Spot water markets and risk in water supply

Water availability patterns in semiarid regions are typically extremely variable. Even in basins with a highly developed infrastructure, users are subject to unreliable water supplies, incurring substantial economic losses during periods of scarcity. More flexible instruments, such as voluntary exchanges of water among users, can help users to reduce risk exposure. This article looks at the effects of spot water markets on the economic risk caused by water availability variations. Our theoretical and empirical risk analyses are based on the random profits of water users. Profit probability density functions are formally and graphically characterized for both water sellers and buyers under several possible market outcomes. We conclude from this analysis that, where water supply is stochastic, water markets unambiguously reduce both parties' risk exposure. The empirical study is conducted on an irrigation district in the Guadalquivir Valley (Southern Spain), where there is a high probability of periods of extreme water scarcity. Water demand functions for the district representative irrigators and a spatial equilibrium model are used to simulate market exchanges and equilibrium. This programming model is combined with statistical simulation techniques. We show that the profit probability distribution of a representative irrigator is modified if water exchanges are authorized, leading to risk reductions. Results also indicate that if the market were extended to several districts and users that are subject to varying hydrological risk exposure, extremely low‐profit events would be less likely to occur. In sum, we show that exchanging water in annual spot markets can reduce farmers' economic vulnerability caused by water supply variability across irrigation seasons. These results support the water policy reform carried out in Spain in 1999 to allow for voluntary water exchanges among right holders.     

Irrigation water pricing: differential impacts on irrigated farms

European water policy, as set out in the Water Framework Directive (WFD), requires all EU Member States to implement volumetric water pricing at rates that roughly cover the total costs of providing water services. The objective of this paper is to develop a methodology that, for the different types of farm in an irrigable area, will enable us to analyse the differential impact that a pricing policy for irrigation water would have. For this purpose, Multi-Attribute Utility Theory (MAUT) mathematical programming models were used. The methodology is implemented on a representative area in the Duero Valley in Spain. Our results show the usefulness of differential analysis in evaluating the impact of a water pricing policy. This allows significant differences in the evolution of agricultural incomes to be observed, as well as the recovery of costs by the State, demand for agricultural employment and the consumption of agrochemicals resulting from rising prices of irrigation water in various groups of farmers within a given irrigated area.     

Specialization,diversification, and productivity: a panel data analysis of rice farms in Korea

This article examines the microeconomics of productivity associated with specialization/diversification in production activities, with an application to Korean rice farms. Korean rice farms tend to be very small and highly specialized. Our analysis examines the productivity effects associated with both farm size and farm specialization/diversification in Korean agriculture. Relying on farm‐level panel data, the analysis studies farm productivity in a multi‐input multi‐output context, accounting not only for changes in inputs and technical change in rice production, but also for the role of diversification in the production of other crops in current and previous periods. We find positive but small productivity gains from farm diversification. These gains come mostly from complementarity effects across farm outputs, with minimal effect of scale economies. The positive complementarity effects work against nonconvexity effects, which provide strong productivity incentives for rice farms to specialize.     

Irrigation technology adoption and its implication for water conservation in the Texas High Plains: a real options approach

Water shortage has been a significant issue for several decades in the Texas High Plains. Agriculture has been identified as the main activity contributing to this shortage. To address this issue, many efforts have been focused on the possible adoption of sophisticated irrigation systems with high levels of water application efficiency. In this study, the entry and exit thresholds for the low‐energy precision application (LEPA) system are analyzed simultaneously in cotton farming in the Texas High Plains using a real options approach. The results show that the LEPA system is profitable only when cotton price is set above $1.59/kg. The exit (entry) threshold is consistently low (high) over a range of values for parameter changes including investment cost, exit cost, variable cost, risk‐adjusted discount rate, and volatility rate, so it is unlikely that farmers with irrigation systems in place would leave them easily. This implies that to attain the goal of saving water, Lubbock County needs to focus on convincing current farmers to replace old irrigation systems with new ones.     

