ECONOMIC IMPLICATIONS OF A DYNAMIC LAND AND WATER Mack
ECONOMIC IMPLICATIONS OF A DYNAMIC LAND AND WATER BASE FOR AGRICULTURE IN CENTRAL ARIZONA by Lawrence E Mack A Dissertation Submitted to the Faculty of the DEPARTMENT OF ECONOMICS In Partial Fulfillment of the Requirements For the Degree of DOCTOR OF PHILOSOPHY In the Graduate College THE UNIVERSITY OF ARIZONA 1969 THE UNIVERSITY OF ARIZONA GRADUATE COLLEGE I hereby recommend that this dissertation prepared under my direction by Lawrence E. Mnck entitled Economic Imilications of a D .11 .( for Agriculture in Central Arizona be accepted as fulfilling the dissertation requirement of the degree of Doctor of Philosophy Dissertation Director L After inspection of the final copy of the dissertation, the following members of the Final Examination Committee concur in its approval and recommend its acceptance:* J y / / J S,, /h7 21 / This approval and acceptance is contingent on the candidate's adequate performance and defense of this dissertation at the The inclusion of this sheet bound into final oral examination. the library copy of the dissertation is evidence of satisfactory performance at the final examination. STATEMENT BY AUTHOR This requirements is deposited rowers under dissertation has been submitted in partial fulfillment of for an advanced degree at The University of Arizona and in the University Library to be made available to borrules of the Library. Brief quotations from this dissertation are allowable without special permission, provided that accurate acknowledgment of source is made. Requests for permission for extended quotation from or reproduction of this manuscript in whole or in part may be granted by the head of the major department or the Dean of the Graduate College when in his judgment the proposed use of the material is in the inIn all other instances, however, permission terests of scholarship. must be obtained from the author. SIGNED: PREFACE The research reported in this dissertation focuses on the changes and adjustments that will occur in irrigated agriculture in two irrigation districts located in central Arizona. It is part of a comprehensive study of the use of Arizona's water resources entitled "Water in Relation to Social and Economic Growth in an Arid Environmentt' and has been supported by a grant from The Rockefeller Foundation. This comprehensive study has proceeded in two parts. The first part has been the construction of an interindustry model of the state's economy with primary importance being placed on the heavy water-using A second phase, of which the present study is a part, has been sectors. a determination of how the output of the agricultural sector will change in response to various water conditions expected to occur over time in different subregions of the state. An integration of these regional studies of the agriculture sector with other sectors of the economy will provide a total picture of how the economy of the state will be affected by changing water conditions. Intra--sector adjustments in agricultural related industries following adjustments within the agriculture sector will be determinable. The social and economic changes necessary to facilitate orderly planning for changes that will occur in all sectors of the state's economy will be possible. Projections of intra-sector and intersector, as well as total state economic activity, will be possible at the culmination of this research. iii ACKNOWLEDGMENTS A sincere debt of gratitude is extended to Dr. N. M. Kelso, who provided constant counsel and guidance at all stages of the author's graduate studies. His thoughtful judgments and enduring patience during the preparation of this dissertation are beyond recompense. The helpful advice and criticisms of Drs. Robert C. Angus, William E. Martin, Philip G. Hudson and Robert A. Marshall in the final preparation of this dissertation are gratefully acknowledged. The valuable programming assistance provided by Mr. Russell Gum has been much appreciated. Fellow students, Drs. Douglas N. Jones and Harold M. Stults and Mr. Kenneth J. Hock, have also contributed greatly by providing technical assistance and participating in informal digcussion sessions. A final note of thanks is due The Rockefeller Foundation and The University of Arizona, whose generous financial support made this dissertation possible. To all of the above who have given so unselfishly of their time and talents, I extend a personal thank you. iv TABLE OF CONTENTS Fag e viii LIST OF TABLES Xi LIST OF ILLUSTRATIONS xii ABSTRACT CHAPTER INTRODUCTION 1 3 Problem Orientation Geographical Location Water Sources and -Rights Land Availability and Use 3 5 6 6 Objectives Method of Analysis Assumptions Data Sources Review of Related Studies INSTITUTIONAL FRAMEWORK OF WATER SUPPLY ORCAIIIZATIONS Central Arizona Water Industry 9 10 11 13 . 16 17 17 Development Description Distinctive Features 18 20 22 Users' Cooperative 23 Water Pricing Water Supply Organizations Salt River Project Roosevelt Water Conservation District Significance of Water Supply Organizations for the Present Study REPRESENTATIVE MODEL SPECIFICATIONS Sample Characteristics Definition of Size Categories V 25 25 29 30 31 33 33 vi TABLE OF CONTENTS--Continued Page Production Resources Land Irrigation Facilities Buildings Water Availability Machinery Inventory Custom Operations Labor Capital Management Alternative Enterprise Combinations Calendars of Operations and Budgets Costs and Returns Yields, Product Prices and Gross Returns Net Returns Over Variable Costs Fixed Costs 34 35 35 36 37 38 39 39 40 40 41 41 43 43 47 50 THE LINEAR PROGRME'4ING MODEL 54 Procedural Technique Components of the Models 54 58 The Objective Functions Real Activities Restrictions Variations in Water Quantity Variations in Land and Water Availability Over Time Land Availability Groundwater Table Projections Pumping Costs Water Supply Functions RESULTS AND CONCLUSIONS Projected Adjustments to Resource Changes Enterprise Combinations Cropland and Water Use Net Revenue Changes Firm Numbers Allotments 58 58 59 62 63 63 65 69 75 77 77 78 92 96 100 106 vii TABLE OF CONTENTS--Continued Page Total Costs and Net Returns per Farm Agricultural Demand for Irrigation Water Water Parameter Variations Additional Water Sources Values and Quantities of Additional Water VI. SUMMARY AND EVALUATION LIST OF REFERENCES 107 108 119 119 121 129 133 LIST OF TABLES Page Table Salt River Project Land Use, 1962-1968 7 Roosevelt Water Conservation District Land Use, 1963-4968 8 Selected Central Arizona Irrigation District Data 19 Range of Cropland Acreage, Total Number of Farms, Aggregate Cropland Acreage, and Number of Farms in Sample, SRP, 1964 33 Range of Cropland Acreage, Total Number of Farms, Aggregate Cropland Acreage, and Number of Farms in Sample, RWCD, 1964 33 Salt River Project Farm Model Sizes 34 Roosevelt Water Conservation District Farm Model Sizes 34 . Irrigation Well and Ditch Inventory and Investment for Typical Farm Models, SRP and RWCD 36 Alternative Crop Enterprises Available to Typical Farm Models, SRP and RWCD 42 Yields, Prices, and Gross Returns per Acre from Field Crops, SRP and RWCD 44 Farm Model Gross Returns, Total Variable Operating Costs, and Net Returns per Acre, SRP and RWCD 48 Annual Fixed Costs for Typical Farm Models, SRP and RWCD 51 . Aggregate Water Availability and Cost by Size Group, SRP, 1967 Constraints for Aggregate Model Farms, SRP and RWCD, 1967. 16. . 60 Aggregate Water Quantity Variations in One-Half Acre-Foot Increments from Zero to Six and One-Half Acre-Feet per Acre, SRP and RWCD 64 Projected Agricultural Land and Irrigation Water Availability over Time, 1967-2020, SRP 66 ix LIST OF TABLES--Continued Page Table 31. Estimated Pumping Lifts and Rates of Groundwater Decline, 1967-2020, SRP and RWCD 71 Pumping Lifts and Pump Water Costs per Acre-Foot for Selected Years, SRP and RWCD 73 Projected Adjustments on Farms in Size Group I to Changing Land and Water Availability, SRP 79 Projected Adjustments on Farms in Size Group II to Changing Land and Water Availability, SRP 80 Projected Adjustments on Farms in Size Group III to Changing Land and Water Availability, SRP 81 Projected Adjustments on Farms in Size Groups IV to Changing Land and Water Availability, SRP 82 Projected Adjustments on Farms in Size Group I to Increasing Water Costs, RWCD 83 Projected Adjustments on Farms in Size Group II to Increasing Water Costs, RWCD 84 Projected Adjustments in Agriculture to Changing Land and Water Availability, SRP 89 Projected Adjustments in Agriculture to Increasing Water Costs, RWCD 90 Projected Adjustments in Agriculture to Changing Land and Water Availability and Increasing Water Costs, SRP and RWCD. 93 Projected Water Use by District, per Acre by District and by Study Area 97 Projected Aggregate Net Revenue over Variable Production Costs by Farm Size Group, Irrigation District and Study Area 98 Projected Change in Farm Numbers by Farm Size Group, SRP, 1967 and 2020 103 Gross Returns, Fixed Costs and Net Revenue per Farm and Its Allocation, 1967 105 x LIST OF TABLES--Continued Page Table Demand for Irrigation Water at Various Prices by all Farms in Each Farm Size Group and by the Aggregate of all Farms, SRP, 1967 114 Demand for Irrigation Water at Various Prices by all Farms in Each Farm Size Group and by the Aggregate of all Farms, RWCD, 1967 115 Estimated Time-Related Demand for Replacement Water for Agriculture in the SRP and RWCD 122 Projected Net Revenue at Selected Marginal Water Prices, SRP and RWCD 125 Projected Net Revenue per Acre, Water Use per Acre, and Net Revenue per Acre-Foot of Water Used, SRP and RWCD. . 130 LIST OF ILLUSTRATIONS Page Figure Central Arizona Groundwater Subareas as Determined by United States Geological Survey Depth to Water, 1967, and Change in Water Level, 1962-1967, in Selected Wells in the Central Part of Arizona 4 70 Projected Water Use and Net Revenues over Variable Production Costs, SRP 101 Projected Water Use and Net Revenues over Variable Production Costs, RWCD 102 Individual Model Farm Demands for Irrigation Water, SRP, 1967 109 Individual Model Farm Demands for Irrigation Water, RWCD, 1967 110 Aggregate Agricultural Demand for and Supply of Irrigation Water, all Farms, SRP, 1967 112 Aggregate Agricultural Demand for and Supply of Irrigation Water, all Farms, RWCD, l97 113 xi ABSTRACT Irrigated agriculture's future in central Arizona is dependent upon the availability of two relatively fixed and limited resources: land and water. Adjustments within the agricultural sector will flow directly from, or in response to, changes in the availability and/or costs of these production factors. This study explores the agricultural use of these two factors of production and adjustments that will follow from their changing availability and cost over a 53-year period from 1967 to 2020. The area of central Arizona under study encompasses two irrigation districts-the Salt River Project (SRP) and the Roosevelt Water Conservation District (RWCD). A structural model of the agricultural sector was synthesized from a survey of 102 operating farms in the study area. Models of four farm sizes were employed in a linear programming analysis to depict economies of scale. All four models were used to represent SRP farms, while two were used to represent RWCD farms. These farm models were held constant throughout the projection period, except for specified changes in the number of acres represented by each model (a decrease in land availability) in the SRP and the increasing water cost with which they are confronted in the RWCD. All other changes and/or adjustments wIthin agriculture are, in this analysis, dependent upon these land availability and water cost factors. xii xiii Agricultural land and irrigation district surface and groundwater availability are considered factors exogenous to the agricultural sector. In the SRP, land and its appurtenant water rights have been and will continue over the projection period to flow into the urban-industrial sector at the expense of the agricultural sector. The cost of obtaining ground- water will increase over the projection period as the groundwater table declines. This increasing cost of groundwater will affect adjustments in agriculture in the SRP only slightly since water is provided to agriculture primarily through a user's cooperative which has excess electrical power revenues available to subsidize water prices to farmers. Increasing water costs in the RWCD will have a considerable affect on adjustments in agriculture because of the absence of revenue from any source to subsidize the cost of obtaining groundwater. Land availability is assumed constant in this district and, therefore, is of no significance in adjustments that occur over the projection period. Acreages of crops producing high values per acre-foot of water used are not affected by projected decreases in cropland and/or increases in water costs. Adjustments occurring within agriculture over the pro- jection period take place in the acreages of those crops which produce a low net return per acre-foot of water used. As land availability decreases and/or water costs increase over the projection period, cropped acreage, total water use, over variable production costs decline. and net revenue The changes are not proportional since adjustments take place in the acreage of those crops which produce low values per acre and per acre-foot of water used. In the SRP, cropped acreage is projected to decrease 76 percent, total water use to decrease xiv 71 percent, and net revenue over variable production costs to fall approximately 50 percent due largely to continuous transfer of land and water out of agriculture. Projected declines in cropped acreage in the RWCD are 50 percent, total water use decreases 45 percent and net revenue over variable production costs falls 21 percent due entirely to increasing cost of water. A second phase of this analysis presents a demand function for irrigation water in each district over price ranges from zero dollars per acre-foot to those at which no water would be demanded. In the SRP, positive price and quantity relationships were found to exist from a price of $248 per acre-foot at which quantity would be zero, to a quantity of 816,873 acre-feet demanded at a zero price. Price and quantity relationships in the RWCD ranged from zero quantity demanded at a price of $113.36 per acre-foot to a quantity of 130,338 acre-feet at a zero price. A final section of this study treats various possible sources, uses, and values of additional water to agriculture in each irrigation district over the projection period. CHAPTER I INTRODUCTION Economic activity in Arizona is heavily dependent on an annually recurring quantity of surface water and a fixed stock of groundwater. The groundwater is being depleted at a relatively rapid rate. Competition among present and potential uses and users for this water supply and for the land area on which it may be used occurs in all parts of the state, though most acutely in areas of intensive irrigation and rapid urbanization. The intensity of this competition is expected to become more acute as the groundwater table falls, population increases, and the nonagricultural economy grows. These changes have been occurring at relatively rapid rates during the past two decades and are expected to continue. In order better to understand the implications of this intensifying competition for limited water supplies, the Department of Agricultural Economics, in cooperation with other segmeiits of The University of Arizona, has initiated studies that examine its implications for the continued growth of the Arizona economy, assess the need for changes in the state's water policies, and determine the economic benefits and costs of developing additional water supplies. These studies seek to determine the historic, present and future water demands in the state. They also explore the political, economic, legal and sociological implications of past, present and future water use patterns. 