Stochastic Net Profit-Water Functions: Assessing Changes in Irrigation Needs and Farm Profits to Public Policy and Climate Variability
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Changing economic and social priorities have significantly affected water availability for irrigation in recent years. Exacerbating this situation has been apparently increased climatic fluctuations and potential climatic change. Public policy responses have included in various cases newly opened water markets, compensation schemes for irrigation reduction or elimination, and statutory limits on irrigation application, among other options. These changes in climate and economic incentives have also changed the farm profit calculus. A technique for determining the stochastic relationship of farm net profits to irrigation application is the focus of this paper. By formulating crop-water production functions for long climatic records, the crop yield versus irrigation relationship is determined in a probabilistic manner incorporating historical climate variability. This probabilistic yield versus irrigation function can then be incorporated into a net profit calculus that includes new public policy effects such as irrigation limits and water sales opportunities. Preliminary results from ongoing work are presented. Copyright ASCE 2005.
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