You mean farming of water-intensive crops would become unprofitable. Yeah that is fine. The flip side of this is that it never was profitable to begin with and

You mean farming of water-intensive crops would become unprofitable. Yeah that is fine. The flip side of this is that it never was profitable to begin with and only was done because citizens gave enormous handouts to these companies (paying for all their water). You can keep doing that, but make it more explicit: Make them pay for all the water, but give them a subsidy of $X and change it if they waste water.