Assessing Agriculture-Water Links at
   Basin S l
   B i Scale: A H d E
                Hydro-Economic Model of
          ...
Presentation Overview
•   Objectives of Modeling Exercises
•   Overview of the Hydro model
•   Overview of the Economic Mo...
Key Objectives of Hydro-
         Economic Models
         E       i M d l
• Understand Farmer Behavior and Outcomes
  – C...
A Basin-Wide Hydrology Model

                               Petrolina




 Barreiras



Paracatu




Rio Paranaiba


    ...
Core of the Economic Model of
 Agriculture: Farmer Objective Function
 max ∑ pit qit (x nirrt , ewit (xirrt )) − ∑ w jt xi...
Economic Simulation Model
      E     i Si l ti M d l

max ∑ pit qit (x nirrt , ewit (x irrt )) − ∑ w jt xijt − ∑ cewit (p...
Basin-Wide Models’ Temporal and
  B i Wid M d l ’ T            l d
   Spatial Resolutions and Extents
     Spatial Resolut...
Hydrologic & Economic Model Links
         y     g

• Crop-specific                     Algorithm to translate
           ...
Precipitation
P i it ti
in the SFRB
and Today’s
    Focus




       UCD/Embrapa
Setting the Policy
         Experiment Stage
• Variable Weather Conditions
  – Wet year and drought
  – Rainfall and evapo...
Water Available at the Entrance to Sobradinho Dam




                                                                    ...
Upstream Water Demand
Upstream Water Demand for Boqueirão
         (sample município)
           Blue = baseline
  Green =...
Available Water Downstream after 
                                                      Available Water Downstream after
 ...
Upstream Cultivated Areas
            (by scenario, irrigation)

500,000

400,000                                         ...
Area in Sugarcane
           Upstream Sugarcane Areas
            (by scenario, irrigation)

30,000
30 000
25,000
20,000
1...
Upstream Agricultural Employment
                  (by scenario, irrigation)                                    R   l
    ...
Upstream Sugarcane and Total Ag Profits
                      (by scenario, irrigation)
120,000,000
100,000,000
 80,000,00...
Conclusions and Policy
             Implications
             I li ti
•   Application of ANA Guidelines Will Affect Agricu...
Muito Obrigado!




                  UCD/Embrapa
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Assessing Agriculture-Water Links at Basin Scale: A Hydro-Economic Model of the São Francisco River Basin, Brazil

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Presented at the BFP Special session in the 13th World Water Congress, Montpelier, France

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Assessing Agriculture-Water Links at Basin Scale: A Hydro-Economic Model of the São Francisco River Basin, Brazil

