PRODUCER RESPONSES TO  CHANGING AGRI-ENVIRONMENTAL  POLICIESDr. Karina SchoengoldTransatlantic ConferenceOctober 17-18, 2011
Outline of Talk   Producer decisions about input use and technology    depend on:       Prices         Average price   ...
Policy changes and water use   Greater use of water trading   Limited water allocations   Government land purchases for...
Intensive Margin Effect
Drivers of Changing Water Use   Total water use     Food prices: positive effect, output is more profitable     Energy ...
Higher Energy Prices and Water Use   Four impacts of higher energy prices on water use:     Biofuel effect (+)     Dive...
Determining the Value of Water(shadow values)“When the wells dry, we know the worth of water.” - Benjamin  Franklin (1706-...
Trends in Water Market Activity, All Uses                             90                             80                   ...
Trend in the Median Price in Two Water Markets                                                         (2003 dollars)     ...
Implications of Water Trading for Irrigation Water Usage    Optimal pricing/trading will reduce water use     resulting i...
Trading and the Adoption of Water-ConservingTechnologies       Water trading allows rights-holders to trade water        ...
Current Trends in Irrigation TechnologyUse (United States)                                         Irrigation Technology T...
Estimates of Water Price Impacts (CentralValley, California)    Previous research (Schoengold, 2006) shows:      Direct ...
Extensive Margin Effect
Policy changes and land use   Land in irrigated agriculture     Food  prices: positive effect, production is more      p...
Current Research at UNL   Risk and production decisions     Water/irrigationtechnology     Weather and climate risk - l...
Questions?Contact information:Karina Schoengoldkschoengold2@unl.edu
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22 karina schoengold

  1. 1. PRODUCER RESPONSES TO CHANGING AGRI-ENVIRONMENTAL POLICIESDr. Karina SchoengoldTransatlantic ConferenceOctober 17-18, 2011
  2. 2. Outline of Talk Producer decisions about input use and technology depend on:  Prices  Average price  Price variability Decisions affected include:  Water  Total water use  Precision irrigation technology  Land use  Irrigated land
  3. 3. Policy changes and water use Greater use of water trading Limited water allocations Government land purchases for water rights (e.g., New Mexico, Oregon, Kansas) Groundwater/surface water connection recognized in policy decisions Subsidies for precision irrigation technology  Need to consider recharge and consumptive use measures
  4. 4. Intensive Margin Effect
  5. 5. Drivers of Changing Water Use Total water use  Food prices: positive effect, output is more profitable  Energy price: uncertain, depends on mix of biofuel and food products  Water “price” (shadow value): negative effect Precision irrigation technology (e.g., drip, drop nozzles)  Food prices: uncertain, depends on irrigation restrictions  Energy price: uncertain, depends on relative costs for pumping/conveyance versus pressurization  Water “price” (shadow value): positive effect, applied water is more costly
  6. 6. Higher Energy Prices and Water Use Four impacts of higher energy prices on water use:  Biofuel effect (+)  Diversion cost effect (-)  Pressurization cost effect (-)  Conveyance cost effect (+/-)
  7. 7. Determining the Value of Water(shadow values)“When the wells dry, we know the worth of water.” - Benjamin Franklin (1706-1790), Poor Richards Almanac, 1746The value of water in a market or the bargained price in a trade will depend on several factors:  Time (within season and between seasons)  Location (Phoenix versus Atlanta)  Quality (urban water users demand a higher quality)
  8. 8. Trends in Water Market Activity, All Uses 90 80 70 60 Number of cases 50 Sales 40 Leases 30 20 10 0 1990 1992 1994 1996 1998 2000 2002Figure from Brown, T. C. (2006), Trends in water market activity and price in the western UnitedStates, Water Resour. Res., 42, W0942, doi:10.1029/2005WR004180
  9. 9. Trend in the Median Price in Two Water Markets (2003 dollars) 80 70 60 Dollars/ML/year 50 40 30 20 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 N. Platte (WY) municipal N. Platte (WY) irrigation Rio Grande (TX) municipal Rio Grande (TX) irrigationFigure from Brown, T. C. (2006), Trends in water market activity and price in the western United States, Water Resour. Res.,42, W0942, doi:10.1029/2005WR004180
  10. 10. Implications of Water Trading for Irrigation Water Usage  Optimal pricing/trading will reduce water use resulting in:  Adoption of conservation technologies  Transfer from agricultural users to cities  Reduction in acreage of low value crops (cotton vs. strawberries)  Less water project construction over time (due to more efficient use of water)
  11. 11. Trading and the Adoption of Water-ConservingTechnologies  Water trading allows rights-holders to trade water they do not use  The adoption of water-conserving technologies (drip, sprinkler, drop nozzles) is expensive  Water trading might make it worthwhile to pay those costs (farmers can sell the unused water)  Recent research suggests that increasing the price of water promotes adoption and fallowing with Central Valley farmers (Schoengold, 2005, 2006)
  12. 12. Current Trends in Irrigation TechnologyUse (United States) Irrigation Technology Trends 35,000 30,000 25,000 Acres (thousands) 20,000 Gravity Sprinkler 15,000 Drip or Trickle 10,000 5,000 0 1988 1994 1998 2003 2008 Source: USDA Farm and Ranch Irrigation Survey
  13. 13. Estimates of Water Price Impacts (CentralValley, California)  Previous research (Schoengold, 2006) shows:  Direct response = 0.38 (reducing applied water while keeping the same crop)  Indirect response = 0.54 (changes in crop choice and/or irrigation technology)  Translation:  An price increase of 100% for irrigation water:  Reduces applied water on existing crops by 38%  Reduces applied water due to shifts in crop/irrigation technology by 54%
  14. 14. Extensive Margin Effect
  15. 15. Policy changes and land use Land in irrigated agriculture  Food prices: positive effect, production is more profitable  Energy prices: uncertain effect, depends on mix of food and biofuel crops  Water “prices” (shadow values): negative effect, shift to more land fallow or dryland farming
  16. 16. Current Research at UNL Risk and production decisions  Water/irrigationtechnology  Weather and climate risk - land use/tillage practices Design of groundwater trading programs  Inter- and intra-seasonal requirements
  17. 17. Questions?Contact information:Karina Schoengoldkschoengold2@unl.edu

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