1 2 One such study is entitled "Water in Relation to Social and Economic Growth in an Arid Environment. The goal of this study is to determine the aggregate effects on the state's economic output that will result from possible changes in economic activity in those sectors of the economy affected directly by growing economic scarcity of water. To this end, a major phase of this study has been the construction of an inter-industry "flow-of-funds" model of the Arizona economy (Tijoriwala, Martin and Bower, 1968). This model will provide the mechanism for de- termining by conventional input-output analysis the aggregate economic effects of individual sector changes induced by growing competition for land and water. Since irrigated agriculture is an important sector of the state's economy and accounts for approximately 90 percent of all water used in the state, changes that will occur in that sector due to growing competition for land and water are of primary importance in the use of this model. Aggregate water use in the state's agriculture may change over time because of water's increasing economic scarcity and changing land availability. As water costs increase and land availability declines, gross and net revenue and land and water use in agriculture will decline. These changes and adjustments will have direct and indirect effects in other sectors of the economy. These intersector effects stemming from changes within the agricultural sector will be determined via the input-output model described above. This research is supported by a grant from The Rockefeller 1. Foundation and is being conducted under the direction of Dr. M. N. Kelso, Professor of Agricultural Economics, Agricultural Economics Department, The University of Arizona, Tucson. 3 The research reported in this dissertation focuses on the changes and adjustments that will occur in irrigated agriculture in two irrigation districts located in Maricopa County in central Arizona. In this area, there is competition for both land and water between the urban-industrial and agricultural sectors. The adjustments and changes in the agricultural sector herein determined, together with those determined by Stults (1968), Jones (1968) and Hock (n.d.) and others for other irrigated areas, will be used in the input-output model of the state's economy to project aggregate state changes in economic activity as the water and land base change. Problem Orientation Principal characteristics of the area relevant to the problem under investigation are described below. Geographical Location The area with which this study is concerned is composed of two separate, but related, irrigation districts (see Figure 1, Page 4). These are the Salt River Project (hereafter denoted by the initials SRP) and the Roosevelt Water Conservation District (hereafter denoted by the initials RWCD). These irrigation districts are distinct in that their water supply, its cost, and the availability of agricultural land differ and this difference is expected to increase. Their similarities, which provide a basis for studying them together, are their location in a singular climatic region, their access to common basic resources, and their production of identical combinations of crops with similar production techniques and resource organization. Source: Figure 1. r A 1s: CANOLE N AREA 6.2 L Vt 3E. COUSTYI R.4E. RIVAL IMARICIPA CSTY r I (I - '- _ O]h QUEEN - CREEX- -- Junct.On SO PC NO I 1t5 E. I P.6 C. lION U UU !AUlUUUUI - IkUUUUUU h. ruurdiIIIIUUiU U 'dUU AN TAN U j4 El i*iri 1UiUJI UUUUW4ULIIUUU I1I .-J__ -' ..i.... - R.9E. iIiIU ' IIi!ç!Jlihl UU y ChUndI.n C A- ' ua tuiuiUa .UII J UlU .t1idncnU IY mI 1lU4UI if I) RE. Central Arizona Groundwater Subareas as Determined by United States Geological Survey. R. I E. -- -t ttr L, r4 I. " Ui1U' U... In UUUUUUIIIIUI$EIUIII1 lit , u.I.UU.t..CrPiU.UU!.iU! NIUUUliUUULRW'p UI1 WU*UUU51 Pu UUI, S.. ii,1Nv iiuui;aui uiuiiu. '--I ii Glenda White, Stulik and Rauh, 1964. 60/HOARY OP SUBAREA IRRIGATION CVAL (20-/Had iaHHn.H/) CHANGE IN WATER LEVEL ---20 RAND-ROCK AREA ALLUVIAL AREA NIX- TOLL E SON- uuu. P_lw. EXPLANATION dui. 4.1.. -. PUU PHOE ---- _l_ luU4 UIkIll .P, _UlU.lIUIuI.UU.. UUURViUi Iu. ' I. Prii 5 Annual rainfall is 10 inches or less and is of minor consequence in agricultural production, Soils are generally of sufficient depth to provide excellent growing conditions. Soil compaction and waterlogging are minor problems that have, from time to time, presented problems but are presently of little consequence. Drainage wells have been drilled to alleviate shallow water tables in the past, but at present are more detrimental than helpful. Cropping patterns in both districts are diversified. Major field crops include cotton, alfalfa, small grains and a variety of vegetables, of which lettuce is predominant. Cilrus, together with other speciality crops, is of minor importance so far as land and water are concerned. Water Sources and Rights Irrigation water is obtained from three sources in both districts. These are surface-water runoffs carried in the Salt and Verde Rivers, project pumps, and private pumps. Surface water is obtained exclusively from four reservoirs on the Salt River and from two reservoirs on the Verde River, constructed for and operated by the SRP. These reservoirs capture and retain runoff from approximately 13,000 square mules of watershed located in east central Arizona. This water is distributed to SRP and RWCD lands under a variety of water rights based upon past history of water use, continuous cultivation, contractual arrangements, and water availability. In addition to surface water, both districts produce water from pumps which they operate on a cooperative basis with district members. The SRP and RWCD operate 250 wells and 60 wells, respectively. 6 A third source of irrigation water is wells owned and operated by private landowners in the districts. The exact number of these private wells is not known; however, estimates place approximately 500 in the SRP and 26 in the RWCD. Both the SRP and RWCD have been declared critical groundwater areas by the Arizona State Land Department. As a result, only replacement irrigation wells may be drilled (Ernst, 1954). No restrictions are placed on the quantities of water that may be produced from existing wells or their replacements. Mann (1963), in Chapters 3 and 4, describes the surface-water and groundwater law under which these districts operate and the history of its development. Land Availability and Use SRP land use is presented in Table 1. pattern is evident. The changing land use Irrigated agriculture has experienced a decline in land availability coincidental to an increase in residential and industrial land use. Since water rights are attached to land, this means that as land moves from one use to another the water also moves. This movement of land and water is expected to continue. Land use data for the RWCD are presented in Table 2. lands are used exclusively for agricultural purposes. not shown, is in subdivision use. Project A small portion, The area subdivided occupies only about one-tenth of one percent of the total acreage in the district and has not exhibited any recent tendency to change. Obj ectives A first objective of this study is to determine the marginal value productivity of irrigation water in the SRP and RWCD as increasing Source: 1968b Salt River Project, 1962-l968. Preliminary spring report, compiled in June, 1968. b. 135,742 Totals are not constant because of reporting procedures. 13,027 a. 148,769 9,438 80,045 238,252 238,252 77,051 9,672 135,600 15,929 151,529 1967 238,252 75,559 9,762 135,890 17,041 152,931 1966 238,252 72,971 9,917 145,329 10,035 155,364 1965 238,252 70,170 10,085 146,031 11,966 157,997 1964 238,081 68,000 12,030 159,881 1963 10,200 146,289 19,289 165,575 147,851 Totala 239,150 Subdivided 62,000 (Acres) Farmsteads, Ditches and Roads 10,575 Salt River Project Land Use, 1962-1968. Area Area in Fallow Irrigated or Idle Cultivation 1962 Year Table 1. a. 39,415 2,545 1,056 Source: Roosevelt Water Conservation District, 1963-1968a. Totals may not be exact due to rounding procedures. 5,544 30,310 1968 39,415 2,568 902 9,823 5,968 26,227 29,977 1967 39,425 2,500 956 12,031 9,425 23,882 26,544 1966 39,425 2,445 730 9,223 5,510 26,912 30,740 1965 39,425 2,536 730 7,105 4,117 28,786 32,042 1964 39,425 2,415 678 27,803 31,453 8,358 Totala Uncleared 4,876 Roosevelt Water Conservation District Land Use, 1963-1968. Fallow or Area in Farmsteads, Idle Cultivation Fall Ditches and Roads Fall Spring Spring 1963 Year Table 2. 9 quantities are applied to cropped acres. Production theory states that as larger amounts of water are applied to these acres, its marginal value productivity will fall since each additional quantity is employed in the production of crops, or units of crop output, from which declining amounts of net revenue are received per unit of additional water used. These successive and declining marginal value products from increasing quantities of water applied constitute the demand function for water in irrigated agriculture in these districts as of 1967. The second and primary objective is to project changes in crop enterprises, in volume of crop output, in net incomes, and in water use that will occur in irrigated agriculture in the districts as the availability of their land and water bases changes over time. The adjustments and changes are projected for each district, starting in 1967 and proceeding by five-year intervals from 1970 to 2020. Method of Analysis Linear programming is the analytical tool used to develop the demand function for water and to predict changes in the agriculture of the districts that will follow from changes in the agricultural land and water base over time.2 Basic inputs for the linear programming models were determined from a field survey. This survey provided the necessary data for a description of the typical agricultural resource organizations, The program employed is Aiphac, Version I, developed by 2. Thomas Zierer at the University of California, Berkeley, for use on the 6400 Control Data Computer. 10 cropping patterns, size distribution of farm units, and operation procedures for producing an array of relevant crops. From these data, calendars of operation and technical and financial budgets based on available production equipment were constructed for each of four distinct farm sizes found to characterize the area. Linear programming models were then developed for each of four farm sizes. All four models were found to be relevant in the SRP, while but two were needed to represent the resource combinations and production techniques in the RWCD. These six linear programming models, which represent typical operating units in the two districts, are representative of all farming units in the study area. Once constructed, the linear programming models were used to generate an aggregate demand function for irrigation water in each district and to project adjustments in agriculture to a changing land and water base over time. As sumptions The method of analysis described above include severalassumptions basic to any linear programming problem and some that are necessary to this particular study for purposes of workability. Those that are inherent in the analytical tool are well documented in readily available literature. Assumptions employed to provide workability in this study are recognized to be departures from real world conditions, but are necessary in order to focus attention sharply only on the consequences of land and water changes. This sharpness of focus was obtained by arbitrarily holding constant in the analysis other real world variables not germane to this objective. 11 The overriding economic assumption is that the elasticity of supply and demand will remain unchanged. That is, the ratio of product prices to factor costs, and among product prices and factor costs, will not change over the projection period. It is further assumed that technical production coefficients will not change over time; that the assumed enterprise mix will not change in favor of new varieties of existing crops or totally new crops requiring substantially different resources; that the quality of irrigation water will remain such that the quantity needed on any specific crop will remain constant or that costly materials or practices will not be needed to correct its quality; and that all project lands are, and will remain, homogeneous in quality. Current government acreage control policies are also assumed to continue unchanged from those prevailing currently. Irrigation district operations and policies are assumed to continue as they have in the recent past. This includes such district-related matters as their size, their policies relative to water deliveries, their water right structures, and voter participation in determining policies relative to their operation. Data Sources Input-output coefficients were developed from information ob- tained from a sample of operating units in the two irrigation districts. The basic population list from which the sample was drawn was obtained from the list of farms with cotton allotments maintained by the Maricopa County Agricultural Stabilization and Conservation Service (ASCS). list contained information as to both total farm acreage and cotton This 12 allotment acreage for each farm. The list was found to be quite com- plete as almost all farms in the area grow cotton. Farm units of less than 30 acres were excluded from the population on the assumption that they were not commercial farms. A commercial farm was defined as one producing $10,000 or more in gross revenue. The ASCS farm list was correlated with the United States Census of Agriculture 1959 (United States Bureau of the Census, 1961) as a check on the number and distribution of farms by size. population of farms was arrayed by sizes from 30 to 5,000 acres. The Sampling ratios were determined, both on the basis of concentration of numbers of farm units within ranges and total farm acreages. This method thus con- sidered both number of farms and total acreage in farm units by size classes. It also provided a basis for sampling operating units as well as acreage, in that smaller farms were sampled more heavily in terms of number of units while larger farms were sampled more heavily in terms of total acreage. A sample was drawn from the population by a systematic procedure involving a random start within the array of farms in each size range A farm survey questionnaire (Mack, 1968) was developed, of which 102 were completed in the study area. Ninety were from the approximately 150,000 acres of irrigated land in the SRP, and 12 were located in the 32,000 acres of irrigated cropland in the RWCD. Retail suppliers were contacted to obtain factors costs. Maricopa County Extension personnel extended considerable advice as to agronomic practices in the area. Much of the basic data relative to product prices, machine accomplishment rates, and variable operating costs are presented 13 by Young, Martin and Shaw (1968). Individual crop calendars of operations and budgets can be found in an unpublished file report of the Department of Agricultural Economics (Mack, 1968). Review of Related Studies Several studies have been carried out over the