Well there could be several reasons why he lost irrigation or it could be even the fact the well went dry or even if he grazed cattle on the winter grasses, then you could be right that it was a drought. If you want to reconstruct what happened to your grandfather, some more time periods would be helpful. When he came to the area and when he lost the ranch and where it was located. Did he lose it shortly after he came or was he there for a few years? There were periods of migration you can tie in to and they are still going on, although mostly out of CA now. I have one great uncle that went to CA (from IA) in the 30s and he was a lawyer for the migrant workers. He helped get laws in place to help them. Part of that family stayed in CA. Another line moved from MO to Mad River CA in the late 20s. That was a young family and I am still not sure why that family moved to CA but they stayed. The Merrill line came in the 1800s and settled near Chico, they came all the way from the east coast. One brother was a miner. They were not the only family from their town to go to CA. You might try looking at where your grandfather came from and what other people from his area moved to CA too. Seldom did a single person relocate but I wouldn't say never. Looking at the complete historical picture will help you.

You may or may not be able to reconstruct exactly what happened but you should be able to use circumstantial evidence to get a picture. Even today the irrigation districts are very powerful and you do not want to get on their bad side. I lived in the central valley south of Stockton and have heard a variety of tales, some quite ugly. Of course this is unlikely nowadays but it did happen and it is part of history.

Good luck!