling over 3000 wells in 1977 alone [19].
For users, the drought meant that they turned to groundwater as “money in the bank” [20]. For water managers at the state level, however, the drought pointed to the problems with groundwater laws, which allowed for “unlimited new wells and provide[d] no administrative mechanisms whatever to deal with groundwater pumping” [21]. In other words, by owning the property above the aquifer, landowners were able to secure the rights to the groundwater below it—with no real limitations as long as they used the water on the property. (This has changed somewhat with the passage of the Sustainable Groundwater Management Act in 2014 but has not yet resulted in significant reductions in groundwater withdrawals, and likely won’t until the implementation of groundwater management plans in the 2030s and 2040s [22]).
But rather than increase regulations on groundwater or restrict well-drilling as state regulators wanted, California’s legislature enabled groundwater transfers so that water could be transferred off the properties where it was pumped. Assemblyman Richard Katz pushed for making groundwater transfers between districts easier [23]. A new class of investors emerged wanting to cash in on the drought [24]. Economist Mason Gaffney argued that this legal change popularized water marketing, marking another step in California’s continued oscillation between subsidized water sources to overdraft to emergency projects [25].

Old Woman Mountains from the Cadiz Dunes, less than 10 miles from the proposed Cadiz Inc Project. Source: Julia Sizek.

In 1983, Cadiz became one of these investors. Betting on the ability to transfer groundwater out of their district, they hoped to move their water from the California desert to metropolitan Southern California, beginning with acquiring around 30,000 acres of checkerboarded desert land along the railroad line.
Though the company told the public that their project was agricultural, their Securities and Exchange Commission filings show otherwise. For example, when they purchased the distressed Sun World (Parrish 1994) [26], a raisin and watermelon growing company, in 1996, their listed “Transaction Rationale” to the Securities and Exchange Commission listed water rights above the agricultural value of the company.
“Sun World owns approximately 20,000 acres of developed farmland with prime senior water rights primarily in the Central Valley of California.  The Company believes that with ever-increasing pressure to relieve the water shortages in the state and with agriculture consuming in excess of 80% of the water used, established acreage with prime water rights will increase in value substantially over the next several years” [27].

Like other water investors in the late 1990s, they were interested in finding new ways to cash in on the water market through agriculture. An anonymous lawyer involved in the bankruptcy proceedings was quoted in the Chicago Tribune as saying that Cadiz “saw acquiring Sun World as a very important step in developing their water rights” and to get them a leg up in water district negotiations, as California districts have been traditionally dominated by agricultural interests [28].
It also gave them a leg up in battling a proposed landfill in the desert sponsored by WMX Technologies Inc, the parent company of Waste Management Inc, in the late 1990s [29][30]. Though ultimately doomed by a combination of a lawsuit from Cadiz, local opposition, and a mob-linked scandal, Cadiz was able to claim that the landfill would hurt its farming operations—even though their farm in Cadiz, a small town along Route 66, has consistently lost money.
Even as Sun World was dragged down by its parent company’s land investments [31], they were able to make revenue through growing crops and licensing them around the world. In 1999, the company was involved in a development deal in Southern Egypt called the Tushka project alongside Kingdom Agricultural (known as KADCO), owned by Saudi Prince Alwaleed Bin Talal Bin AbdulAziz Alsaud. In 2002, KADCO planned to buy 49.75% of Sun World, bringing much-needed cash to Cadiz while furthering Saudi agricultural interests away from home [32]. But the deal never went through, for “technical reasons” and regulatory problems with the Egyptian government related to the Tushka project [33]. (In 2011, KADCO gave back most of the land to the Egyptian government, but continued farming on their remaining lands until they sold the company in 2017 [34][35]).
In 2003, Cadiz filed for Sun World’s bankruptcy, and with it, became “no longer engaged in agricultural operations” [36]. They returned to the only thing that they thought could make them money: water. In the late 2010s, they began a new iteration of the project, partnering with the Santa Margarita Water District.
In my research, I’ve chronicled the challenges that Cadiz has faced in developing their water and selling it to Los Angeles during the last 10 years since they made their plans with SMWD, focusing primarily on the regulatory and legal aspects of the project [37][38][39]. But here, I think, Cadiz Inc—in their confusing acquisitions and business strategy—can help us envision the financialization of farmland beyond the farm, and turn instead to the legal and regulatory sides of land’s affordances. These property regimes—like other property regimes around the world—differ state by state, and the difference in land’s affordances offer opportunities for arbitrage, brokering, and regulation.
In California, the opportunities to make money from groundwater are only growing. While recent rains have temporarily alleviated stressors on water supply, new strains will appear when the proposed changes to the Colorado River compact will significantly decrease California’s share [40]. With the end of free surface water, California will inevitably turn back to groundwater. What if farmland becomes the answer?