Factors Affecting Technical Efficiency of Rice Farmers in Village Reservoir Irrigation Systems of Sri Lanka

Given the importance of water for rice production, this study examines the factors affecting the technical efficiency (TE) of irrigated rice farmers in village irrigation systems (VIS) in Sri Lanka. Primary data were collected from 460 rice farmers in the Kurunagala District, Sri Lanka, to estimate a stochastic translog production frontier for rice production. The mean TE of rice farming in village irrigation was found to be 0.72, although 63% of rice farmers exceeded this average. The most influential factors of TE are membership of Farmer Organisations (FOs) and the participatory rate in collective actions organised by FOs. The results suggest that enhancement of co‐operative arrangements of farmers by strengthening the membership of FOs is considered important for increasing TE in rice farming in VIS.     

Determinants of millet diversity at the household-farm and village-community levels in the drylands of India: the role of local seed systems

This research characterizes the biological diversity of millet crops in the semiarid regions of India at the household and village‐community ( panchayat) scales of analysis, placing that evidence in the context of local seed systems. A set of seed system parameters that span formal and informal exchange and can be measured empirically are proposed. The analysis is based on data collected through sample surveys of farmers and traders in selected sites of Karnataka and Andhra Pradesh, combined with cultivar taxonomies developed with geneticists and applied to seed samples. Findings demonstrate that millet crop diversity levels at both scales of analysis are significantly influenced by seed system parameters, factors which related studies have omitted. In particular, the presence of active local (formal and informal) seed markets enhances millet richness among and within farming communities. Crop improvement strategies oriented toward local seed markets could provide important benefits and incentives to farm households living in these marginal environments. There is a need, however, for an enhanced theoretical understanding of local seed markets in analyzing crop variety choices and the diversity of materials grown in less favored environments.     

Efficiency and total factor productivity in Ukrainian agriculture in transition

This article analyzes efficiency and total factor productivity (TFP) change of large agricultural enterprises during their transition to a market economy in Ukraine. Efficiency is calculated by Data Envelopment Analysis and productivity change is measured by the Malmquist Productivity Change Index in the period between 1990 and 1999. On average, TFP declined by 6% annually, dropping a total 42%. The main reason for the observed TFP decline is a decrease in technical efficiency, which is found to be remarkably significant. At the same time there is a high variation among individual enterprises: the distribution of efficiency scores widens, which indicates that the farms diverge with respect to their economic performance. A Tobit regression analysis is conducted in which efficiency scores are related to factors such as farm type, farm size, initial conditions, and legal form.     

The impact of water conservation and intensification technologies: empirical evidence for rice farmers in Ghana

This study employs the propensity score matching model to examine the impact of the adoption of water conservation and intensification technologies on farm output and income among small-scale lowland rice farmers in the Northern Region of Ghana. The matching was conducted based on the Mahalanobis distance combined with the propensity score. Balancing tests by checking the mean standardized absolute bias in the matched sample were conducted as well as a sensitivity analysis was conducted to check for hidden bias due to unobservable selection. The empirical results show a positive and significant impact of the adoption of bunds technology on input demand as well as a positive but insignificant impact on output supply and net returns. Adopters of the dibbling technology were found to have higher output supply, whereas no statistically significant difference was found between the incomes of adopters and nonadopters of dibbling seed method. The results, however, reveal a positive and significant effect on output and net returns when the dibbling method is combined with intensified weeding. The estimates were found to be relatively insensitive to hidden bias.     

Cost and environmental efficiency of rice farms in South Korea

We examine cost and nutrient use efficiency of farms and determine the cost to move farms to nutrient‐efficient operation using Data Envelopment Analysis (DEA) with a dataset of 96 rice farms in Gangwon province of South Korea from 2003 to 2007. Our findings show that improvements in technical efficiency would result in both lower production costs and better environmental performance. It is, however, not costless for farms to move from their current operation to the environmentally efficient operation. On average, this movement would increase production costs by 119% but benefit the water system through an approximately 69% reduction in eutrofying power (EP). The average estimated cost of each EP kg of aggregate nutrient reduction is approximately one thousand two hundred won. For technically efficient farms, there is a trade‐off between cost and environmental efficiency. We also find that the environmental performance of farms varies across farms and regions. We suggest that agri‐environmental policies should be (re)designed to improve both cost and environmental performance of rice farms.     

