The regional value of water in agriculture
de Bodisco, Christopher N.
THE REGIONAL VALUE OF WATER IN AGRICULTURE CHRISTOPHER DE BODISCO Dissertation under the direction of Dr. Andrea Maneschi This study estimates regional variation in the value of irrigation water. A Minflex Laurent Generalized Leontief profit function is estimated to calculate the marginal value of water across regions, and to identify key factors affecting variation in water values. Using data from both the Farm and Ranch Irrigation Survey, and the Census of Agriculture for the years 1982 - 1997, STATGO soil data, and PRISM GIS climate data, it is determined that the most important factors affecting water values are input prices (fuel, labor, chemicals, and other), the quantity of water applied, and mean temperature. Water values vary considerably by region. Driven down by high input prices and high water usage, water prices in the West are generally low with marginal value products near zero dollars per acre-foot. Florida has high water values primarily due to its climate and lower input prices. Georgia has much higher water values due to very low water application rates. Geographic factors such as a precipitation, soil characteristics, and irrigation techniques, have positive but relatively minor effects on water value. Profit per acre is negatively correlated with the shadow price of water. The implication is that high profitability in vegetable farming over time has generated both the incentive and the means to increase the supply of water, and farmers are now extracting much of the value from that water. Federal farm policies appear to lower the value of water by stimulating the production of crops that use water less intensively with a lower marginal value product. Removal of these distortions actually may increase water demand, but with wide variations by state.