Maybe CA needs well-informed grassroots picketing against farmer water rights gluttony in Sacramento?
That's not to say that farmers don't need to conserve more - the 80% alone means that's where we should be looking for efficiency wins (whatever portion of gdp), and letting them draw down shared aquifers without paying their neighbors is a clear tragedy of the commons situation.
I think incentives would help, yes. There is also a "use it or lose it" system builtin to many of the water rights contracts that are toxic. Much like big corporate budgets, farmers find a way to use the water just in case they need it the next year.
The reality is it is very expensive to change irrigation systems in established orchards. Incentives to do that would certainly be well received by the tree farmers I know.
Also in your opinion, are the high water usage due to primarily the irrigation methods or that the crops need lot of water? Like almonds for example?
The Almond Board of California has some info on this for Almonds. Obviously, take this as you will, given the source: http://www.almonds.com/pdfs/waterfactsheet315.pdf