By mid-decade, “up to 40,000 head entered annually” . Large numbers of sheep were also driven in from the Southwest to augment the 17,500 sheep that were in California in 1850. In the peak year of 1856, 200,000 head of sheep entered California. But the rancheros quickly lost out to American entrepreneurs who understood far better the nature of the demand for beef and the need for improved cattle. By the end of the decade, there was a flourishing American owned cattle and sheep business in California. Estimates of the number of cattle vary from 1,234,000 head recorded in the 1860 census to three million head estimated by Jelinek . However, weather, the ever-threatening wild card of California agriculture, dealt a near death blow to the cattle industry in the first half of the 1860s. In 1861–62, a huge flood in the Central Valley created a lake 250–300 miles long and 20 to 60 miles wide and drowned perhaps 200,000 head of cattle . Immediately following the flood was a two-year drought in 1863–64 during which “many hundreds of thousands of cattle perished” . Durrenberger claimed that droughts of the 1860s “resulted in the death of millions of head of cattle.” Thus, even with some recovery in population, there were only 630,000 head of cattle left in California in 1870. The cattle industry was briefly overtaken by the sheep industry as California’s major agricultural enterprise. The first census in 1850 identified 17,514 head of sheep. By 1860 it was a million head, and the industry peaked in 1876 at 6,406,465 head . But, even before the sheep population peaked, wheat acreage was growing rapidly on large, extensive ranches, some of which approached one million acres in size . California already had significant wheat production in 1859 and had begun to export wheat. The combined acreage of wheat and barley soared in the 1860s, exceeding one million acres in 1867 and peaking at nearly four million acres in the late 1880s. The combined production of wheat and barley was reported on three to three and a half million acres for most of the 1880s and 1890s .

Tufts et al. reported that “by 1889 the state ranked second for wheat,large plastic pots for plants producing more than 40,000,000 bushels on 2,750,000 acres.” But, as quickly as wheat had grown to dominate valley agriculture, it crashed to the point where “by the end [of the first decade] of the 1900’s only about 0.5 million acres of wheat were cut and the state became a net importer of wheat” . Three causes are often postulated to explain the demise of the wheat industry, though there is some disagreement on the third. The first was soil exhaustion. Yields were declining as large-scale wheat growers simply mined natural soil fertility and moved on . To some extent, barley replaced wheat as it was better suited to dry conditions. Second, there was a severe depression in agricultural prices in the 1880s and it was acute in wheat. California’s distance from European markets resulted in very low farm prices. Third, development of a small but diversified fruit, nut, and vegetable industry provided an alternative land use. In the same period , irrigated acreage was increasing rapidly. It is tempting to argue that horticulture replaced, if not displaced, wheat. But some scholars argue that wheat declined and fell on its own and that considerable wheat land lay idle for a number of years . The major point is that the transformation from extensive grain growing and livestock grazing occurred relatively quickly and resulted from a complex interaction of many factors. From 1890 to 1930, the population of California increased fivefold . Incomes rose rapidly from 1910 to 1929, which drove consumer demand toward fruits, vegetables, and livestock products and away from grains and field crops. A world class agricultural research and extension system was established. Californians continued to import biological technology and test it, continuing in the spirit of Agostin Haraszthy and Luther Burbank. Finally, while inadequate rainfall at the wrong time of year limited rain-fed extensive agriculture, irrigation provided the final building block for producing a wide variety of products that thrive in California’s hot climate and excellent soils laid down by millions of years of periodic flooding. The 1920s, according to Benedict, was a period of relative optimism and rapid development. In the period 1919 to 1929, grape acreage expanded 94 percent; subtropical fruit and nut acreage, 82 percent; vegetable acreage, 91 percent; and temperate-zone fruit acreage, 63 percent. In contrast, acreage of cereals, hay, and other field crops fell .

In part, this transition was responsive to changes in relative agricultural prices in the 1920s. All agricultural prices fell sharply in 1919 at the end of World War I , and grain prices stayed relatively low throughout the 1920s before plunging again in 1930. Prices of fruits, vegetables, nuts, and cotton, however, recovered substantially in the 1920s, fueled, no doubt, by rising incomes and a growing California population. Immigration in the 1920s amounted to 1.25 million people who came for well-paying jobs in growing cities. Another indicator that California’s agriculture did relatively better than U.S. agriculture in the 1920s is land prices. In 1920 the Index of Farm Land Value for the United States was 170 while the index of California land values was 167. By 1930, the U.S. index had fallen to 115 while California’s remained at 160 . This probably reflects California agriculture’s diminishing dependence on traditional grain and livestock products and rapidly improving productivity in horticultural products. Thus, by 1930, California seemed on the way to agricultural riches, but ominous things were beginning to cause worry. Much of the expansion of irrigation in the period 1900–1930 came from groundwater sources; in 1902 less than 10 percent of irrigation water came from groundwater sources. The fastest expansion in groundwater exploitation occurred in the period 1910–1930, driven, in part, by widespread adoption of the centrifugal pump. The number of pumping units increased from approximately 10,000 in 1910 to almost 50,000 in 1930. Groundwater use again expanded in the 1940s, rising to 75,000 units in 1950 . Groundwater had been perceived as an unlimited resource, but by 1930 problems with falling water tables, subsidence, and salinization were steadily approaching what Riesner called an ecological time bomb. The most promising source of water for further expansion of California agriculture was thus not only open to question but supplies were in danger of being reduced by continued over drafting of underground water basins.As we have seen, the 1920s was a period of rapid expansion in many perennial crops, where perennial crop prices had fared better than grain prices. Therefore, the crash into the Depression was even more precipitous and shocking. Failing prices, exacerbated by significant droughts in 1929, 1931, 1933, and 1934, led to sharp contractions of farm income. Irrigated acreage dropped by one million acres between 1929 and 1935.