  1. 1. Assessing Agriculture-Water Links at Basin S l B i Scale: A H d E Hydro-Economic Model of i M d l f the São Francisco River Basin, Brazil Marco Maneta Marcelo Torres Stephen Vosti Center for Natural Wesley Wallender Resources Policy Analysis A l i -- CNRPA SFRB Team September 2008 UCD/Embrapa
  2. 2. Presentation Overview • Objectives of Modeling Exercises • Overview of the Hydro model • Overview of the Economic Model of Agriculture • Interaction between Hydro and Econ Models y • Geographic Focus of Today’s Presentation • Setting the Stage for a Two-Part Policy Experiment – Application of ANA water use guidelines and a sugarcane price shock • Simulation Results – Hydrology – Agriculture g • Conclusions and Policy Implications UCD/Embrapa
  3. 3. Key Objectives of Hydro- Economic Models E i M d l • Understand Farmer Behavior and Outcomes – Cropping patterns, input mix, employment, water use – Income and poverty – Surface water and groundwater availability • Predict the Effects of Proposed Policy and other Changes on Farmer Behavior/Outcomes • Inform Policy • Modeling at Three Spatial Extents – Plot-Level LUS Model – Buriti Vermelho Model – Basin-Wide Model UCD/Embrapa
  4. 4. A Basin-Wide Hydrology Model Petrolina Barreiras Paracatu Rio Paranaiba UCD/Embrapa
  5. 5. Core of the Economic Model of Agriculture: Farmer Objective Function max ∑ pit qit (x nirrt , ewit (xirrt )) − ∑ w jt xijt − ∑ cewit (pirrt , xirrt ; z) i i i Agricultural Production Function Effective Water •Vector of Non Irrigation Inputs (xnirr): Vector Non-Irrigation Cost Crop •Fertilizers, seeds, land, pesticides, Non-Irrigation • Irrigation Input Prices machinery etc Input Cost Prices – pirr •Effective Water – ew • Price - wsj • Irrigation Input •Function of Irrigation Inputs (xirr) F ti f I i ti I t ( ): •Q Quantity - xsij tit Quantities - xirr Q titi •Applied water • z – Vector of •Irrigation Capital factors that may •Irrigation Labor g affect irrigation costs •Irrigation Energy (e.g. distance to ( di t t river) UCD/Embrapa
  6. 6. Economic Simulation Model E i Si l ti M d l max ∑ pit qit (x nirrt , ewit (x irrt )) − ∑ w jt xijt − ∑ cewit (p irrt , x irrt ; z) ˆ x i i i Land : ∑ land it ≤ Bland t i Subject to: Labor : ∑ labor it ≤ Blabor t i Surface Water : swm ≤ Bswm UCD/Embrapa
  7. 7. Basin-Wide Models’ Temporal and B i Wid M d l ’ T l d Spatial Resolutions and Extents Spatial Resolution Hydro model 14 large polygons Econ model Município Temporal Resolution Hydro model month Econ model agricultural season Spatial Extent SFRB, both models Temporal Extent Decades, both models UCD/Embrapa
  8. 8. Hydrologic & Economic Model Links y g • Crop-specific Algorithm to translate g HYDROLOGIC • poduction cropping decisions into MODEL • water use water demand • irrigation efficiency Cropping Decisions Hydrologic Consequences ECONOMIC • Water available for ag Algorithm to translate O MODEL hydrologic consequences • rainfall into water availability •surface water UCD/Embrapa
  9. 9. Precipitation P i it ti in the SFRB and Today’s Focus UCD/Embrapa
  10. 10. Setting the Policy Experiment Stage • Variable Weather Conditions – Wet year and drought – Rainfall and evapotranspiration • Water Policy Setting – Application of the ANA guidelines • Price Shock – Large increase in sugarcane prices • Use Hydro-Econ Models to Predict: – Cropping p pp g patterns, water use, employment, income , , p y , – Water availability in river system UCD/Embrapa
  11. 11. Water Available at the Entrance to Sobradinho Dam Water Available for Agriculture Water Available at the Entrance to Sobradinho Dam Wet-Year Water Drought-Year Water Availability (m3s-1) Availability (m3s-1) January 5477.3 2991.8 “Available” for Ag = February 5471.1 2955.0 March 5718.0 2364.9 River Flow Entering April 3130.6 1578.3 Sobradinho Dam Minus May 1724.2 681.8 June 1573.5 274.0 2000 m3s-1 for July 1391.7 66.9 Environmental Flows August 919.1 10.0 (following Braga and Lotufo September 380.7 380 7 10.0 10 0 2008) October 621.2 10.0 November 1740.4 627.7 December 3863.4 2153.5 UCD/Embrapa
