VALLEY CENTER -- A well-timed rainy season in the middle of a statewide water shortage may have spared some groves earlier this year.

But rising water prices and tight supplies may still force some area growers out of business altogether, a key water official said Wednesday.

"It could be the knockout punch for some tree crops in North County," Valley Center Municipal Water District General Manager Gary Arant said.

He said some district customers have been forced to cut down trees because of water-rate hikes, a 30 percent supply cut and uncertainty about the future of a discount program that allows area growers to purchase lower-cost water for agricultural use.

What's more, regional agriculture industry leaders said local growers can't raise produce prices to absorb the increased water costs because of fierce marketplace competition from out-of-state and foreign-grown crops.

"We can't set the price of our products," said Al Stehly, a Valley Center avocado grower.

Stehly manages several avocado groves in the area. He said tree agriculture could quickly become a thing of the past in North County if water supplies and costs aren't stabilized.

"We've had some rain, but the problem's not over," he said Wednesday. "We're cutting trees every day, marking more to be stumped and capping sprinklers."

Robert Polito, a Valley Center water district board member and 28-year citrus grower, removed more than 30 percent of his trees last month.

He said his profit margin at Polito Family Farms on Betsworth Road continues to shrink each year.

"I'm going to hang in there as long as I can, but as some point my land will become real estate," he said.

Officials from water agencies statewide, including the Metropolitan Water District of Southern California and the San Diego County Water Authority, have said that the region faces serious water shortages because of drought and an August court ruling that limits water deliveries from Northern California, which supplied almost two-thirds of imported water last year.

County growers, who are largely dependent on imported water, have been among the first to feel the effects.

Under the Interim Agricultural Water Program, growers pay $250 less than residential or commercial ratepayers per acre-foot of water.

In exchange, they agree to mandatory reductions in emergency situations. An acre-foot is 326,000 gallons, enough to sustain two households for a year.

Growers in the program, administered by Metropolitan, have been subject to a 30 percent supply cut since Jan. 1.

Now, three months later, the situation is becoming increasingly grim for growers, who make up 80 percent of customers in Valley Center's 100-square-mile, rural district, Arant said.

He said he's worried that the program may not even continue if the region's water supply problem isn't corrected soon, because some officials with Metropolitan have said they see no rationale for selling any water to agricultural customers at a discount when no surplus exists.

"(The agriculture discount program) is under assault," Arant said.

Meanwhile, water prices continue to rise.

Metropolitan is set to raise rates by roughly 14 percent by the beginning of next year.

That will cause Valley Center growers' water bills to increase by nearly 13 percent, making it more expensive and less profitable to grow produce.

"(Farmers) can only farm until they go bankrupt, and then they have to quit," Arant said.

Metropolitan officials said they also expect a cumulative 25 percent to 30 percent increase by 2011.

The agency needs to raise rates because it is paying more for electricity; to protect an endangered fish in the Sacramento Bay Delta; and to remove the Quagga mussel, a fingernail-sized mussel that invaded and is clogging Southern California's water systems, officials said.

"Barren land with dead groves all over the place," Arant said. "That's what it's going to look like out here if all the agriculture goes away."

San Diego County has the 12th-largest farm economy in the nation. With nursery crops and avocados leading the way, the local economic impact is more than $5 billion annually, according to county Farm Bureau statistics.

Contact staff writer Darryn Bennett at (760) 740-5420 or dmbennett@nctimes.com.