Evaluation of drought management in irrigated areas

This paper focuses on the economic consequences of droughts for the irrigation sector. We develop a dynamic‐recursive mathematical programming farm model that assumes imperfect mobility of capital and labour as well as rational expectations about future water availability. The model is calibrated to 12 representative farms belonging to three irrigation communities of the Guadalquivir Basin (south Spain) and used to simulate the 1991–1997 period, which included 3 years of intense drought. Results indicate that the drought imposed significant costs on farmers, but show also that water managers partly exacerbated these costs by allocating excessive amounts of water to irrigators in the abundant years. The model is also used to evaluate the benefits of a perfect water supply forecast and to simulate the economic gains of a voluntary water banking scheme. Results show that the benefits resulting from the perfect forecast of water supply 1 year ahead would represent a relative gain of 5%. However, a voluntary banking system would allow farmers to increase their benefits by 32–82% depending on the supply system.     

Incentives to managers or participation of farmers in China's irrigation systems: which matters most for water savings,farmer income,and poverty?

The overall goal of our article is to better understand which matters for water savings, farmer income and poverty in China's irrigation systems: incentives to managers or participation of farmers. To pursue this goal, the article has three objectives. First, we track the evolution of water management reform, examining the practice of providing incentives to managers, and increasing the participation of farmers. Second, we identify the impact of water management reform on crop water use. Specifically, we want to measure whether or not incentives to managers and farmer participation in water management institutions affect the performance of the irrigation system. Because we also are interested in the potential results of water management reform, the article explores how changes in incentives and farmer participation affect farmer income and poverty. Based on a random sample of 51 villages and 189 farmers in four large irrigation districts in Ningxia and Henan provinces, both in China's Yellow River Basin, our results show that the two major forms of water management reform, water users' associations (WUAs) and contracting, have begun to systematically replace traditional forms of collective management. Our analysis demonstrates, however, that it is not the nominal implementation of the reform that matters, but rather it is the creation of new management institutions that offer water managers monetary incentives that lead to water savings. In contrast to the original design of China's reform policies, participation of farmers has not played a role in saving water. Importantly, given China's concerns about national food production and poverty alleviation, the reductions in water, at least in our sample sites, do not lead to reductions in income and do not increase the incidence of poverty.     

Irrigation production functions with water-capital substitution

The dynamics of biomass growth implies that the yield of irrigated crops depends, in addition to the total amount of water applied, on irrigation scheduling during the growing period. Advanced irrigation technologies relax constraints on irrigation rates and timing, allowing us to better adjust irrigation scheduling to the varying needs of the plants along the growing period. Irrigation production functions, then, should include capital (or expenditures on irrigation equipment) in addition to aggregate water. We derive such functions and study their water-capital substitution properties. Implications for water demand and adoption of irrigation technologies are investigated. A numerical example illustrates these properties.     

Yield and income risk-efficiency analysis of alternative systems for rice production in the Guinea Savannah of Northern Ghana

Risk efficiency of rice grain yield and returns to farm operators' household resources generated from an improved short‐duration cover crop fallow system were compared with (traditional) natural bush fallow, and continuous rice‐cropping systems. The improved fallow system involved maintaining Calopogonium mucunoides, seeded into a natural bush fallow for 2 years before planting to rice. With no chemical fertilizer application, which reflects farmers' practice in the area, average grain yield for continuous rice (1,185 kg/ha) and the cropping sequence incorporating a natural bush fallow (1,175 kg/ha) did not differ, but were higher for the improved fallow system (1,304 kg/ha). This suggests that nutrient contribution from the leguminous cover crop made up for critical crop N requirements in the improved fallow. Stochastic dominance of grain yield distributions from the improved fallow system, relative to the other two cropping systems, was more dramatic with no N fertilizer application compared to treatments with 30 kg/ha N. Average returns were highest for the improved fallow system, followed by the natural bush fallow‐cropping system, and then continuous rice, under the no N fertilizer treatment regime. With 30 kg/ha N fertilizer, income risk efficiency was less clear (compared to treatments with no N fertilizer), especially between continuous rice and the improved fallow treatment, because of faster N mineralization effects on continuous rice. In contrast, the improved cover crop fallow system completely dominated the natural bush fallow treatment under both fertilizer regimes. Rice production systems that incorporated the leguminous cover crop fallow were superior to the natural bush fallow system, based on both grain yield and average farm income risk‐efficiency considerations.     

