A two-decade-long megadrought in the American West is forcing farmers and ranchers to rethink how they raise crops and cattle as water resources become stretched.

"You know, our farmers and ranchers are used to dealing with curveballs coming their way, but we're in a new era," Kate Greenberg, commissioner of the Colorado Department of Agriculture, told Yahoo Finance Live (video above). "We're really thinking about diversity, resilience, perseverance to make sure that we can keep producing food here in Colorado, knowing we're under a future of less water."

As of August 30, nearly half of the state (46%) is experiencing drought conditions, while 86% of the state is classified as "abnormally dry," according to the latest Drought Monitorreport. The most severely drought-stricken areas also happen to overlap with the top agricultural-producing counties in the state, as seen in the maps below.

Agriculture makes up a $47 billion industry in the state, around a tenth of Colorado's gross economic output, and employs over 195,000 workers. Cattle is the top commodity produced in the state.