past 10 years that treat, in part, the particular problem investigated here. Several other works deal with a similar problem in its entirety in other areas of Arizona. However, this study is unique in that it analyzes resource use within the agricultural sector while considering urban-industrial changes only as exogenous factors. The Planning and Zoning Departments of Maricopa County and the City of Phoenix (City of Phoenix and Maricopa County, l959a and 1959b) have undertaken a number of studies for purposes of long-range planning. These studies deal with an array of factors such as present population characteristics and projections, employment and income characteristics, future employment needs, present land and water need and use and their probable need and use in the future. They consider the agricultural sector only in its role as a user of resources in the total economy. They make no analysis of the use of resources within agriculture. They take present resource use within agriculture as given and project proportional adjustments in agricultural sectors solely on the basis of urban population increases and their needs. Western Business Consultants, Inc. (1959) and Western Management Consultants, Inc. (1965) have prepared studies that analyze present resource use and provide future expected patterns of change. These studies emphasize resource use and expected use in all sectors of the county's 14 economy but, similar to the above studies, do not treat within-sector use. They do, however, provide an inventory of resource need and avail- ability outside the agricultural sector. Dr. Heinrich J. Thiele (1965) conducted a study which centers on water use and its potential availability in the Phoenix Metropolitan Area. This area encompasses the study area of the SRP and RWCD. analysis relates water need to its availability. Thiele's He assumes a constant per acre use of water in the agricultural sector in his predictions of water use by the several sectors that compose the Phoenix Metropolitan Area. Smith (1968), in a sociological study of the SRP, describes many of the attitudes of project personnel and water and power users. He focuses on the effect of different degrees of disorganization, secular- ization and individualization with respect to changes in the distribution of water and increasing number of participants. SRP actions and their accompanying user reactions are described and assessed. Future courses of project action are predicted on the basis of these assessments. Smith's analysis provides a great deal of information upon which the project's future relations with its agricultural participants can be based. His work is relied upon and cited extensively throughout this study. Hedges and Moore (1962-1965) have completed studies in the San Joaquin Valley of California, analyzing adjustments that occur in response to changing irrigation water availability and costs. The initial features and methods used by Hedges and Moore are similar to 15 those of the present work. This study, however, employs a dynamic analysis whereby adjustments within agriculture are related to a changing land and water base. CHAPTER II INSTITUTIONAL FRAMEWORK OF WATER SUPPLY ORGANIZATIONS Institutional arrangements develop out of some group need for the fulfillment of a specific function. Rules are established to pro- vide guidelines or bounds within which orderly actions on the part of members of the group can proceed to satisfy their own individual needs. These rules provide the structure or framework of the institution. institutional framework develops. Hence, This framework may be broad and quite loosely constructed or it may be narrow and very rigid. supported by custom or a formal legal structure. It may be Individuals or organ- izations may operate within institutional frameworks. Water supply organizations conform to the pattern of development described above. These organizations perform the function of developing and/or delivering water to users under the auspices of a set of welldefined regulations. They have evolved from rather loosely formed groups of individuals fulfilling the needs of a small number of users to highly developed formal organizations which function within a rigid legalistic framework. In many instances, they have adapted themselves to performing an array of functions that members desire. has changed or been extended. The framework New legislation has preceded as well as followed these changes. 16 17 Central Arizona Water Industry Water supplies in central Arizona have been developed by a large number of organizations which can be nominally lumped together as an industry on the basis of their generally similar economic functions. This industry has evolved to become one of the most important and powerful in central Arizona. As such, its influence is felt throughout the entire economy of the area. A study of any sector of the economy that uses large quantities of water supplied by the water industry necessarily involves some development of the water industry itself. A synopsis of the industry includes such factors as its development, physical features, and number of operating units. Development The first modern irrigated agriculture in central Arizona began in about the year 1869 when only a few hundred acres were under cultivation. The first irrigation facilities were owned and operated by private companies that supplied water directly from the surface sources to the land. In 1910, approximately 151,000 acres were being actively farmed under irrigation. Since that time, the number of acres of irri- gated cropland in this area has increased with some fluctuations and is presently of the approximate magnitude of 510,000 acres. During this 60-year period, several irrigation districts have been established. These date from 1903 to 1964. and surface water. Several districts distribute both pump Some districts supply their members with only pump water, while others function only as ready-made organizations through 18 which supplies of surface water might be distributed if it should become available. Description Surface water supplies for central Arizona are obtained almost exclusively from the Salt and Verde Rivers. A series of six dams impound water for controlled use by the agencies that exercise a claim on this surface water. This water, or its equivalent in SRP pump water, is delivered through the conveyance system of the SRP, which uses the largest quantity, to the lands of the Fort McDowell, Gila and Salt River Indians and to the RWCD, St. Johns Irrigation District, Buckeye Irrigation District, and the Peninsular-Horowitz Ditch Company. The City of Phoenix receives "gate" water from Horseshoe Dam on the Verde River. This claim arose when the City of Phoenix financed the construction of higher "gates" on Horseshoe Dam, thus increasing its potential reservoir capacity. The only other source of district surface water is Lake Pleasant on the Agua Fria River, which provides a small, rather unstable quantity of water to the Maricopa County Municipal Water Conservation District. In addition to project pump and surface -iater, private pumps also operate in most districts. The number of and quantity of water obtained from these wells vary considerably among districts. In several districts, private pumps provide the one single source of water. Table 3 summarizes selected central Arizona irrigation district data. Cities and towns also operate and maintain pumping units in central Arizona. The cities of Phoenix, Mesa and Tempe are the three largest municipal water users in this area. population centers. They are also the major The cities of Phoenix, Tempe, Gilbert, Glendale 1 X X X X X X X X X X X X X x x Inactive United States Department of the Interior, 1965. NcMicken Irrigation District New State Irrigation and Drainage District Peninsula Ditch Company Roosevelt Irrigation District Roosevelt Water Conservation District Salt River Indian Irrigation Project Salt River Project St. Johns Irrigation District Queen Creek Irrigation District No. Aquila Irrigation District Arlington Canal Company Buckeye Water Conservation and Drainage District Chandler Heights Citrus Irrigation Districts Harquahala Valley Irrigation District Maricopa County Municipal Water Conservation District Source: 13. 14. 15. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Active x Power Generation Selected Central Arizona Irrigation District Data. Irrigation District Table 3. x X X X X X X X X x X X X X X Project Sources Ground- Surface Water Water 46,619 240,000 2,960 9,600 X 39,425 2,400 2,262 38,152 35,000 45,000 60,000 X X X X X X X X X 1,380 20,465 42,240 4,800 X X X Acreage Private Pumps 20 and Peoria have domestic water contracts with the SRP. Water delivered under these contracts may be from surface or ground sources. Several other smaller municipalities are located in the area but their combined total water use is less than five percent of the total municipal use (Arizona Interstate Stream Commission, 1967:36). Distinctive Features Basic similarities exist between the water industry of central Arizona and other industries. In spite of these basic similarities, there are also fundamental dissimilarities between the conventional industry of privately owned, profit-seeking firms and a water industry like that of central Arizona. Due to these distinct features of the water industry, its conduct differs from that of conventional industries. Bain, Caves and Margolis (1966), in a study of the northern California water industry, have presented six major ways in which the water industry differs from a privately owned, profit-seeking industry. These also apply to the industry in central Arizona. First, the rela- tionship between water suppliers and users is typically geared to the provision of maximum advantage to the user of water rather than to its supplier; second, regulations on the actions of the public utilities operate to restrict districts in the water industry; third, there is competition among distributing agencies for supplies of water rather than for customers; fourth, there is generally an allocation of some water to benefit the public generally rather than special groups of direct users; fifth, there is an inflexibility of long-term allocations of water supplies and a resulting imperfection of the competitive process in meeting changing patterns of demand for water; and sixth, there exist 21 legal barriers to the bargaining processes as substitutes for competitive markets in allocating water and water rights. Markets in the water industry are not continuous in either space or time. Generally, competition exists only for long-term or perpetual legal rights to surface flows or groundwater, rather than water supplies on a day-to-day or year-to-year basis. The result of this nonexistence of continuous competition is that rigid and inflexible allocations of water rights are established among different users. established, become effectively perpetual in law. These rights, once The legal processes then operate as substitutes for markets in determining the allocation of water and water rights among competing users. In the water industry, there is no live and continuing compet- itive process through which water supplies may be reallocated due to changes in technology or patterns of demand for water. As stated by Bain, etal., (1966:10), "It is rather an episodic historical process reflected in a series of events, each dated in time." In a conventional private industry independent sellers and buyers are said to be "at arm's length" from one another. Members of the industry produce in order to sell to others at a profit rather than to use themselves what they produce. Conflicting aims exist between buyers and sellers in that the seller seeks to sell at as high a price as possible while the buyer desires to buy at as low a price as possible. The typical case in the water industry, however, is one on which the aims of both the "sellers" and "buyers" have a common goal: to provide water to its users (buyers) at as low a price as possible, and in the quantities and at the times desired. This is accomplished either through 22 a self-supplying user of water or a water supply organization which acts as a users' cooperative in developing and supplying water for its members as the water users. Users' Cooperative A user-supplier of water combines the function of developing water and using it into a single function. exists. No supplier-user relationship This is typically the case of a farmer operating his own wells. His motive is to produce water in a quantity and at a cost such that his profit from his water using activity will be maximized. The farmer's water producing activity and his water using activity are combined into a single entity under one management head. An irrigation district operating as a users' cooperative for a particular group is not an independent entity. It is not completely separated from the user's in that it does not have the conventional arm's length relationship of seller to buyer. It is rather "an instrumentality created by a group of users to act in ways most advantageous to them" (Bain, etal., 1966:9). Its motive is not to make a profit but to pro- vide water in such quantities and at a cost that will permit its organizers to maximize their individual profits from the productive activities in which they use water. The relationship that exists between the dis- trict and its members is a seller-buyer one in that the users have control over the administration of the actions and charges of the district supplier. From this it follows that the users' cooperative can be thought of as vertically integrated with the operations of the individual members. vertically integrated firm is interested in maximizing the profits for the whole chain of operations. The cooperative will operate to the The 23 advantage of its members. Water will be supplied in a mutually agreed upon quantity to each member at the lowest possible cost. Individual member water rights may still be important within the users' cooperative, but each member will be treated equally after rights extra-legal to the cooperative have been satisfied. Several characteristics of the water industry provide an explanation as to why users' cooperatives have developed in this industry. These include such things as water law, a lack of active water markets, externality factors, the need for development of organizations which will assure long-term supplies of water and construction of facilities for which funds can be obtained by pledging tax yields as security for the repayment of loans. Water Pricing Pricing patterns of agricultural water districts have been built on the basis of numerous considerations of equity and efficiency as seen from within each individual district. Water districts operating in the agricultural sector as users' cooperatives generally set water prices and tax rates so that current variable and fixed costs will be covered, or occasionally to cover these costs, plus a contribution to a "safe" surplus (Bain, et al., 1966:332). Water is typically priced by water districts at its average rather than marginal cost of production. The SRP does, however, distinguish between surface water and pump water in its pricing policy in a manner related marginally to the higher cost of providing pump water in the aggregate in comparison to the cost of providing surface water also in the aggregate. Emphasis is placed on maintaining charges fairly constant (or increasing or decreasing at a 24 constant rate), thus avoiding large fluctuations on a year-to-year basis. Changes in water prices and taxes come slowly and tend to be small when they do occur, unless some major reorganization of the district's facilities or size takes place. The relative pattern of water rates and taxes differs substantially Those districts in relatively prosperous areas, or among districts. districts which obtain large incomes from sales of hydro- or steamgenerated electric power, thus needing only modest water revenues to cover costs, often use a moderate assessment charge plus a relatively small per acre-foot water charge. These districts may supply some quantity of water at some fixed charge to its members in the form of an assessment to cover district fixed financial costs. Surface water may also be made available to members at no charge when district facilities are inadequate to store large watershed runoffs at times when district storage facilities are full. Districts that depend solely on a relatively expensive source of water tend to set their assessment prices to cover their fixed obligations and the maintenance of their system; their irrigation water rates being set somewhere near their variable costs of its production. Water allocation on a nonprice basis takes place in some irrigation districts. - The types of rationing used depend on the nature of the district's physical facilities. Rationing may be in terms of a quantity per unit of time, a total "seasonal" quantity, or some combination of these. A "prorate" among member-users may exist due to a "shortage" of available water during a specific period of time or because of an inability of the distribution system to adequately satisfy periodic peak demands. 