Valuing animal genetic resources: a choice modeling application to indigenous cattle in Kenya

In an effort to improve productivity and profits, many farmers have replaced traditional livestock breeds with higher yielding alternatives. While such changes may bring about short‐term economic gains, the loss of traditional livestock breeds could result in the loss of an important genetic resource as a variety of important genetic traits adapted to local conditions gradually become less common in the population. This is a particular problem in Africa, where livestock make a substantial contribution to human livelihoods. Using the example of cattle in Kenya's pastoral livestock markets this study uses a choice experiment approach to investigate buyers' preferences for indigenous breeds such as the Maasai Zebu. The analysis employs a latent class approach to characterize heterogeneity in valuations both within and across respondents buying cattle for breeding, slaughter, or resale. The results show that there are at least three classes of buyers with distinct preferences for cattle traits and that most buyers favor exotic rather than indigenous breeds. Such preferences have implications for the conservation of indigenous cattle in Kenya and in other developing countries and suggest that some form of intervention may be required to ensure the preservation of this important animal genetic resource.     

Geography of plant breeding systems,agroclimatic similarity,and agricultural productivity: evidence from Nigeria

Agroclimatic conditions and agricultural research and development (R&D) including plant breeding activities by the public sector are some of the most significant exogenous factors in the agricultural sector. However, the effects of the interactions between these two sets of factors on agricultural productivity have not been studied widely in developing countries, despite potentially important implications on their plant breeding strategies. Using three‐wave panel data of agricultural households in Nigeria and spatial data on various agroclimatic parameters, we show that agricultural productivity and technical efficiency at the agricultural household level is significantly positively affected by the similarity of agroclimatic conditions between locations where agricultural households are located, and locations where major plant breeding institutes are located. These results hold after controlling for various socioeconomic characteristics of these households, including their physical distances to the breeding institutes. Findings are robust across parametric and nonparametric specifications such as Data Envelopment Method, and after addressing potential endogeneity of agroclimatic similarity and agricultural inputs variables in the production function. Productivity effects due to the locations of plant breeding institutes and resulting agroclimatic similarity can be potentially sizable given Nigeria's past productivity growth speed.     

Regional Planning of Wastewater Reuse for Irrigation and River Rehabilitation

Subject to a few agri‐environmental restrictions, municipal wastewater can be utilised for agricultural irrigation and river rehabilitation. This paper develops a single‐year Planning Model for a region in Israel which consists of a city and three potential wastewater consumers. The model incorporates, in one endogenous system, the economic, physical and biological relationships in the water–soil–plant–environment system and its objective is to maximise the regional social welfare. The model determines the optimal crop mix and the optimal allocation of the limited water and land resources among all potential users. Then, different allocation approaches from the concept of transferable utility games are applied to determine a reasonable and fair allocation of the additional net benefits which will be acceptable to all the players. The results support the collaboration among the economic entities and indicate economic and environmental advantages which can serve the decision‐makers.     

Productivity growth, catching-up and uncertainty in China''s meat trade

The potential role of China as a major importer of agricultural products, and the likely impact on world markets has been a topic of considerable debate over the past decade. In this paper, we focus specifically on the livestock sector and develop a detailed analysis of productivity growth in China’s pig and poultry production along with projections of China’s likely meat trade in the year 2010. We use a general equilibrium model which permits us to explore the sensitivity of our projections to macro-economic uncertainty as well as uncertainty in livestock productivity growth rates. Our analysis shows that China’s net trade position is very sensitive to both of these factors. With high livestock productivity growth and a slow-down in the rest of the economy, China could be a substantial competitor in export markets by 2010. On the other hand, slow productivity growth in livestock production, coupled with a rapidly growing macro-economy could transform China into a major market for future meat exports.     

Farmers' health and agricultural productivity

Agriculture is one of the most hazardous productive sectors around the world. Most previous studies have focused on health issues of farmers in developing countries, while little attention has been paid to farmers' health problems in developed countries. The present study assesses the effect of farmers' health conditions on agricultural productivity in Norway. Employing stochastic frontier regression techniques, we conclude that differences in farmers' health help to explain the variance in agricultural production efficiency.