Lake Shasta reservoir above by the California Department of Water Resources

In California's third year of historic drought, the price of water on the open market is being pushed to staggering levels that scream what a bargain farmers have enjoyed forever.

It also raises the question of how much longer it will last.

In the agricultural wonderland that is the San Joaquin Valley, farmers pay about $200 per acre-foot for surface deliveries from the State Water Project. But as reservoir levels and allocations have dropped, farmers with trees and vines to keep alive are pushing prices to extremes whenever local water districts auction off excess supplies.

The first time was in February in Bakersfield, when winning bids ranged up to $1,350 per acre-foot and the average was $1,135. But the most recent auction made those prices look cheap.

In July, the Madera Irrigation District auctioned off supplies it had saved from 2013. The winning bids ranged from $2,000 to $2,200 per acre-foot.

Rising prices have led to a nasty collision between free enterprise and the question of who owns groundwater. Case in point: A water district southwest of Modesto has talked with two farmers outside of the district about pumping water from their wells and selling it to the district for $1,000 per acre-foot, representing millions of dollars of profit for the farmers.

It's only mid-August in the country's largest agricultural area. It's hot, it's dry and there is still no rain in sight until winter. So don't be surprised if water prices keep going up.

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