Economic Tidbits

Value of Water for Irrigation

Most people understand the value of water used in irrigation varies across regions and time. And most people probably believe the value of water is greatest in arid regions and during times of drought. However, researchers with Daugherty Water for Food Global Institute (DWFI) suggest the latter statement may not be the case. Indeed, their study suggests “that the per unit value of irrigation water is highest not during severe droughts and not in more arid areas . . . but rather when and where irrigation can make the largest improvements to average crop productivity.”

The study, co-authored by Renata Rimsaite, DWFI Postdoctoral research associate, Justin Gibson, a Corteva agriscience data scientist, and Nick Brozovic, DWFI director of policy, examined corn production in the central High Plains region (Nebraska, Colorado, and Kansas). The authors estimated an average value of water for each year between 2010-2017 for counties in the region based on corn prices, yield differentials between irrigated and dryland production, and estimated irrigation requirements. The estimated per unit gross value of water equaled the revenue differences between dryland and irrigated production divided by irrigation requirements. Irrigation costs were not considered.

The authors found the gross average value of irrigation water was highest in the central and eastern areas of the region where dryland crops are prevalent, and irrigation is used only supplementally (Figure 2). Not surprisingly, the estimated values of water were highest during years with high crop prices. But contrary to what most persons would think, the highest average values were not seen in 2012, the year of a severe drought. The differences in yields between irrigated and dryland corn were highest in 2012, but the irrigation requirement was the highest too, reducing the average value of water in that year. Instead, the highest average value of water was seen in 2011 across the three states.

Rimsaite et al. suggest estimated average water values can be used as an indicator of where new disputes over water use might surface. With climate change, major production areas which are predominately dryland now (i.e., Iowa, Illinois, Indiana, or Missouri) may see increased drought and a greater need for supplemental irrigation. Absent drought planning and water management schemes, they suggest conflicts over water use in these areas could occur.

Figure 2. Value of Water in Corn Production, 2010-2017

Source: Renata Rimsaite, Justin Gibson, and Nicholas Brozovic. Informing drought mitigation policy by estimating the value of water for crop production. Environmental Research Communications. April 21, 2021.

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