Economic implications of a dynamic land and water base for agriculture in central Arizona.

Abstract

Irrigated agriculture's future in central Arizona is dependent upon the availability of two relatively fixed and limited resources: land and water. Adjustments within the agricultural sector will flow directly from, or in response to, changes in the availability and/or costs of these production factors. This study explores the agricultural use of these two factors of production and adjustments that will follow from their changing availability and cost over a 53-year period from 1967 to 2020. The area of central Arizona under study encompasses two irrigation districts-- the Salt River Project (SRP) and the Roosevelt Water Conservation District (RWCD). A structural model of the agricultural sector was synthesized from a survey of 102 operating farms in the study area. Models of four farm sizes were employed in a linear programming analysis to depict economies of scale. All four models were used to represent SRP farms, while two were used to represent RWCD farms. These farm models were held constant throughout the projection period, except for specified changes in the number of acres represented by each model (a decrease in land availability) in the SRP and the increasing water cost with which they are confronted in the RWCD. All other changes and/or adjustments wIthin agriculture are, in this analysis, dependent upon these land availability and water cost factors. Agricultural land and irrigation district surface and groundwater availability are considered factors exogenous to the agricultural sector. In the SRP, land and its appurtenant water rights have been and will continue over the projection period to flow into the urban-industrial sector at the expense of the agricultural sector. The cost of obtaining groundwater will increase over the projection period as the groundwater table declines. This increasing cost of groundwater will affect adjustments in agriculture in the SRP only slightly since water is provided to agriculture primarily through a user's cooperative which has excess electrical power revenues available to subsidize water prices to farmers. Increasing water costs in the RWCD will have a considerable affect on adjustments in agriculture because of the absence of revenue from any source to subsidize the cost of obtaining groundwater. Land availability is assumed constant in this district and, therefore, is of no significance in adjustments that occur over the projection period. Acreages of crops producing high values per acre-foot of water used are not affected by projected decreases in cropland and/or increases in water costs. Adjustments occurring within agriculture over the projection period take place in the acreages of those crops which produce a low net return per acre-foot of water used. As land availability decreases and/or water costs increase over the projection period, cropped acreage, total water use, and net revenue over variable production costs decline. The changes are not proportional since adjustments take place in the acreage of those crops which produce low values per acre and per acre-foot of water used. In the SRP, cropped acreage is projected to decrease 76 percent, total water use to decrease 71 percent, and net revenue over variable production costs to fall approximately 50 percent due largely to continuous transfer of land and water out of agriculture. Projected declines in cropped acreage in the RWCD are 50 percent, total water use decreases 45 percent and net revenue over variable production costs falls 21 percent due entirely to increasing cost of water. A second phase of this analysis presents a demand function for irrigation water in each district over price ranges from zero dollars per acre-foot to those at which no water would be demanded. In the SRP, positive price and quantity relationships were found to exist from a price of $248 per acre-foot at which quantity would be zero, to a quantity of 816,873 acre-feet demanded at a zero price. Price and quantity relationships in the RWCD ranged from zero quantity demanded at a price of $113.36 per acre-foot to a quantity of 130,338 acre-feet at a zero price. A final section of this study treats various possible sources, uses, and values of additional water to agriculture in each irrigation district over the projection period.