25 Water Supply Organizations Two irrigation districts comprise the study area to which this research is addressed. They are located adjacent to each other in central Arizona. The SRP and the RWCD are both organized under Arizona law. The SRP is incorporated as a municipality and the RWCD is organized under Arizona irrigation district statutes. They are owned and operated by the land owners within the districts. Operating decisions are made by managers appointed by boards of directors. The directors are elected from subdivisions of the districts by the members in that district. The cooperative form of organization and operation applies to both of these districts. Water users in the SRP face a vory favorable water supply situation, based almost entirely on project developed facilities. In the RWCD, water supply conditions are less favorable than those in the SRP, but users generally can obtain project water at lower costs than if they produce it on an individual basis. In both projects, water cannot be transferred outside the districts. Salt River Project This project was authorized for construction in 1903 and was the first project undertaken under the National Reclamation Act of 1902. The full name of this organization is the Salt River Project Agricultural Improvement and Power District. The Salt River Valley Water Users' Association operates the irrigation system and acts as an agent for the project. The project was organized and incorporated under the laws of the Territory of Arizona in 1903, primarily to establish a central organ- ization which could represent the individual water users in dealings with the Secretary of the Interior. 26 In 1949, the Salt River Project Agricultural Improvement and Power District took over control of the irrigation facilities of the project, but the Salt River Valley Water Users' Association continues to operate them. This was done in order ". . to secure for the Salt River Valley Water Users' Association lands, rights, privileges, exemptions and immunities granted to public corporations or political subdivisions of the State" (U. S. Department of the Interior, 1965). The service area of this project includes 238,250 acres in central Maricopa County. This area surrounds the City of Phoenix, Arizona. The irrigated lands lie north and south of the Salt River in the triangles formed by the intersection of the Salt-Gila Rivers and the Salt-Agua Fria Rivers. Elevation of the irrigated lands range from 900 to 1,300 feet above sea level. At the present time, approximately 80,000 acres of the total area are devoted to residential, colluLlercial or industrial use. The transfer from agricultural to urban-industrial use is expected to continue at a rate defined in a subsequent section of this study. Two rivers are the source of surface water. A series of four dams and reservoirs on the Salt River and two on the Verde River supply approximately two-thirds of the present water distributed by the project. Additional water is obtained from approximately 250 project owned and operated pumps. Water is distributed by the project under several classes and priorities of rights. Normal flow water rights are those that were established by the Kent Decree (Hurley vs. Abbott, et al., 1910). This right related to water that would be carried by the rivers if their flows were not 27 restricted by dams. These rights to "natural flows" of the river existed prior to the development of the project and give their holders first claim on diversion and use of surface water "flowing" in the river at any and each point in time. Lands entitled to this water must have been in continuous cultivation beginning sometime between 1869 and 1909. Land cultivated and irrigated in the earlier years of this time period has a greater probability of obtaining water under this normal flow right than lands continuously cultivated toward the end of the period. This water is delivered to its claimants on demand through the district's system. During periods of less than adequate flow, many lands with Much of priorities near 1909 do not receive any water under this right. this water right goes unclaimed because it must be used at the time it would theoretically flow if not held in reservoirs. Also, most of the flow of the rivers takes place in the winter and early spring months when there is little demand for water. This normal flow water right is applicable to 151,083 acres of the 238,252 acres of the project area (Hurley vs. Abbott, et al., 1910). Water in the rivers over and above that covered and claimed under the normal flow right is stored in the project's system. called stored and developed water. It is Rights to this water are held equally by all agricultural land having capital stock in the association. After payment of an annual assessment, the project typically makes an allocation of this water on an equal basis among project lands. In some instances, excess or floodwater becomes available and is also distributed on an equal basis. 28 Rights to district-developed pump water are held by district lands for which they were purchased by district members, beginning in 1948. This right was purchased from the association in one-half acre- foot per acre increments up to two acre-feet per acre. This right, when purchased, is a permanent right to buy pump water from the district if and when needed. These are available for sale by the project for an indefinite period. As of 1967, 163,580 acres of project land (or about 70 percent of the eligible acres) had purchased 242,376 acre-feet of this pump water right. A final water right is that entitled "townsite rights.t' These rights provide for the delivery of water to cities and towns within the project. This right is granted under the Reclamation Act of April 16, 1906, allowing the project to deliver water to land designated "Townsite Lands" by the Secretary of Interior (SRP, 1964). In addition to, and in conjunction with its irrigation operation, the SRP maintains and operates an extensive electrical power producing system. Generating capacity is composed of both hydro and thermal plants. These facilities have grown tremendously over the years and revenue obtained from the electrical plant has been used in support of the water production and delivery operations. This financial contribution from power to water has been increasing over time. This may be a function of increasing power revenues, a reflection of increasing costs of water operations, or both. 29 Roosevelt Water Conservation District This district covers an area of 39,425 acres in southeast Maricopa County. A part of this, 2,544 acres, is owned by the district and water rights have been withdrawn from it. All other lands within the district boundaries have equal rights of access to district water. The district water supplies are derived from both surface and underground sources. The district operates approximately 60 wells from which two-thirds to three-fourths of its water supply is produced. Typically, one-quarter to one-third of its supply is obtained from the Salt and Verde Rivers and the balance from project wells. During the late spring and summer months, the project wells are unable to furnish enough water to meet the demand of users. Surface water impounded in the SRP's system, to which the RWCD has a claim, is then used to help meet these peak demands. The source of this water is a 1924 agreement whereby the district contracted with the SRP to pay the cost of lining certain portions of the SRPts major canals. In return, the RWCD was granted the right to use 5.6 per- cent of SRP diversions for agricultural purposes at Granite Reef diversion dam. This water is stored by the SRP and delivered to the RWCD on demand. In order to apportion the water supply throughout the year and to insure a more equitable distribution, the district has established a seasonal "prorate" or limitation on water deliveries to individual disAt the beginning of each year, the board of directors trict members. sets the amount of water that will be available to each acre of project land during the prorate period. This quantity typically varies between two and three acre-feet per acre, depending upon the anticipated supply for the year. The prorate is generally in effect from early March to about October 1. 30 Individual members in this district can transfer water rights from one account to another, either under the same or different ownerships. Any member having a surplus of prorate allotment water may give or sell his right to that water to any other member. The transferred water is then added to the buyer's account and handled in the same manner as his original account. Payments made to the selling member for this water are in addition to the charge made for the water by the district. Significance of Water Supply Organizations for the Present Study A description of the central Arizona water industry, with special emphasis on the SRP and RWCD, has been presented in the previous sections of this chapter. Water supply organizations play a significant role in determining the prices, quantities, and delivery circumstances of irrigation water to individuals, as well as specific groups of users. The policies of irrigation water supplying organizations are determined by a majority of those being supplied within whatever restraints are specified in law. As such, the water supply organization and the individual firm are integrated through the users' cooperative concept. An understanding of this concept and its implications for the individual firm is necessary for the development of future courses of action on the part of water supply organizations. The users' cooperative concept postulates maximum advan- tage to the water user. It is assumed in this study that irrigation water users in the study area will continue to receive this maximum advantage in the form of a favored position in the structure of water charges. CHAPTER III REPRESENTATIVE MODEL SPECIFICATIONS The synthesis of representative single farm models based on specified features of a population of farms can be accomplished in a variety of ways. Perhaps the most widely used method is through a sample of that population. Synthesized representative farm models that specify the struc- tural characteristics of representative farms of the area provide a means whereby only the most relevant characteristics of the population of farms may be considered. Such models eliminate, or substitute for, the need to consider each operating unit of the population as a separate entity. Representative farm models are synthesized from population characteristics as determined from a survey of farm operating units. Typical farm characteristics and the models to which they apply, as determined from the farm survey, are set forth in this chapter. Model characteristics are first developed for single representative farm units within specified farm size categories. These typical single farm models are later expanded to cover all farms in each size category in proportion to their numbers and magnitude in the population of all farms. When referring to a size category or group, the term "aggregate" model or group is employed. Identification of criteria that are relevant to the attainment of an objective must relate to those factors that most directly influence 31 32 the variables which relate to the objective. A concise definition of these variables is not always possible when the objective is being formulated. Pertinent to the objectives of this study, factors that affect adjustments in agriculture and might be included in farm models suitable for this study are such things as land, water and capital availability to farms in the area, production techniques, enterprise combinations, machinery complements, types of management, soil productivities, water qualities, cotton allotment acreages, and possibly others. A sample can only be drawn on the basis of hypotheses as to farm characteristics presumed to have the most direct bearing on the question The sampling procedure employed in this study was outlined under study. in Chapter 11. Lied area. The population sampled was individual farms in the speci- The primary basis upon which the sample was drawn was farm size because economics of size will significantly affect adjustments to a changing land and water base. It was felt that size of farm in crop- land acres would most appropriately reflect economies of size and, hence, most nearly represent a basis for projecting probable adjustments in the agriculture of the area. On this basis, the population of farms was arrayed according to cropland acreage and a 20 percent sample of the farm numbers was drawn. Large farms were sampled more heavily than small farms in order to obtain a sample weighted in terms of acres, as well as farm numbers. Number of farms sampled, number of farms in the population, and aggregate cropland acreage in each sampling range for the SRP and RWCD are presented in Tables 4 and 5. 