Bonanza Spring, a spring that could be affected by groundwater pumping, located approximately 15 miles from the Cadiz Inc project. Source: Julia Sizek.

[1] Bakker KJ (2003) An Uncooperative Commodity: Privatizing Water in England and Wales. Oxford Geographical and Environmental Studies. Oxford [England], New York: Oxford University Press.

[2] Fairbairn M (2020) Fields of Gold: Financing the Global Land Rush. Ithaca, N.Y.: Cornell University Press.

[3] Ouma S (2016) From Financialization to Operations of Capital: Historicizing and Disentangling the Finance–Farmland-Nexus. Geoforum 72: 82–93. DOI: https://doi.org/10.1016/j.geoforum.2016.02.003.

[4] Headey D and Fan S (2008) Anatomy of a Crisis: The Causes and Consequences of Surging Food Prices. Agricultural Economics 39(1): 375–91. DOI: https://doi.org/10.1111/j.1574-0862.2008.00345.x.

[5] Pope S (2015) Who Is Behind Those Water Signs On I-5? KQED. San Francisco: KQED. Available at: https://www.kqed.org/bayareabites/96228/who-is-behind-those-water-signs-on-the-i-5 (accessed: 07/06/2023).

[6] Kay K (2016) Breaking the Bundle of Rights: Conservation Easements and the Legal Geographies of Individuating Nature. Environment and Planning A 48 (3): 504–22. DOI: https://doi.org/10.1177/0308518X15609318.

[7] Li TM (2014) What Is Land? Assembling a Resource for Global Investment. Transactions of the Institute of British Geographers 39(4): 589-602. DOI: https://doi.org/10.1111/tran.12065.

[8] Sallam OM (2010) The Role of Virtual Water Imports in Groundwater Protection-Case Study: Saudi Arabia. Proceedings of International Conference on Water Resources and Arid Environments 4: 214–21.

[9] Cantor A, Turley B, Ross CC, et al. (2022) Changes to California Alfalfa Production and Perceptions during the 2011–2017 Drought. The Professional Geographer 74(4): 628–41. DOI: https://doi.org/10.1080/00330124.2022.2075409.

[10] Grasten M, Seabrooke L and Wigan D (2021) Legal Affordances in Global Wealth Chains: How Platform Firms Use Legal and Spatial Scaling. Environment and Planning A: Economy and Space. DOI: https://doi.org/10.1177/0308518X211057131.

[11] Mezzadra S and Neilson B (2013) Extraction, Logistics, Finance: Global Crisis and the Politics of Operations. Radical Philosophy 178. Available at: https://www.radicalphilosophy.com/article/extraction-logistics-finance.

[12] Molle F, Berkoff D (2006) Cities Versus Agriculture: Revisiting Intersectoral Water Transfers, Potential Gains, and Conflicts. International Water Management Institute: Colombo.

[13] Wittfogel KA (1981) Oriental Despotism: A Comparative Study of Total Power. Yale University Press: New Haven, USA.

[14] Worster D (1982) Hydraulic Society in California: An Ecological Interpretation. Agricultural History 56(3): 503–15.

[15] Ouma S, Johnson L and Bigger P (2018) Rethinking the Financialization of ‘Nature’. Environment and Planning A: Economy and Space 50(3): 500–511. DOI: https://doi.org/10.1177/0308518X18755748.

[16] Sizek J and Stringfellow K (2018) The Trouble with Cadiz. KCET (Web edition) sec. Artbound. Available at: https://www.kcet.org/shows/artbound/the-trouble-with-cadiz (accessed: 13/11/2019).

[17] Robie RB (1977) Pressures Created by a Severe Drought on Water Institutions. American Journal of Agricultural Economics 59(5): 938–42. DOI: https://doi.org/10.2307/1239867.

