Farmers are well aware of water and the sustainablity of its sources. It just so happens that the equilibrium point they aim for is sustainability for them, not them & everybody else that happens to live downstream
The rate of depletion of large aquifers suggests that farmers don't care very much about sustainability of their water source. I think price is pretty much the only signal that farmers can afford to care about.
Depends where you live, but farmers around me are always monitoring everything — rainfall, water retention in the soil, aquifer levels, river and creek levels, etc.
That said, you’re right, they’re running a business. What they tend to do is use the smallest amount of water to produce good yields.
The only real thing a farmer can control are what they plant, when they water, when they fertilize and what they harvest (plus some maintenance, like weeding, but water isn’t impacted).
What farmers tend to do is water when necessary (between rain periods). They’ll also select different plants to grow based on price and watering schedule. That said; I’ve also seen farmers try to improve water retention (through tilling in cover crops and / or adding organic material). They’ve also built dams, etc to capture rain water and reduce erosion.
As far as I can tell, farmers do indeed try to conserve and utilize what they can. At the same time, water is being subsided by government and / or regulated. So places like California have a weird things like building farms in the desert. If the water prices were more free and people still build farms, I don’t see an issue frankly. They’re just using every drop before it gets to the sea. As the water depletes (ie too many farms) I imagine farmers will go elsewhere or change crops to become more efficient.
To be honest, I don’t see water management being too much of an issue at the moment. Plants have become increasingly drought resistant and we have the ability to breed and genetically modify them more so.
