Extreme droughts in Southern California are causing more than just water shortages and devastating wildfires. The agricultural sector has been impacted by the droughts, which are getting more severe every year because of climate change. Citrus producers are particularly being squeezed by water restrictions and irrigation issues, thus creating a major shortage of lemons and an opportunity for investors to consider the Limoneira Company (Nasdaq:LMNR), currently trading in the $28 to $29 range.

(Source: Finviz.com)

While citrus trees can thrive in high temperatures, they still need water, moisture and rain to grow the juicy and appealing fruits for the demanding American market. Agricultural experts and meteorologists are forecasting drought conditions to continue until October; in the meantime, the lower supply of lemons has increased prices by more than 80 percent.

To get an idea of the lemon shortage situation, it helps to review reports published by the United States Department of Agriculture: June 2018 price range for a carton of premium quality lemons: $36 to $39. * Late July 2018 price range: $52 to $55. It should be noted that the USDA prices are at the terminal level, which is what wholesalers are used to paying. Retailers such as vendors and restaurants can expect to pay at least $10 more per carton; in fact, street prices for food truck operators in Los Angeles have been as high as $70 per carton in early August.

Lemon growers in California have suffered a fate similar to that of avocado producers: their crops have not caught up and regional climate conditions are prompting small fruits to fall off earlier than expected. The premium lemon market demands large and unblemished lemons; moreover, processed juice and pulp no longer satisfies demand because consumers want fresh produce. The situation is exacerbated by the fact that imports from Mexico and Chile have not been sufficient in this regard since those markets are locked into supplying fruit for processing plants.