33 Table 4. Range of Cropland Acreage3 Total Number of Farms, Aggregate Cropland Acreage, and Number of Farms in Sample, SRP, 1964. Cropland Total Number Aggregate Number of Farms Acrea.e Rart:e of Farms Cro.land Acrea:e in Sample 30- 199.9 223 22,320 16 200- 599.9 106 42,768 28 600-1,199.9 42 37,728 28 1,200 and Above 23 41,184 18 Table 5. Range of Cropland Acreage, Total Number of Farms, Aggregate Cropland Acreage, and Number of Farms in Sample, RWCD, 1964. Crop1 and Total Number Aggregate Number of Farms Acreage Range of Farms Cropland Acreage in Sample 30-199.9 200 and Above 90 9,000 6 45 18,000 6 Sample Characteristics After the survey was completed, an analysis of factors which affect economies of size was undertaken. It was concluded that a signif- icant correlation existed between cropland acres and other factors of production such as number of crawler and wheel tractors, amounts and types of custom operations performed, irrigation water sources and supplies, number of irrigation wells, number of full-time nonsupervisory employees and number of hired supervisors. These productive resources greatly influence economies of size which, in turn, affect adjustments that were specified in the objectives of the study. Definition of Size Categories Model sizes within each acreage range described in Tables 4 and 5 were determined by dividing the number of farms into the aggregate acreage included in each acreage range. As such, the models represent 34 averages within size groups. The models are referred to as Size Groups I through IV for the SRP and Size Groups I through II for the RWCD. These are identified in Tables 6 and 7. Table 6. Salt River Project Farm Model Sizes. Group Classifications Cropland Acreage Range Model Size (Acres) I 30- 199.9 100 II 200- 599.9 400 600-1,199.9 900 III IV 1,200 and Above 1,800 Table 7. Roosevelt Water Conservation District Farm Model Sizes. Group Classifications Crpland Acreage Range Model Size (Acres) I II 30- 199.9 200 and Above 100 400 Production Resources A detailed description of all major production resources and their relevant characteristics for this analysis can be found in a Department of Agricultural Economics file report series (Mack, 1968). The information presented in that report describes in great detail the resource base, enterprise combinations, costs and returns of enterprises and basic linear programming matrices for each representative farm model. Although the file report is supplemental to this dissertation in an informal sense, it will be referred to in the remaining parts of this work and can be obtained from the Department of Agricultural Economics or author upon request. 35 Because of the importance of several major production resources to the analysis in Chapter IV, a brief review of these factors is presented here. A reiteration of their magnitudes and accompanying assumptions follow. Land All land within each representative farm model, as well as between models, is assumed to be homogeneous in productive capacity. It is readily granted that differences do exist throughout the study area; however, the degree and extent to which soils do vary is not always a major factor as to resource use and yields obtained. More often, manage- ment as to types of land used to produce different crops is the relevant var jab 1 e. Throughout the study area, soils are generally deep, well suited to the types of crops grown, and require similar inputs of productive factors necessary to produce alternative crops. Irrigation Facilities A complete and accurate listing of all irrigation equipment was obtained in the farm survey. This included wells, pumps and ditches. Other minor irrigation equipment such as shovels, ditch checks and siphons are included under small tools. A synthesis of these data on a representative farm model basis can be found in the supplemental report (Mack, 1968). Representative model facilities and their costs are presented in Table 8. 36 Table 8. Group Irrigation Well and Ditch Inventory and Investment for Typical Farm Models, SRP and RWCD. Wells SRP RWCD Concrete Ditches Number Investment Number Miles Investment Investment (Dollars) (Dollars) (Dollars) I 0 0 0 0 .5 3,300 II 2 45,302 .6 13,590 2.5 16,500 III 3 64,184 4.5 29,700 IV 6 135,906 9.0 59,400 Mack, 1968. Source: Larger farms were found to have a greater total investment in irrigation facilities; however, the investment per acre was lowest on farms having no irrigation wells. Buildings Farm building inventories were obtained for each farm surveyed. The range and type of buildings on farms in each size category were found to be quite diverse. In many instances farms had buildings which were not being employed in their present enterprise organization. When syn- thesizing the typical building inventory for each size group, buildings not currently in use were excluded on the assumption that they had no value in the operation and would not be repaired or replaced. Most farms surveyed had some type of shop building(s); however, their size, condition, and age varied considerably. Labor and management housing was typically present on farms in the larger size groups. Farms in the largest size group always had some type of office building however, the range in their value was considerable. A complete summary of buildings by size group can be found in Table 8 of the supplemental 37 report (Mack, 1968). sented. Their corresponding sizes and values are also pre- These values for representative model farms are indicated in a later section of this chapter. Water Availability A general outline regarding the sources and availability of water by irrigation districts has been presented elsewhere in this Study (see Chapter II, Water Supply Organizations). However, as noted, water avail- ability varies between irrigation districts and among representative farm models. In the SRP, water is available under five different categories (Mack, 1968 and Smith, 1968). Thee are assessment, normal flow, stored and developed, project pump and private pump. These sources, however, are not relevant as far as each size group is concerned. Assessment water up to two acre-feet is delivered upon request to all project lands once the basic assessment has been paid. Normal flow water is, likewise, delivered upon demand to land having a normal flow right (see Chapter II, Water Supply Organizations). Although not all project lands have a normal flow right and not all such rights are fully used, an average of one-half acre-foot per acre of this right for all cropland is assumed (Mack, 1965 and Smith, 1968). Stored and developed water is allocated, depending upon its availability, but has typically amounted to one acre-foot per project acre (Salt River Valley Water Users' Association, 1962). This amount is assumed to be available to all cropland in the model farms. 38 Pump water available from SRP pumps can vary from zero to two acre-feet. As of 1967, 163,580 acres of project land had project pump water rights of 242,376 acre-feet. The opportunity to purchase this right from the project is still available. On this basis, it is assumed that each acre of land employed in agriculture in the SRP has a project pump water right of two acre-feet per acre. In addition to project water, private wells exist on all farms except those in Size Group I. It is assumed there is no limit on water obtainable from these wells. Project water, in fact or by assumption in this study, is avail- able to each size group in the SRP in equal quantities per acre. The only variation among size group models is that Group I farms have no private pump water. In the RWCD, project water is available on an equal share basis to each acre. The only limitation on project water is a three acre-foot maximum per acre during the prorate period (see Chapter II, Water Supply Organizations). During the remaining part of the year there are no quan- tity restrictions on water available from the project. in this project have .6 of an irrigation well per farm. Group II farms Water from this source is assumed to be available to all farms in this size group. Machinery Inventory A detailed machinery inventory for each of the typical farm models based on data collected in the farm survey is presented in Tables 9 through 12 of the supplemental report (Mack, 1968:11-17). These machin- ery inventories for the various size models provide the basis for selecting a power unit and implement size in the individual enterprise budgets. If an implement is available in the inventory, the operations for which the 39 machine is used are considered done by the farmer. If a machine is not listed, the operations performed by that machine are considered done on a custom basis. Tables 9 through 12 of the supplemental report (Mack, 1968) also present machinery costs. These cost estimates were determined by inter- views with retail machinery dealers located throughout the study area. It is assumed that inventories and costs of machinery will remain constant over time. This is in line with the previous assumptions of a constant level of technology and prices. The value of machinery inven- tories is presented in a later section of this chapter. Custom Operations Farm survey data indicated that many small farms did not typically own the more expensive tillage and harvesting equipment. performed by these machinery items were hired done. Operations The machinery inven- tory of the previous section of this chapter and operations done on a custom basis are negatively correlated. This is to say that if a machine is owned, the operation is not performed on a custom basis. A complete listing of custom operations and their associated costs is contained in Table 19 of the supplemental report (Mack, 1968:25). Labor The supply function for all classes of labor is assumed to be perfectly price elastic; that is, any and all quantities of labor, or number of laborers, can be hired at a constant wage rate. line with the assumed condition postulated in Chapter I This is in (Assumptions) that the price elasticity of all supply and demand relationships would be considered perfectly elastic. 40 A comprehensive discussion of the various classes of labor is presented on Page 19 and in Table 14 of the supplemental report (Mack, 1968:20). Capital An infinitely elastic capital supply function is assumed for the study area, as well as for individual farm models. It is assumed that farm operators, as individuals and in the aggregate, may obtain as much capital as they need at constant interest rates. In reality, there is a large variety of sources of capital, and individual farm operators may be able to obtain increasing amounts of operating capital only at increasing costs. This would not be the case, however, with regard to large groups of farm operators. An average efficiency in obtaining capital is assumed. Management Many levels of management ability are found at any one time in any sector of the economy. In some instances, the range of abilities may be as wide as the number of firms. However, over time the less efficient management will either improve or be driven out and in the theoretical long run, perfectly competitive situation all management will be homogeneous. Management ability in this study is assumed to be homogeneous within each size group as well as between groups. This also embodies the assumption that levels of technology and output are identical for all operating units within specific size groups. 41 Alternative Enterprise Combinations Cropping patterns differ tremendously among farms within the study area. Some farms specialize in the growing of specific crops, while others are diversified and may grow as many as six crops. The farm survey indicated that speciality crops are grown principally on farms represented by Size Groups II and III. The farms represented by Groups I and IV tend to be oriented more toward general diversified field crops. Table 21 of the supplemental report (Mack, 1968:20) pre- sents an array of crops that might be specified as grown on the various farm size models. These crops are only alternatives and, in no case, would all of them be grown on any single farm or specified as grown on any one representative model farm. Table 9 summarizes these alternative enterprise possibilities. Calendars of Operations and Budgets A complete and detailed calendar of operations and unit budget for each alternative crop for each farm size model are presented in the supplemental report (Mack, 1968:29). The kinds and types of operations for each crop were obtained from the farm survey. There was little variance among farms as to oçerations performed and physical inputs in the production of identical crops. Consequently, calendars of operations for individual crops are identical for all representative farm models. Representative farm model budgets are composed of inputs, operations and equipment necessary to perform the operation. Equipment related to an operation is taken directly from the machinery inventory (see this chapter, Machinery Inventory) of the relevant farm model. Unit Source: Mack, 1968. D-C specifies double-cropped. An "X" indicates possible crop alternative. X X X X X X X X X a X X x X X X X X X X X X X X x X X X X X X X X X X X X X X X X X X X X X X x 1,800 Acre Farm x Alternative Crop Enterprises Available to Typical Farm Models, SRP and RWCD. Farm Model Size 900 Acre 100 Acre 400 Acre Farm Farm Farm Crop Enterprise Short Staple Cotton (Solid Planted) Short Staple Cotton (Skip-Row Planted) Alfalfa Production and Pasture Alfalfa Production Alfalfa Establishment Sugar Beets for Sugar Barley Grain Sorghum b Barley-Grain Sorghum D-C Wheat Lettuce (Spring) Lettuce (Fall) Potatoes Carrots Onion (Dry) Table 9. 43 costs of an operation performed by a particular size and type of machine on any given size farm model are taken from Young, et al., (1968). Costs and Returns Several types of costs and returns are discussed in this section. The relevance of each will be covered in turn. gross and net. Returns are of two types: The two kinds of costs discussed are variable and fixed. Each of these cost and return concepts is related to the representative farm models previously developed. Yields, Product Prices and Gross Returns Major field crop yields used in this study were obtained from farm survey data. These yields were closely comparable to yields given in other Arizona published sources. In some instances, however, it was felt that irrigation district crop reports (SRP, 1962-1968 and RWCD, 1963-l968a) provided more complete and comprehensive data pertinent to the present in contrast to the time the field survey was conducted. This was particularly the case with regard to vegetable crops. Only one output level for each enterprise is specified in Table 10. Production theory states that optimum input-output levels change as the cost of inputs varies. This relationship with respect to water use and crop yields could not be identified in the study area even though there was considerable variation in individual user's water costs. It was found that farmers, when faced with a physical water restriction, adjust cropped acreage rather than water use per cropped acre. When confronted by high water costs, farmers discontinue its use on low value crops rather than attempt to produce these crops at lower water-yield Dry Onions Carrots Fall Potatoes cw t. cw t. cwt. cwt. cwt. ton day Lettuce Spring day Pa s tur e cwt. cwt. ton cwt. 260 390d 275d 475 32 34 6.5 25 4.5 25 41 33 2.00 2.30 3.10 4.10 5.20 2.50 2.50 25.00 .05/day 25.00 .05/day 2.50 3.00 34 cw t. cw t. 2.50 32 1 cwt. 50.00/ton .22 50.00/ton .22 10.94 10.00 2.50 1,500 2,295 1,150 1,760 20 ton acre lb. lb. lb. lb. Alfalfa Hay PastureC Wheat Barley-Grain Sorghum Double-Cropped Barley Sorghum Alfalfa Hay (Early) Grain Sorghum (Late) Barley Grain Sorghum Lint Seed Sugar Beets (Sugar) Pasture Short Staple Cotton (Skip 4x4) (Solid) Lint Seed Short Staple Cotton 950.00 897.00 825.50 1,230.00 1,352.00, 80.00 74.80 162.50 12.50 112.50 12.50 90.20 99.00 74.80 218.80 10.00 80.00 330.00 57.38 253.00 45.00 2.14 per a 42.80 Support Payment 103.15 a Diversion Payment 61.91 Support Paymenta 103.15 a 61.91 Diversion Payment (Dollars) Yields, Prices, and Gross Returns per Acre from Field Crops, SRP and RWCD. Product Crop Unit Yield Price per Unit Revenue Government Payment Table 10. 950.00 897.00 825.50 1,230.00 1,352.00 125.00 175.00 154.80 90.20 99.00 74.80 80.00 271. 60 552.44 463.76 Gross Return Source: Table 10. Mack, 1968. See Foerman (n.d.) and Salt River Project, 1962-1968. Average 10 sheep per acre for 25 days at $0.05 per head per day. See Young, et al., 1968. See Pawson and Nelson, 1966. (Continued). 