Just basic economics. Subsidies increase supply which reduces prices. Lower prices discourage production. Net result is that production shifts to the place with the subsidies.
My suggestion is that we'd be better off if they weren't there. That doesn't necessarily suggest a plan of action, though, since just dropping long-existing subsidies can cause a lot of problems. I don't know what the solution is, but I think the goal should be to charge farmers something like the fair value of the water they consume.