The index of farm land values, which had been at 160 in 1930, plunged to 109 in 1933 . In the general economy, unemployment rose rapidly and job-induced in-migration virtually stopped by the early 1930s. But it was soon replaced by a further influx of poor farmers displaced by the Dust Bowl and the Depression. These new migrants, poor and unemployed, settled mainly in rural California, adding to an already volatile and sometimes violent labor situation. Contractions in demand hammered farm prices, drought reduced farm production , surplus labor put downward pressure on wages, and poverty rates soared among both farmers and farm workers. Agricultural prices showed some signs of recovery in the period 1933–1936, partly because of drought-induced crop failures and partly because of major federal efforts to reduce field-crop production under the Agricultural Adjustment Act of 1933. However, the good years of 1937–1939 caused grain, livestock,blueberry pot and cotton prices to sink again. Financial stress became particularly acute. Export markets for specialty crops also contracted sharply and almost disappeared with the outbreak of war in Europe in 1939. California’s agricultural exports basically ceased for three years before experiencing regrowth after the United States entered the war.Federal intervention came on several fronts, including new forms of credit under the Farm Credit Administration.The AAA instituted support prices for “basic commodities,” including wheat, barley, rice, cotton, and milk. Though proposed as temporary, the measures became permanent parts of U.S. farm policy that remain today. Relatively generous support prices, coupled with California’s efficiency in producing rice, cotton, and milk, no doubt contributed to rapid expansion of production of these commodities in the post-World-War-II period. The 1930s also saw major efforts by California agriculture to enlist state assistance in constructing a major water scheme to capture and transport northern Sierra water to southern Central Valley agriculture. The original Central Valley Water Project, proposed as a state operation that was to be financed by a voluntary bond sale, quickly received legislative approval. However, due to the deepening Depression, the bond sale was never initiated. Attention turned to the federal government, where the idea of spending to help agriculture while creating public works employment appealed to New Dealers in the early 1930s. In 1935 the Central Valley Project became a Bureau of Reclamation project and, after 1937, a massive dam and conveyance system began to be constructed. The major impact on California agriculture would not, however, occur until after WWII. Prior to the 1930s, irrigation development in California was almost exclusively financed privately. Less than 1 percent of irrigated acreage in California had been developed through federal action . The takeover of the CVP by the Bureau of Reclamation in 1935 and the state’s subsequent development of the California Water Project in the 1960s meant that a large share of all subsequent surface-water development was publicly financed. Just as the 1930s for California agriculture contrasted sharply with the growth and prosperity of the 1920s, the 1940s saw a return to prosperity and growth. The value of California agricultural output “grew tremendously . . . throughout the war years” .

Acreage devoted to farming increased “an astounding 16.4 percent between 1940–1945” . Agricultural income was $452 million in 1940 and rose to $1.4 billion in 1945 . This recovery was mainly a product of developments in the California and U.S. economies that were driven by the war effort. Durrenberger argues that WWII transformed California from a rural, natural-resource-based economy to a leading industrial and military state in just five years. The population in California almost doubled, from 5.6 million in 1930 to 10.6 million in 1950—with nearly four million of the increase occurring in the 1940s. In-migration resumed and, at its peak in the early 1940s, amounted to about a half-million people per year. California led all states in receipt of federal wartime expenditures. The state was a major contributor to the building of ships and airplanes, and the war spawned supporting industries, such as steel and construction, and caused massive increases in housing. “Over 90% of federal expenditure to promulgate the war in the Southwest Pacific was allocated to California” . Even after hostilities ceased, higher levels of military spending persisted in California and growth in commercial air services sustained much of the employment in the aircraft business. As the economy boomed, the impact on the demand for agricultural products was obvious and substantial. Any likelihood of a postwar depression was put to rest by the beginning of the Korean War in 1950. Unlike after WWI, there was not a sharp fall in agricultural prices and incomes after WWII. California agriculture continued to grow and diversify due to a combination of federal policy and an economy that was also growing rapidly, which prevented major price drops. Instead, the value of farm output in California grew by 24 percent in the period 1945–1950. Expansion and its labor requirements made labor the dominant issue in California agriculture in the postwar 1940s and 1950s. The wartime boom had siphoned excess labor out of agriculture. California agriculture, facing rising wage rates, pressed for and received a program that allowed importing of Mexican labor. The federal Bracero Program, initiated in 1942, supplied significant quantities of farm labor through the boom years of the war and the postwar expansion of California agriculture.