An economic analysis of crop-water production functions : California

Water conservation has become an increasingly important issue in much of the arid West and in California in particular. Governmental agencies are interested in instituting policies which will help conserve water (reduce water application levels on a per acre basis). Some of the policies include water pricing, tax credits and/or subsidies for improving field and irrigation delivery efficiencies, reductions in available irrigation water and use of the extension service as a means of conveying water-saving techniques and technologies to farmers. The effects of the above policies on farmer profits, returns over total variable costs and quantities of water conserved are examined for three crops grown in California - corn, cotton, and processing tomatoes. The results show that there is potential for conserving water in California through implementation of governmental policies. Water pricing policies could be effective on all crops if the price changes are dramatic rather than marginal. Improvements in field and delivery efficiencies for furrow irrigated crops could conserve water and improve farmers' returns over total variable costs. Improving field efficiencies for sprinkler irrigated crops could conserve some water, but farmers returns over total variable costs are only marginally improved. Reductions in available water will clearly conserve water. The effects on farmer profits, however, vary with the type of crop, type of irrigation and location of the farm. Using the extension service to encourage farmers to irrigate at profit maximizing levels rather than at the levels currently being used could conserve water and marginally improve profits.

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