Predicting farmer response to a falling water table: an Arizona case study

Abstract

The groundwater level in Pinal County has been dropping steadily since large scale expansion of irrigated agriculture began in the early 1940s. The current average rate of decline of the water table of about nine feet per year means steadily increasing pumping costs. Since over 95 percent of the water in Pinal County is used by farmers, the initial impact of increasing pumping costs fall almost entirely on farmers, resulting in continuous adjustments in resource use, cropping patterns, output and income. The principal objective of this dissertation is to estimate the extent and significance of the adjustments Pinal County farmers will make over time as their water costs increase due to increasing pumping lifts. Farmer adjustments to increasing pumping costs are analyzed in two major steps. First, an economic model of typical Pinal County farms is developed for four size groups and three pumping lifts within each size class. This model provides estimates of net return over variable costs for the various field crops in Pinal County for each farm size and pumping lift. Second, data provided by the analysis of typical Pinal County farms is incorporated in a linear programming model which estimates enterprise combinations, output, and income from typical farms subject to restrictions regarding factor supplies, and assuming profitmaximization as a goal. Changes in cropping patterns, output and income over time are estimated by comparing the result from a linear programming model based on 1965 water costs to the results from a model based on projected water costs in the years 1966, 1976, 1986, 1996, and 2006. The results from this model suggest that Pinal County farmers do not face an immediate "water crisis", as often suggested. While the declining water supply will require large adjustments over time in acreage of low-valued hay and feed grain crops, this will not substantially affect net farm income because these crops provide a relatively small portion of the net income to Pinal County farmers. Cotton provides Pinal County farmers with most of their net income and the return to cotton is more dependent on lint price and Government programs and payments than on water costs. Certain assumptions regarding prices, technology and institutions are implicit in this model. Changes in these assumptions can generally be reflected by general or relative price changes. A sensitivity analysis of the effect of price changes shows that net income is very sensitive to changes which affect cotton, but not very sensitive to price changes in other crops in the model. Cotton acreage is determined by Government acreage allotments. However, price decreases in cotton do not result in decreases in cotton acreages with current Government payments, while price decreases in other crops generally result in substantial decreases in output. Pinal County farmers, like the users of any stock resource, will continue to face declining net returns as the cost of tapping the stock of water increases. Adjustments in land values, net income, and number of farms will continue. The continued overdraft of water by Pinal County farmers apparently presents no particular threat to nonagricultural water users in the foreseeable future because nonfarm consumption is small relative to the total supply. Costs of supplying the nonagricultural sector with water would increase, but would be small relative to the productivity of water in these uses.