46 levels. Based upon these two findings, only one water-yield relationship is presented for each crop. The import of this approach is that water users assume that so long as it is profitable to apply any water to a crop, it should be applied at the level of maximum yield. When water price moves above this level, no water should be applied to the crop. The implicit production function is therefore merely a point as illustrated below: X -ç N Water Input At any water price lower than or equal to the breakeven price, ON quantities of water are applied and yield is OX. At any water prices higher than the breakeven price, no water is used on that crop and it drops out of production entirely. Though the empirical validity of a function of this form is dubious, farmers act as if it were true. Farmer's response to growing water scarcity, which is what is being projected in this study, will follow this pattern and, hence, becomes valid for this analysis. Product prices are those reported in Arizona Agriculture, 1967 (Cooperative Extension Service and Agricultural Experiment Station, 1967) and Young, etal., (1968). Where applicable, government price support pay- ments are included as a separate item in computing gross returns. Table 10 presents a summary of yields, product prices, government payments, and gross returns. 47 Net Returns Over Variable Costs Variable operating costs are those costs which are incurred in the production of any one crop. They are variable in that if the specific crop is not produced, these costs are not incurred. They are directly related to the production of a specific enterprise and are sometimes referred to as direct costs. These costs are dependent upon the level of output in the short run since varying amounts of certain production factors can be changed over the production period. In this study, however, specified levels of variable inputs are assumed for each enterprise. Net returns over variable production costs determine the shortrun allocation of resources among alternative enterprises. Enterprises with greater net returns over variable costs contribute the greatest amount of net revenue to cover fixed costs and provide a residual profit. Variable costs for producing each enterprise on each representative farm model are presented in Table 11. These costs are transcribed directly from the unit budgets of each crop which are presented in the supplemental report (Mack, 1968). Total variable operating costs subtracted from gross returns of Table 11 yields net returns. The net returns are inclusive of variable water costs since operating costs, as used herein, do not include the cost of water. Water cost, being one of the variables included under the objective of this study, will be brought into the analysis later in negative quantities in the objective function of the linear programming matrices. In Table 11, net returns do not show clear economies of size for all enterprises. This is due to two factors: transportation costs. hired management and These two items are particularly high on the 400- Alfalfa (Hay and Pasture) Alfalfa (Hay and Pasture) Alfalfa (Hay only) 6.5 T. Alfalfa (Hay only) 4.5 T. (Early) (Skip-Row) Sugar Beets Barley-Grain Sorghum Double-Cropped Potatoes Dry Onions Carrots Spring Lettuce Fall Lettuce Wheat Barley Grain Sorghum (Late) Grain Sorghum Short Staple Cotton (Solid Plant) Short Staple Cotton 35.22 52.45 25.19 89.78 110.05 87.31 125.00 162.50 112.50 29.03 61.17 90.20 62.48 56.99 14.41 60.39 74.80 112.52 55.96 54.12 32.72 45.88 47.28 175.00 100.06 556.68 663.25 469.37 746,59 644.34 42.19 43.41 46.62 108.18 154.80 825.50 1,230.00 1,352.00 950.00 897.00 99.00 80.00 25.13 54.40 108.10 87.37 35.16 64.43 33.41 70.51 83.65 72.98 86.12 59.16 75.18 62.62 41.99 65.09 78.85 53.02 77.65 56.50 31.04 88.88 55.69 16.45 49.88 87.32 60.91 97.35 33.70 19.11 55.56 36.66 43.44 43.34 58.35 55.17 99.63 49.78 251.40 556.09 867.96 190.81 235.76 54.68 33.82 18.84 339.60 114.79 219.21 156.81 325.10 109.50 227.34 162.10 105.02 574.10 673.91 484.04 769.19 662.28 45.72 46.18 282.26 181.50 277.06 Reb turns Net 1,800 Acre Farm Total Operating Costs 186.70 900 Acre Farm Total Net OperReating b turns Costs and Net Returns per Acre, 54.74 268.82 566.75 842.63 203.41 252.66 56.51 32.59 324.23 114.02 278.78 89.84 110.57 228.21 157.58 268.15 89.95 284.29 181.65 552.44 271.60 185.98 237.89 225.87 463.76 (Dollars) Farm Model Gross Returns, Total Variable Operating Costs, SRP and RWCD. 400 Acre Farm 100 Acre Farm Total Total Net Net OperOperReGross ating Reating b b a turns Returns Costs Costs turns Crop Table 11. Source: Table 11. See text. Unit budgets, supplemental report (Mack, 1968). Net returns are inclusive of water costs. Taken from table 10. (Continued). 50 and 900-acre farm models. Their magnitudes and allocation among crop enterprises are discussed in Mack (1968). Their effect is largely to eliminate economies of size from many of the crop enterprises appearing in the agriculture of this area. Fixed Costs Fixed costs are defined as those incurred regardless of the level of output. They continue as long as the basic producing plant is maintained without regard to output. typical short run. They cannot be varied in the Over a long time span, longer than the usual yearly production period for agricultural field crops, they are subject to change by disposal by any one individual farm unit. However, since this study deals with the aggregate of all farms that compose the area, fixed resources and their attendant costs will always exist so long as production continues in the aggregate. Fixed costs for each representative farm model are presented in Table 12. Fixed costs, as usually presented on an individual farm basis, include an opportunity cost for real estate investment. However, since land values are dependent upon the availability of buyers and since buyers will be available as long as agriculture produces a net return to land, and since this study is concerned with agriculture as an aggregate rather than with farms as individual business entities, an opportunity cost for real estate does not exist within agriculture and is not included here among the fixed costs. Total Investment per arma Annual Amortized Cost Annual Insurance Annual Repair Cost Total Annual Cost per Farme Total Investment per Farm Annual Amortized Cost per cre Total Annual Cost per Farm 15. 16. 17. 18. 14. 13. Taxes 12. 11. 10. 9. Real Property Tax on Landtm Real Property Tax on Wells Real Property Tax on Buildings Personal Property Taxes Irrigation District Total Taxes per Farmr Total Investment per Farm1 Annual Amortized Costj Annual Insurance Cost Total Annual Cost per Farm Machinery Inventory 8. 7. 6. Irrigation Facilities 5. 4. 3. 2. 1. 25500q 500.00 0.00 10.80 70.58 26,140.00 3,551.59 26.14 3,577.73 3,300.00 2.58 258.14 1,200.00 93.87 6.00 24.00 123.87 100 Acre 1,005. 4,31451v 1,600.00 1,380.00 54.00 275.51 00q 102,040.00 13,863.96 102.04 13,966.00 12.08 4,831.59 61, 764. 00 6,000.00 469.36 300.00 120.00 889.36 93,880.00 8.16 7,344.55 10,400.00 813.56 520.00 208.00 1,541.56 3,600.00 1,920.00 126.00 477.58 2,255.00 8,378.58 176,880.00 24,032.31 176.88 24,209.19 (Dollars) Model Size 900 Acre 400 Acre Annual Fixed Costs for Typical Farm Models, SRP and RWCD. Farm Buildings Table 12. 7,200.00 3,840.00 216.90 821.62 4,505.00 16,583.53 304,305.00 41,345.00 304.31 41,649.59 195,300.00 8.49 15,277.65 24,100.00 1,885.26 1,250.00 482.00 3,617.26 1,800 Acre (Continued). 48. 70.00 l2 4,866. 100 Acre 220.00 (Dollars) 600.00 47,473.30 52.74 Model Size 900 Acre 400 Acre 1,150.00 78,278.02 43.48 1,800 Acre years. years. From Tables 9, 10, 11 and 12, supplemental report (Mack, 1968:11-17). Line 7 times model size. Amortization cost includes depreciation and interest on investment at six percent for 30 From Table 7, supplemental report (Mack, 1968:9). Amortization cost includes depreciation and interest on investment at six percent for 10 All machines are assumed to be depreciated to zero value at the end of 10 years. f, Sum of lines 2, 3 and 4. Annual repair cost is assumed to be two percent of total investment. Average valuation is one-half Amortization cost includes depreciation and interest on investment at six percent for 25 Annual insurance cost is based on $1.00 per $100 valuation. of total investment given on line 1. years. repaired. Does not Value given is new cost. From Table 8, supplemental report, (Mack, 1968:9). include owner's home, labor housing or any buildings which are not in use and would not be replaced or Personal Liability Insurance5 Total Annual Fixed Cost per Farm Average Annual Fixed Cost per AcreU Miscellaneous Table 12. Tax estimates of real estate are based on farm survey data. Sum of lines 10 and 11. Annual insurance costs are based on $0.20 per $100 valuation. (Continued). Assessed valuation is assumed to Assume tax rate of $9.00 per $100 of assessed valuation. be three percent of line 9. above.) - These amounts are for farms in the SRP. Line 20 divided by model size. Sum of lines 5, 8, 12, 18, and 19. They will differ for farms in the RWCD. Estimates based on amount and type of machinery and number of employees. Sum of lines 13, 14, 15, 16, and 17. (See "q" This is the irrigation assessment cost per farm in the SRP. It includes an account charge of $5.00 and a per acre assessment of $2.50 in the SRP. In the RWCD assessment charges are $7.00 per acre. To determine irrigation district assessment charges in the RWCD, multiply model sizes I and II by $7.00 and substitute these figures for the SRP assessment charges for models I and II shown in the table. Assessed valuation is assumed to Assume tax rate of $9.00 per $100 of assessed valuation. be 10 percent of line 1. Assume an average pump Average valuation is one-half Tax on wells is based on estimates by Nelson and Busch, (1967:32). horsepower of 200. 1. of line 9. k. Table 12. CHAPTER IV THE LINEAR PROGRAHf'1INC MODEL The specific problem considered in this study involves (1) estimating the value of varying quantities of irrigation water within each of the farm model groups and the aggregate study area and (2) determining enterprise adjustments and outputs as the quantity of land and the price of water is varied. resource programming. This is a combination of variable price and variable A detailed analysis of this procedure is presented by Heady and Candler (1958, Chapters 7 and 8). Values for and adjustments to resource prices and quantities and their changes are determined within each of the representative farm models specified in Chapter III (Definition of Size Categories). The individual farm model results are then aggregated to determine resource values and quantities used and enterprise adjustments for the entire study area. Procedural Technique Resource valuation on the individual farm is a typical problem in production economics since such valuation is implicit in the allocation of resources among competing enterprises. One method whereby a resource can be valued is to consider the firm within which it is being used to be operating at its short-run economic optimum and then to determine how an increase or decreas9 in the resource under consideration by unit amounts affects net revenue of the firm. This procedure is typically referred to as variable resource programming. 54 Variable price progralahting 55 is quite similar with the exception that resource or activity prices are varied and adjustments in resource use or activity levels and mix are noted. Several methods are available by which resources can be properly distributed among a variety of competing uses. If alternative uses and available resources are few in number, the problem is quite simple and can be handled rather easily by a budgeting process. If, however, a large number of enterprise activities and resources are available, budgeting is a very inefficient means of obtaining optimum solutions and resource values at the margins. Linear programming has proven well adapted to this type of problem. A brief general exposition of the linear prograulluing technique is pre- sented to show how it is related to solving the problem under study. A more complete development of this technique can be found in Dorfman, Samuelson and Solow (1958) or Heady and Candler (1958). Linear programming, in its most basic form, is an analytical technique used to solve a system of simultaneous equations. programming problem is composed of the five following parts: Any linear (1) an objective function, the value of which is to be maximized or minimized and which yields estimates of returns to or costs of each activity at such maximum or minimum level of value of the total function, (2) real activities available to the producing unit, (3) disposal activities allowing nonuse of productive resources, (4) artificial activities providing for required solutions and computational convenience and (5) - restrictions which specify the upper bounds of or limits on resources available in the model. The objective of the problem is to maximize or 56 minimize the objective function subject to the restraints imposed by the limiting resources. Production possibilities of the representative farm models can be summarized in matrix form as follows: aX +a 122 X 111 + +ainni X<b aX X 211 +a 222 + +a2nn X<b2 aX +a m22 X ml 1 + +amnn X<bm the b's (b1, b2 .... b) are quantities of various resources which are limitational. These are the restrictions. In the farm models, these are such factors as land and water quantities and acreage allotments available to each model. The coefficients, a , ii a 12 .... a mn , are the input requirements of each enterprise for each of the limitational resources. These are the production coefficients. The columns contain all input coefficients (say a1 ... . am) for each activity (say X1) and the rows contain the input coefficients (say a1 .... a) for each resource. Thus, a11 is the amount of b1 required to produce one unit of the first activity (X1) listed in the matrix. The X's are the unknowns and represent the to-be-determined levels at which each activity will be carried on. These are the real activities. The inequalities indicate that no more of a resource may be used than is available, but some of it may go unused. Nonuse of a resource is provided for in the matrix by the presence of disposal activities. Defining C. as unit net revenue above specific variable costs for the jth activity, and with maximum profit as the objective, the 57 optimum use of resources is achieved when the quantity C1X1 + C2X2 + .... + CX is at a maximum subject to the inequality restrictions of the production possibilities matrix. This is the objective function and may contain negative, as well as positive, coefficients. The algebraic summation of the C X function is total net revenue over variable pronfl duction costs. The marginal unit value of any particular scarce resource is the amount by which the value of the objective function (z C.X.) would be reduced by limiting the availability of that resource by one unit, while holding all other resource restrictions constant. Most computational schemes contain a process whereby the marginal values of limiting resources are determined and presented simultaneously with the optimum solution. A complete schedule of marginal values for a resource may be derived by an approximate series of programming steps (Heady and Candler, 1958, Chapter 7). These values represent the prices that would be paid for various quantities of the resource under the assumption of profit maximization; that is, a demand schedule for that input or resource. Ideally, a program with a parametric-objective function would be employed in this procedure. However, by varying the resource in a nonparametric program for which a demand function is being developed, a close approximation to a parametric solution can be developed. Several assumptions are implicit in the linear programming procedure described above. These are in addition to the assumptions stated in Chapter I (Assumptions). Briefly, these assumptions are: (1) addi- tivity and linearity, (2) divisibility, (3) finiteness, (4) single-value expectations, and (5) profit maximization. A complete discussion of these 58 and their particular relevance can be found in Heady and Candler (1958: 17-18). Components of the Models Component parts of a linear programming model were discussed in the previous section of this chapter. Three of these parts and their relative magnitudes for the specific problem in this study are presented below. Much of the data presented here is in summary form and can be found in appropriate preceding sections of this study or in the supplemental report (Mack, 1968). The supplemental report also contains a linear programming matrix for each model farm. The Objective Functions An objective function (six in all) is developed for each of the six model farms in the SRP and RWCD. These functions contain net revenue coefficients from Table 11 for all enterprise activities on each model farm, as indicated in Table 9. Unit water costs as negative quantities are also contained in this function. Water is available in varying quantities under several cost situations. These quantities and costs are developed later; however, their general structure is presented in Table 13 of this chapter. Real Activities The range of alternative enterprise combinations constitute the real activities in the models. These are presented in Table 9. In addition to real activities, disposal activities, which provide for nonuse of resources, are incorporated in each model and represent solutions to each of the problems. 