[18] Santos J and Godwin AF (1978) The 1976-1977 Drought: A Review. Sacramento: Department of Water Resources, p. 39.

[19] Robie 1977, p. 941.

[20] Weber, GS (1994) Twenty Years of Local Groundwater Export Legislation in California: Lessons from a Patchwork Quilt. Natural Resources Journal 34: 658.

[21] Robie 1977, p. 942.

[22] Berven, CG (2020) The Sustainable Groundwater Management Act’s Impact on Groundwater Withdrawl in the Sacramento Hydrologic Region. Berkeley: SGMA Impacts on California Groundwater.

[23] Weber 1994.

[24] Green C (2012) Farmland in Demand. Available at: https://www.latimes.com/business/la-xpm-2012-dec-26-la-fi-farmland-20121226-story.html (accessed: 13/11/2019).

[25] Gaffney M (1997) What Price Water Marketing?: California’s New Frontier. The American Journal of Economics and Sociology 56(4): 476. DOI: https://doi.org/10.2307/3487329.

[26] Parrish M (1994) Setbacks Take the Shine off Sun World, Drive the Produce Giant into Chapter 11. Los Angeles Times (accessed: 13/05/2023).

[27] Cadiz Land Company, Inc (eds)(1997) Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934. 10-K 0–12114. Securities and Exchange Commission Filings. Rancho Cucamonga, CA: Cadiz Land Company, Inc. Available at: https://www.sec.gov/Archives/edgar/data/727273/0000912057-96-014746.txt (accessed: 13/05/2023).

[28] Schodolski V (1997) Water Buoys WMX Foe in Fierce Desert Battle. Chicago Tribune, Available at: https://www.chicagotribune.com/news/ct-xpm-1997-03-30-9703300159-story.html (accessed: 13/04/2023).

[29] Schodolski 1997.

[30] Carraher C (1998) Dump in the Desert: A Scrapbook of the Bolo Dump Fight. California: Joshua Tree.

[31] Fulmer M (2000) Desert Farmer Taps into Global Markets. Available at: https://www.latimes.com/archives/la-xpm-2000-oct-08-fi-33244-story.html (accessed: 13/04/2023).

[32] Visalia Times Delta (eds)(2002) Sun World Grows for World Markets. Available at: https://www.newspapers.com/newspage/284995331/ (accessed: 13/04/2023).

[33] Hiltzik M A (2002) Merger Plan Fails for Cadiz, Kadco. Available at: https://www.latimes.com/archives/la-xpm-2002-jul-11-fi-cadizsked11-story.html (accessed: 13/04/2023).

[34] Reuters (2011) Saudi’s KADCO Agrees to Hand Back Egypt Land -Govt. Available at: https://www.reuters.com/article/egypt-alwaleed-idUSWEA594220110420 (accessed: 13/04/2023).

[35] Ghali S and Farid D (2017) Giant Saudi Investments Return Prince Alwaleed Bin Talal Ushers in a New Wave of Saudi Investments. Available at: https://www.egypttoday.com/Article/3/17712/Giant-Saudi-Investments-Return-Prince-Alwaleed-Bin-Talal-ushers-in (accessed: 13/04/2023).

[36] Cadiz Inc (eds)(2004) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2003. SEC 10-K 0–12114. Los Angeles, CA: Cadiz Inc. Available at: https://otp.tools.investis.com/clients/us/cadiz_inc/SEC/sec-show.aspx?FilingId=3253978&Cik=0000727273&Type=PDF&hasPdf=1 (accessed: 13/04/2023).

[37] Sizek J (2018) California’s Groundwater Regime: The Cadiz Case. Resources 7(1): 7. DOI: https://doi.org/10.3390/resources7010007.

[38] Sizek J (2021) Zombie Infrastructure: A Legal Geography of Railroad Monstrosity in the California Desert. Environment and Planning D: Society and Space 39(4): 758–75. DOI:  https://doi.org/10.1177/02637758211023504.

[39] Sizek J (2023) Regulatory Alchemy: How the Water Cycle Becomes Capital in the California Desert. Antipode. DOI: https://doi.org/10.1111/anti.12942.

[40] Flavelle C (2023) Biden Administration Proposes Evenly Cutting Water Allotments From Colorado River. Available at: https://www.nytimes.com/2023/04/11/climate/colorado-river-water-cuts-drought.html (accessed: 13/04/2023).