  12. 12. Upstream Water Demand Upstream Water Demand for Boqueirão (sample município) Blue = baseline Green = Sugarcane Price Increase Total Demand  of all Simulated  Upstream Responses to  Sugarcane Price Increases (m3s‐1) January y 39.5 February 33.4 March 40.1 April 22.3 Mayy 27.1 June 37.8 July 54.4 August 89.5 September 99.4 October 92.5 November 74.6 December 43.1 UCD/Embrapa
  13. 13. Available Water Downstream after  Available Water Downstream after 3 ‐1 Sugarcane Price Increase (m s )  Downstream Water January Wet Year 5442 Drought 2973 February 5388 2927 Availability after March April 5723 3175 2154 1585 Price Shock May June J 1743 1483 650 222 July 1366 10 August 827 10 September 296 10 Water Available at the Entrance to Sobradinho Dam Water Available at the Entrance to Sobradinho Dam October 543 10 November 1718 574 December 3794 2016 UCD/Embrapa
  14. 14. Upstream Cultivated Areas (by scenario, irrigation) 500,000 400,000 Agricultural 300,000 200,000 Land Use L dU 100,000 0 Baseline Sugar Price -- Sugar Price -- Wet Drought Year Downstream Cultivated Areas Rainfed Irrigated Total Cultivated Area (by scenario, irrigation) 900,000 800,000 700,000 600,000 500,000 500 000 400,000 300,000 200,000 100,000 0 Baseline Sugar Price -- Sugar Price -- Drought Wet Year Rainfed Irrigated Total Cultivated Area UCD/Embrapa
  15. 15. Area in Sugarcane Upstream Sugarcane Areas (by scenario, irrigation) 30,000 30 000 25,000 20,000 15,000 10,000 5,000 5 000 0 Baseline Sugar Price -- Sugar Price -- Drought Wet Year Downstream Sugarcane Areas (by scenario, irrigation) Total Sugarcane Total Irrigated Sugarcane 50,000 40,000 30,000 20,000 10,000 0 Baseline Sugar Price -- Sugar Price -- Drought Wet Year Total Sugarcane Total Irrigated Sugarcane UCD/Embrapa
  16. 16. Upstream Agricultural Employment (by scenario, irrigation) R l Rural 6,000 5,000 , 4,000 Employment p y 3,000 2,000 1,000 0 Baseline Sugar Price -- Sugar Price -- Drought Wet Year Downstream Agricultural Employment Total Rural Employment p y Total Irrigated Ag Employment g g p y ( y (by scenario, irrigation) , g ) 50,000 40,000 30,000 20,000 10,000 0 Baseline Sugar Price -- Sugar Price -- Drought Wet Year Total Rural Employment Total Irrigated Ag Employment UCD/Embrapa
  17. 17. Upstream Sugarcane and Total Ag Profits (by scenario, irrigation) 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 40 000 000 Agricultural 20,000,000 0 Baseline Sugar Price -- Sugar Price -- Profits Drought Wet Year Total Ag Profits Irrigated Ag Profits Total Sugarcane Profits Irrigated Sugarcane Profits Downstream Sugarcane and Total Ag Profits (by scenario irrigation) scenario, 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000 0 Baseline Sugar Price -- S gar Sugar Price -- Wet S gar Drought Year Total Ag Profits Irrigated Ag Profits Total Sugarcane Profits Irrigated Sugarcane Profits UCD/Embrapa
  18. 18. Conclusions and Policy Implications I li ti • Application of ANA Guidelines Will Affect Agriculture – Effects will depend on product mix, irrigation technology, location and upstream effects, weather conditions, and product prices • Hydro-Econ Model Can Help Predict: – The location and extent of effects on (say) profits – Provide estimates of willingness to pay for more water • Hence, help develop water markets • Effects f S Eff t of Sugarcane P i Increase on Ag Price I A – Shift in product mix – Increased irrigated area – Profits increase – Upstream farmers not affected by drought; not so for downstream farmers • Effects of Sugar Price Increase on Poverty – B d news: li l employment growth, small-scale sugarcane not likely to Bad little l h ll l lik l participate in boom – Good news: increased water use in sugarcane does not ‘crowd out’ crops with higher labor demand patterns UCD/Embrapa
  19. 19. Muito Obrigado! UCD/Embrapa
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