59 Table 13. Aggregate Water Availability and Cost by Size Group, SRP, 1967. Size Group Water Type II I III IV Variable Cost per Acre-Foot (Acre-Feet) Assessment Normal Flow Stored and Developed Project Pump Private Pump 44,640 11,160 22,230 44,640 0 85,536 21,384 42,768 85,536 (Dollars) 75,456 18,864 37,728 75,456 a a 83,552 20,888 41,776 83,552 0.00 2.00 2.00 a 6.44 750b Size Group II has two sells per farm; Group III has three; and Group IV has six. No restriction is placed on quantity that can be pumped from these wells. Cost based on 2.34 cents per acre-foot per foot of lift, 1967 lift of 280 feet. Restrictions Each representative farm model has a number of restrictions. These are based on the physical and institutional characteristics of the study area. Their magnitudes as of 1966 and 1967 are developed from farm survey and aggregate study area data sources. Two of these restrictions, land and water, are varied at a later stage in the analysis. All other restrictions remain invariant throughout the entire analysis. Available cropland in the SRP currently totals 144,000 acres. This is divided among farm models, as indicated in Table 4. Cotton allotment acreage varies according to model size. The farm survey data indicated that smaller farms had a larger cotton allotment in relation to farm size than larger farms. Based on the 1967 cotton pro- gram (United States Department of Agriculture, 1967) acreage allotment restrictions and diversion use balances are placed on the models as shown in Table 14. b b 83,552 54,000 b 5,000 2,200 2,200 2,200 200 850 750 390 200 18,000 18,000 4,905 2,646 II Group II in RWCD has 27,000 a 1,100 1,100 1 , 100 2,500 200 9,000 9,000 2,457 1,323 I RWCD Size Group Some crops use land Land A refers to uses Group II, III and IV farms in SRP have 2, 3 and 6 wells, respectively. 75,456 b 85,536 a 44,640 83,552 20,888 41,776 LandsA and B refer to land availability by production time period. throughout the entire production period while others use only land A or land B. from January 1 to May 31 and land B to uses from June 1 to December 31. .6 well. 13,728 10,296 10,296 10,296 2,000 41,184 5,086 2,739 41 , 184 (Acre-Feet) 37,728 37,728 7,112 3,829 2,000 1,000 400 550 400 1,000 900 12,576 9,432 8,432 9,432 75,456 18,864 37,728 10,692 10,692 350 550 250 600 600 15,246 10,692 42,768 42,768 8,895 4,790 1,500 1,000 85,536 21,384 42,768 44,640 11,160 22,320 7,440 5,580 5,580 5,580 22,320 22,320 5,078 2,734 No private pump water available. Assessment Water Normal Flow Water S & D Water Private Pump Water Project Pump Water Summer Prorate Water Land AC Land BC Cotton Allotment Diversion Use Wheat Allotment Sugar Beet Allotment Spring Lettuce Fall Lettuce Potatoes Carrots Dry Onions Alfalfa Barley Sorghum Barley-Sorghum (Acres) Constraints for Aggregate Model Farms, SRP and RWCD, 1967. SRP Size Group Constraint I II Iv III Table 14. 61 Initial acreage restrictions are placed on the models in terms of limits on alfalfa, barley and sorghum. SRI' limits on alfalfa are set at no more than one-third of the available cropland. Limits on barley and sorghum are set at no more than one-fourth of the available cropland.' RWCD limits on alfalfa are set at 27 percent and barley and sorghum limits at 12 percent of available cropland. These fractions and percentages of crop limits in the SRI' and RWCD reflect the typical acreages of these crops presently grown in each project. Cotton allotments in the SRP, as a percentage of available cropland, are varied as available cropland changes. No more than one-third of the available land in any model farm may be allocated by the solution to cotton. This restriction has the affect of forcing a rotation pattern on land use in that it prevents cotton from occupying all land as the land base declines relative to available cotton allotment, and, thereby, allows other crops to be grown or cropland to remain idle. Rotational cropping practices in this study are based on agronomic requirements and disease and insect control considerations. Cotton is generally thought to be the primary recipient of rotation benefits. Available literature and discussion with agronomists suggest that a cotton-alfalfa-small grain (or root crop, such as sugar beets) cropping pattern is desirable. Allowing land to lie fallow may also be an acceptable disease or insect control measure in a rotation. In the area studied herein, rotational crops such as alfalfa, sugar beets, and small grains will not be entirely forced out of production due to water scarcity. This is in contrast to conditions projected for Pinal County (Stults, 1968). In Pinal County, land abandonment by 62 rotational crops and restrictjons on cotton acreage by cotton allotments will insure ample acreages of idle cropland for disease and insect rotational purposes. Hence, in the study reported herein, a restriction on cotton acreage was necessary to insure an adequate area of rotational lands for agronomic purposes. The quantity of water available to each representative farm model in the SRP is presented in Table 13. Water quantity is restrictive in the RWCD only during the prorate period, as explained in Chapter III (Water Availability). During this prorate period Group I model farms have available a total quantity of 27,000 acre-feet of district water and Group II model farms have 54,000 acre-feet of district water, plus 20,670 acre-feet of private pump water available to them. Project water is priced at $8.50 per acre-foot and private pump water, obtained from a depth of 457 feet (1967), costs $10.50 per acre-foot. Table 14 presents a summary of all initial model constraints. Variations in Water Quantity The productivity of a resource in its last or final use among a variety of uses is its marginal product. Its marginal product multiplied by that product's price is the marginal value productivity of that resource or the price a user would be willing to pay to obtain one more unit of resource for use in that production process under the assumption of profit maximization. Alternative quantities of irrigation water available to each farm model are specified in this section. Each model is first assumed to have no water and optimum solutions are obtained. Water is then varied in each 63 model in a succession of one-half acre-foot increments up to six and one-half acre-feet per acre. These quantities for the total acreage represented by each model are presented in Table 15. quantities are referred to as "revisions." Alternative water After each revision, a solution is obtained and the marginal value productivity of "shadow price" of that additional water quantity for each model is obtained. Shadow prices for all other limiting resources contingent on that level of water use are simultaneously determined. These shadow prices are the increases in net revenue that could be obtained in each farm model if one more unit of the limiting resource were available. Thus, by varying the water quantity from zero to some quantity such thac the shadow price becomes zero and/or some quantity of water goes into a disposal activity (goes unused), it is possible to develop a quantity-price relationship or demand function for irrigation water within each model. An addition of aggregate model demands provides the data necessary to construct an aggregate demand schedule for irrigation water (Moore, 1962:132). Variations in Land and Water Availability Over Time This section presents projected changes in the availability and costs of selected resources over time. are the variables considered. Land availability and water cost The projection span is from 1967 to 2020. Changes are considered at five-year intervals, beginning in 1970. Land Availability Past and present urban and industrial land use versus agricultural land availability is presented in Chapter I (Land Availability and Use). Agricultural land availability projected to 2020 is developed in this 64,152 33,480 44,640 55,800 66,960 78,120 89,280 100,440 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 3 4 5 6 7 8 9 10 11 226,368 245,232 235,224 256,608 277,992 122,720 133,920 145,080 6.5 6.0 6.5 12 13 207,504 213,840 188,640 169,776 150,912 132,048 113,184 94,320 75,456 56,592 37,728 111,160 192,456 171,072 149,688 128,304 106,920 85,536 42,768 22,320 1.0 2 18,864 21,384 11,160 0 0 III 0 II SRP Size Groups .5 0 0 I 1 tity/ Acre No. Quan- Total Thousands 0 267,692 247,104 226,512 205,920 185,328 164,736 144,144 123,552 102,320 82,368 61,776 41,184 936 864 792 720 648 576 504 432 360 288 216 144 72 0 (Acre-Feet) 20,592 IV 0 58,500 54,000 49,500 45,000 40,500 36,000 31,500 27,000 22,500 18,000 13,500 9,000 4,500 I 0 117,000 108,000 99,000 90,000 81,000 72,000 63,000 54,000 45,000 36,000 27,000 18,000 9,000 II RWCD Size Groups 175.5 162 148.5 135 121.5 108 94.5 81 67.5 54 40.5 27 13.5 0 Total Thousands Aggregate Water Quantity Variations in One-Half Acre-Foot Increments from Zero to Six and One-Half Acre-Feet per Acre, SRP and RWCD. ReviSion Table 15. 65 section. Theile (1965) and Western Management Consultants, Inc. (1965: 147) have projected land availability in the agricultural sector. Theile's (1965) projections are for the Phoenix Metropolitan Area, which includes the area under study here. Western Management Consultants, Inc. (1965:147) projections are based on historical SRP data and appear overly restrictive. Agricultural land projections for the SRP, as developed in the present study, are based on the relationship Y is agricultural land. upon SRP hisotrical data. + (.9765) where Wyatt (1968) developed this relationship, based Table 16 presents these acreage projections in total and by farm size group. Since farms of all sizes are randomly located throughout the project, total acreage declines are distributed proportionately among farm size groups. Transfers of land among size groups are assumed not to occur due to the rapid decline in total project acreage. RWCD agricultural land availability is assumed to remain constant over the period of time under consideration in this study. Groundwater Table Projections Three groundwater subareas, as determined by United States Geo- logical Survey (White, Stulik and Rauh, 1964) underlie the study area. These are referred to as the Phoenix-Glendale-Tolleson-Deer Valley area; the Tempe-Mesa-Chandler area; and the Queen Creek-Higley-Gilbert-Magma area. They are presented in Figure 1 (Page 4). The SRP is almost wholly contained within the first two subareas, while the RWCD is entirely within the third subarea. These subareas differ somewhat in groundwater condi- tions, as well as differing within areas. Changes in depth to water and rates of groundwater decline have been observed, both within and between areas (White, al., 1964 and Cox, 1968). 57,211 50,798 45,100 40,040 35,522 67,116 59,590 52,907 46,974 41,707 370,600 329,048 292,142 259,379 230,295 2000 2005 2010 2015 2020 7 8 10 11 7,280 6,464 10,402 9,236 8,200 14,862 13,196 11,716 21,233 18,852 16,739 76,730 68,123 109,631 97,339 86,421 13,951 12,386 67,688 60,098 96,712 85,866 76,235 12,307 10,927 17,584 15,612 13,861 25,122 22,306 19,805 138,171 122,683 108,927 28,478 25,286 22,451 156,629 139,073 123,480 19,933 17,698 15,713 39,726 35,272 31,318 218,493 193,996 172,249 35,890 31,867 28,294 197,395 175,268 155,617 40,685 36,124 32,074 223,767 198,682 176,407 79,921 66,522 107,046 95,045 84,386 13,622 12,095 19,463 17,281 15,343 27,807 24,690 21,922 41,776 229,768 37,728 207,504 42,768 235,224 152,938 135,795 125,571 (Acres) (AcreFeet) (Acres) (AcreFeet) (Acres) (AcreFeet) data. Acreage projection derived from observed relationship (.9765) (Ye) where Y equals + 1 irrigated acreage. Total acreage is then distributed among size groups on the basis of observed 1967 Total available water is composed of two acre-feet of assessment water, one-half acre-foot normal flow water, one acre-foot stored and developed water and two acre-feet of project pump water. 9 6 5 81,741 75,578 64,006 529,479 470,129 414,116 1985 1990 1995 4 3 95,888 85,139 75,593 116,781 103,686 92,064 756,436 136,988 671,632 121,630 596,337 107,995 1970 1975 1980 2 1 22,320 122,760 (Acres) (AcreFeet) 795,256 144,000 (Acres) 1967 (AcreFeet) Pro'ected A:ricultural Land and Irri:ation Water Availabilit over Time, 1967-2020 SRP. Aggregate Size Groups IV II III Totals I Year In Waterd Landb Watera Landb Landb Landb Watera Landb Watera Watera Future 0 Revision Number Table 16. 