Robert C. Johansson

Pricing irrigation water: a review of theory and practice

Increasing economic pressures on water resources are causing countries to (re)consider various mechanisms to improve water use efficiency. This is especially true for irrigation agriculture, a major consumer of water. ‘‘Getting prices right’’ is seen as one way to allocate water, but how to accomplish this remains a debatable issue. Methods of allocating water are sensitive to physical, social, institutional and political settings, making it necessary to design allocation mechanisms accordingly. This paper surveys current and past views on allocating irrigation water with a focus on efficiency, equity, water institutions, and the political economy of water allocation. r 2002 Elsevier Science Ltd. All rights reserved.

Manure Management for Water Quality Costs to Animal Feeding Operations of Applying Manure Nutrients to Land

Nutrients from livestock and poultry manure are key sources of water pollution. Ever-growing numbers of animals per farm and per acre have increased the risk of water pollution. New Clean Water Act regulations compel the largest confined animal producers to meet nutrient application standards when applying manure to the land, and USDA encourages all animal feeding operations to do the same. The additional costs for managing manure (such as hauling manure off the farm) have implications for feedgrain producers and consumers as well. This reports farm-level analysis examines on-farm technical choice and producer costs across major U.S. production areas for hauling manure to the minimum amount of land needed to assimilate manure nutrients. A regional analysis then focuses on off-farm competition for land to spread surplus manure, using the Chesapeake Bay region as a case study. Finally, a sectorwide analysis addresses potential long-term structural adjustments at the national level and ultimate costs to consumers and producers.

The Manure Hits the Land: Economic and Environmental Implications When Land Application of Nutrients Is Constrained

The discharge of manure nutrients into area waters from confined animal feeding operations is considered a leading contributor to U.S. water quality impairments. An option to mitigate these impairments is to constrain land application of manure. When these constraints are particularly binding, due to minimal acceptance of manure as a substitute for commercial fertilizer, potentially large and unanticipated changes in returns to agricultural production and water quality may occur. Moreover, some of the cost of meeting the constraints is passed on to consumers through higher prices and to a portion of rural economies through lower production rates and labor expenditures.

A Carrot-and-Stick Approach to Environmental Improvement: Marrying Agri-Environmental Payments and Water Quality Regulations

Agri-environmental programs, such as the Environmental Quality Incentives Program, provide payments to livestock and crop producers to generate broadly defined environmental benefits and to help them comply with federal water quality regulations, such as those that require manure nutrients generated on large animal feeding operations to be spread on cropland at no greater than agronomic rates. We couch these policy options in terms of agri-environmental “carrots” and regulatory “sticks,” respectively. The U.S. agricultural sector is likely to respond to these policies in a variety of ways. Simulation analysis suggests that meeting nutrient standards would result in decreased levels of animal production, increased prices for livestock and poultry products, increased levels of crop production, and water quality improvements. However, estimated impacts are not homogeneous across regions. In regions with relatively less cropland per ton of manure produced, the impacts of these policies are more pronounced.

Watershed Nutrient Trading Under Asymmetric Information

This study evaluates first- and second-best trading policies for regulating watershed phosphorus under asymmetric information. The trading policies are differentiated on the degree to which regulators observe point and nonpoint source abatement efforts. The efficiency losses attributable to these informational asymmetries and those of the second-best policies can be measured in social welfare, and provide regulators the shadow value of foregoing first-best measures. Given representative monitoring costs from national water monitoring programs, it is shown that under asymmetric information, the chosen second-best trading policies outperform first-best policies by 11% in the control of watershed nutrient pollution.

Micro and Macro-Level Approaches for Assessing the Value of Irrigation Water

Many countries are reforming their economies and setting macroeconomic policies that have direct and indirect impact on the performance of the irrigation sector. One reason for the movement toward reform in the water sector across countries is that water resources are increasingly becoming a limiting factor for many human activities. Another reason for increased pressures to address water policy issues is that many countries are in the process of removing barriers to trade, particularly in agricultural commodities. Therefore, knowledge of the value of water when crafting domestic and macroeconomic policies is important to compare the variable impacts of reform across sectors of the economy and populations within the country. Researchers have used many methods for assessing the value of irrigation water. This survey reviews a broad literature to ascertain how two basic questions have been addressed by research over the past few decades. First, what is the value of water across different sectors and levels? Second, how will this value change under different macroeconomic and domestic policies? This survey details a number of methods for approaching these two questions. The literature has been organized according to a progression from theoretical underpinnings to empirical approaches to how the value of irrigation services are relevant to the link between globalization and poverty.

Simulating the U.S. Impacts of Alternative Asian Soybean Rust Treatment Regimes

Asian soybean rust (rust) is an emerging issue in U.S. crop production and was identified in nine states during 2004. Recent farm surveys indicate that many producers are adjusting their management practices to the possibility of a rust infestation. The economic and environmental impacts of such adjustments are not known in the medium run given these new developments. We combine 2005 data on the geographical distribution of the fungal pathogen that causes rust with 2005 information on the availability and material costs of fungicides to analyze three treatment strategies. Our results indicate a higher range of economic impacts than previous research has indicated, but are consistent with earlier findings indicating that rust infestations will likely result in reduced soybean production, reduced exports, and higher prices.

Greener Acres or Greener Waters? Potential U.S. Impacts of Agricultural Trade Liberalization

This paper examines the elimination of all agricultural policy distortions in all trading countries and agricultural production decisions in the United States, as well as subsequent environmental quality in the presence and absence of nondegradation environmental standards. The results suggest that trade liberalization has the potential to increase domestic production and boost agricultural returns by as much as 8.5 percent. Consumer surplus would likely fall, and the discharge of nutrients, sediment, and pesticides would likely increase. However, environmental policies can limit these adverse environmental impacts and mute the potential decrease in consumer surplus, while leaving increased returns to agricultural production.

Comparing Policies to Improve Water Quality when Dischargers of Pollutants are Strategic

Abstract Market-based instruments such as fees or tradable permits can be used to simultaneously regulate point and nonpoint sources of pollution discharge into a river. However, sources of pollution discharge often have more information about their own costs of pollution abatement than do regulators. This information asymmetry may lead to strategic behavior, which can lead to different outcomes under different policies. This paper estimates a Nash payoff of a two-period strategic game using econometrically estimated abatement costs for point and nonpoint source phosphorus discharges in the Minnesota River Basin. Results show that when dischargers of pollutants are strategic, discharge permits may yield lower deadweight losses than discharge fees.

The Potential Implications of 'Big Ag Data' for USDA Forecasts

Recent advances in precision agriculture technology have increased the potential to capture near-real time data such as planting and yield information. It is well established that information on crop acreage and yield can have value in commodity markets. That is why the USDA conducts farm surveys and freely reports such information. In this study we use a large sample (just over 1.5 million observations) of farm-level corn yield data to consider if it is possible to use non-random farm yield data (such as might be available to providers of precision agriculture services) to accurately predict the national corn yield. Specifically, we examine scenarios where a forecasting agent has data that is not representative either because it is from a limited region or because it consists primarily of large farms. In general, we conclude that large volumes of data can, to some degree, overcome forecasting bias caused by non-representative samples. Moreover, if the forecaster can benchmark against an unbiased estimator, it may be possible to remove much of the bias from estimates generated by non-representative samples.