67 Theile (1965) has consolidated the Tempe-Chandler and Queen CreekHigley subareas into a Mesa Basin and refers to the Phoenix-Glendale subarea as part of the Phoenix Basin. These two basins encompass all SRP and RWCD land, plus outlying parts of central Arizona. Nonagricultural water use based on population projections (City of Phoenix and Maricopa County, 1959a) estimate that 1.5 million acre-feet of water will be required by the year 2020. Population in. 2020 is esti- mated to be three million people (Theile, 1965). Much of this projected development is expected to take place on land now occupied by agriculture. Hence, a decline in agricultural land (this chapter, Land Availability) will be accompanied by a proportionate decrease in the availability of project supplied water to agriculture since water is appurtenant to the land. No data exist as to water use on an urban-industrial acre relative to an acre of agriculture land as the individual acre(s) are transferred between uses. The official position of the SRP is that total water requirements have not changed with the transfer of land out of agricultural uses. Smith (1968:152) found that the transfer of land out of the agri- cultural sector decreased project water use; however, he also states that residential and municipal uses can be expected to increase ona per capita basis (Smith, 1968:163). Thiele (1965:21) also predicts an increasing per capita consumption of water in the urban-industrial sector. He states that, "Records show a steady increase (in per capita water use) as new household conveniences are developed . . . The past trends show that commercial and industrial water use increases on a per capita basis (over, time). the future." There is nothing to indicate a reversal of these trends in 68 On the basis of the preceding discussion, total water use is assumed to remain unchanged as land moves from agricultural to urbancollilLiercial uses. Consumptive use of water may change, however, due to the reclamation of water used in the urban-industrial sector. This may have an effect on groundwater recharge depending upon the use made of reclaimed water. Presently, no conclusions on this point can be analyt- ically verified; thus recharge is assumed nonvariant. Groundwater decline rates are assumed to be constant since no change in withdrawals or recharge is predicted. Thiele (1965), using his areas of the Phoenix and Mesa groundwater basins, has estimated annual rates of groundwater decline at six feet in the Phoenix Basin and seven feet in the Mesa Basin. United States Geological Survey (White, et al., 1964 and Cox, 1968) data for this same area indicate a range of from small increases to 60-foot declines in the water table from the spring of 1962 to the spring of 1966. This is depicted in Figure 2. Groundwater decline rates in this study are assumed to be 6.5 feet per year in the SRP, which partially coincides with Thiele's Phoenix Basin and seven feet per year in the RWCD, which is encompassed entirely in Thiele's Mesa Basin. A 1965 summer test survey of 173 SRP wells indicated an average pumping lift of 280 feet. A list of 42 RWCD wells tested for the same time period indicated an average pumping lift of 457 feet. These wells are located throughout the projects and are interspersed with private wells. For purposes of this study, pumping lifts of private and project wells are considered identical over the projection period. Estimated 69 pumping lifts and groundwater decline rates over time are presented in Table 17. A constant rate of decline in the groundwater table and a constant rate of increase in pumping lifts assumes that groundwater decline rates are independent of the quantity of water used in agriculture. Since this analysis projects a rapidly increasing urban-industrial sector onto land now occupied by the agricultural sector, the validity of this assumption appears sound in the SRP. In the RWCD, however, some questions regarding the assumption of a constant groundwater decline rate can be raised. Stults (1968) adjusted the rate of decline in the water table in proportion to changes in the quantity of water withdrawn. This method used by Stults appears well- grounded when the water use area overlies the entire groundwater basin(s). The RWCD, being one of several users of a single water basin (see Figure 1, Page 4) exercises only a partial influence upon the water decline rate of one basin. An accurate prediction of decline rates over time would have to take all withdrawals from the basin into account. Since total pumpage from the basin underlying the RWCD is beyond the scope of the present study, a constant rate of decline in the groundwater table is assumed. Pumping Costs Variability of per acre-foot costs of pumping water is primarily a function of pumping lift. Other factors that affect pumping costs are the specific yield of the aquifer, condition of pump, type of pumping unit, and number of bowl stages. be constants in this analysis. These factors are assumed to N N N 6, Source: Figure 2. S 6 33 S N LANE PLEA5ANT 4 2E 5: N 4L BEE RBE RIOE 1 SUPERSTITION MTS. IH -- GALlONS PtA MINUTE jGPNJ Cox, 1968. Depth to Water, 1967, and Change in Water Level, 1962-1967, in Selected Wells in the Central Part of Arizona. G1A BEND - 33 0 71 Table 17. Year Estimated Pumping Lifts and Rates of Groundwater Decline, 1967-2020, SRP and RWCD. SRP RWCD Rate of Decline Lift Rate of Decline Lift (Feet) 1967 6.5 280.0 7 457.0 1970 6.5 299.5 7 478.0 1975 6.5 332.0 7 513.0 1980 6.5 364.5 7 548.0 1985 6.5 397.0 7 583.0 1990 6.5 429.5 7 618.0 1995 6.5 462.0 7 653.0 2000 6.5 494.5 7 688.0 2005 6.5 527.0 7 723.0 2010 6.5 559.5 7 758.0 2015 6.5 592.0 7 793.0 2020 6.5 624.5 7 828.0 72 Pumping costs per acre-foot per foot of lift vary between irrigation districts and between districts and private farm pumpers. Lamoreaux (1966), in a survey of seven irrigation districts in central Arizona, found that average district variable cost per acre-foot per foot of lift was 1.856 cents, while individual farmer costs averaged 2.334 cents. RWCD variable costs per acre-foot per foot of lift were found to be 1.683 cents, while SRP costs were 1.787 cents. In addition to variable pumping costs, an added capital cost for lowering pumping plants must be included as pumping lifts increase. Lamoreaux (1966) estimated these added capital costs per acre-foot per foot of pumping life to be .048 cents in the RWCD, .030 cents in the SRP and .110 cents for privately owned and operated wells. The total variable and added capital costs per acre-foot per foot of lift for the RWCD thus was 1.731 cents, for the SRP it was 1.817 cents, and for private pumpers, 2.45 cents. These unit costs per foot of lift, when multiplied by pumping lift, provide estimates of total variable cost per acre-foot for pumping water from various depths by each class of pumper. Table 18 presents these costs for district pumps in the RWCD and for private pumpers in both the RWCD and SRP. No SRP pumping costs and lifts are presented in Table 18. Approximately two-thirds of the water distributed by the SRI' is obtained from surface sources. The remaining one-third is pumped. No increase in the cost of surface supplied water is foreseen since no increase in distribution costs is assumed. The actual cost of pumping water by the SRP may increase over the projection period, but the cost of project pumped water to the individual farmer is assumed to remain constant over 73 Table 18. Year Pumping Lifts and Pump Water Costs per Acre-Foot for Selected Years, SRP and RWCD. SRP RWCD Private Costa Lift Lift Project Costb Private Costa (Feet) (Dollars) 6.44c (Feet) (Dollars) 850d 1967 280 1970 299.5 7.34 478 9.09 11.71 1975 332.0 8.13 513 9.69 12.57 1980 364.5 8.93 548 10.30 13.43 1985 397.0 9.73 583 10.91 14.28 1990 429.5 10.52 618 11.51 15.14 1995 462.0 11.32 653 12.11 16.00 2000 494.5 12.12 688 12.72 16.86 2005 527.0 12.91 723 13.33 17.71 2010 559.5 13.71 758 13.93 18.57 2015 592.0 14.50 793 14.54 19.43 2020 624.5 15.30 828 15.14 20.29 457 10.50 Includes 2.34 cents variable and .11 cents added capital cost per acre-foot per foot of pumping lift. Includes 1.68 cents variable and .048 cents added capital cost per acre-foot per foot of pumping lift plus an .82 cent project differential. Includes variable cost at 2.34 cents per acre-foot per foot of pumping lift. Present 1967 cost of project pump water to users. 74 the study period. The SRP does, however, state that "the rate for the purchase of pump water is based on the actual cost of pumping and delivering the water" (SRP, 1964). The basis for the assumption in this Study that the cost to the farmer-user of the SRP pumped water will remain constant is founded on the cooperative concept, which holds that the organization exists to supply a factor at the least possible cost to all users. maintains and operates a system of hydro and thermal electric The SRP power generating plants which typically have produced over 90 percent of total project gross revenues. Surplus funds from power revenues have been trans- ferred to project water operations. From 1962 to 1967, the average annual transfer of power revenues to support water operations within the over $5.6 million (SRP, 1962-1967). to the need for water as SRP was Smith found that "the SRP responds expressed by the requirements of water users rather than regulating the requirement for water" (Smith, 1968). Smith further found that "the SRP emphasizes the ends and the means are adjusted to attain the desired ends" (Smith, 1968). Desired "ends" are low cost irrigation water. Adequate revenues from power have been available to subsidize water operations on the part of the SRP. It is assumed that this ability to subsidize will continue at a level such that all project water costs assessed against farm users within the SRP will not increase over time. Thus, SRP supplied pump water is assumed to be available over time to each farm model in the quantity and at the unit cost presented in Table 13. This is in effect an assumption that net power revenues to the SRP will increase over future years at a rate sufficient to cover the increasing 75 variable and added capital costs of pumping from year to year as pumping lift increases, as shown in Table 17. Water Supply Functions Water in Arizona is appurtenant to the land. As the available agricultural land decreases, the total project provided agricultural water supply also decreases. However, quantity of irrigation water avail- able per irrigated acre remains constant. Projected agricultural land and water availability in the SRP is presented in Table 16. Total projected land and water decreases are assumed to be distributed over total acreage occupied by farms represented by each farm model in proportion to the aggregate cropland acreage occupied by farms represented by each model in 1967. in Table 16 relate to SRP water only. Water supply data presented It is composed of the four classes of project water explained in Chapter I (Water Sources and Rights) and Table 13 of the present chapter. They are exclusive of that which may be supplied via private pumps on Groups II, III, and IV. is assumed to be invariant over time. Project water cost Private pump water cost is assumed to change, as indicated in Table 18. RWCD water availability is assumed to remain constant over the time span under study. Each acre has a three acre-foot project water limit during the prorate period (Chapter I, Water Sources and Rights). No restrictions exist on project supplied water during the nonprorate period. Group I farms in the RWCD have no source of water other than that supplied by the project.3 Group II farms have access to private Water is transferable among farms on a private sale basis; 3. however, very little water is, in fact, bought or sold. 76 pump water. Project and private pump water cost is assumed to change over time, as projected in Table 18. Surface water obtained by the RWCD from the SRP (Chapter II, Roosevelt Water Conservation District) varies between one-fourth and one-third of the district's total water use (Goss, 1968). The district's costs of obtaining this surface water are less than for that water obtained from underground sources; however, the individual farmer is charged an average cost for all project water used. The average water cost over time to farm users in the RWCD, it is assumed, will increase at the rate as per acre-foot pump water costs will increase. same This may introduce an upward bias in water cost estimates in that the constant cost to the RWCD of water it obtains from the SRP will tend to offset somewhat the effect of an increasing cost to it of its own pumped water. however, will be of minor significance. The effect, CHAPTER V RESULTS AND CONCLUSIONS Adjustments in optimum enterprise combinations at specified resource levels and costs for each model farm group, in each district, and for the total study area are presented in this chapter. Changes in water use, land use, and net revenue over variable production costs steiiuiiing from optimum enterprise combinations under changing water and land use conditions are analyzed. Changes in numbers of farms and crop acreages over the projection period are examined. Net returns over all costs as of 1967 are also developed. In the concluding two sections, an agricultural demand function for irrigation water as of 1967 is developed and an exploration of water parameter variations over time is undertaken. Additional water sources, variations in water prices, and uses that would be made of additional water at lower prices are explored. Revenue generated over time steuuiiing from these variations in water parameters and uses are also presented. A concluding chapter sums and evaluates the findings of this study. Projected Adjustments to Resource Changes Resource availabilities and costs over time and the rationale supporting these estimates by farm size group and for all farms are presented in Chapter IV (Variations in Land and Water Availability Over Time). Land and water quantity changes over time in the SRP are presented 77 78 in Table 18. Time-related private and project pumping costs are pre- sented in Table 17. The effects of declining cropland availability and increasing water costs on optimum cropping patterns, water use by supply sources, and on total water use for each farm size group in the SRP and RWCD, are presented in Tables 19 through 24. Net revenue and water use pro- jections are presented by farm size group, by irrigation district, in total, and on a per acre basis in the remaining parts of this section. Enterprise Combinations Decreasing land availability and/or increasing water costs or availability over time will affectthe acreages of various crops and the enterprise mix. Each size class of farms will adjust differently, depending upon the range of its alternative crops and upon the relative net returns it can generate from the crops included in its enterprise mix. All farm size models in both the SRP and RWCD will utilize through 2020 under the assumptions made herein, all cropland acreage available for the production of crops that generate a high value per acre-foot of water used. vegetables. These crops are cotton, sugar beets, and Alternative crops that generate a low return per acre-foot of water used are incorporated into or excluded from optimum enterprise mixes over time, as shown in Tables 19 through 24. SRP Size Group I farms adjust enterprise acreages in alfalfa hay and pasture and in barley. Cotton acreage declines over time in line with assumed rotation restrictions (Chapter IV, Restrictions). Adjust- ments in SRP farm model Size Group II take place in barley-sorghum and 2,117 1,421 1,198 1,168 5,078 5,078 4,954 4,390 3,705 3,467 3,079 2,800 2,420 2,155 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 See footnotes on Page 85. 1,036 1,298 1,480 1,667 2,903 3,311 5,479 5,078 1970 6,589 (Acres) 5,078 a 1967 Year 1,118 1,271 1,302 1,598 1,801 2,885 2,299 2,572 3,780 5,385 5,580 5,580 1,118 1,271 1,302 1,598 1,801 2,885 2,299 2,572 3,780 5,394 5,580 5,580 22,624 25,480 28,700 32,326 36,407 41,006 46,186 52,071 58,586 65,982 74,715 78,120 0 5,385 6,713 10,147 (Acre-Feet) 0 22,624 25,480 28,700 32,326 36,407 41,006 46,186 52,017 58,586 71,340 81,028 88,267 Projected Adjustments on Farms in Size Group I to Changing Land and Water Availability, SRP. Alfalfa Hay Idle Cotton Water Supply Sources Total b and PastureC Barley h Land B i Projectm Project Pump Skip-Row 4x4 Private Pump° Water Use Table 19. 4,378 3,433 1,187 601 8,895 8,895 8,895 8,429 7,484 6,644 5,899 5,238 4,650 4,129 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 See footnotes on Page 85. 78 1,850 2,595 6,638 10,234 14,256 14,256 8,895 1970 14,256 8,895 1967 (Acres) 0 28 4,589 6,672 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 43,351 48,846 54,995 61,943 69,765 78,578 88,501 99,637 112,259 126,434 142,397 149,688 792 1,906 3,188 4,622 6,232 8,039 10,080 16,756 28,119 40,801 50,007 54,173 (Acre-Feet) 44,143 50,752 58,183 66,565 75,997 86,617 98,581 116,429 140,378 167,235 192,404 203,861 Pro ected Adjustments on Farms in Size Grou. II to Changin Land and Water Availability, SRP. Cotton Alfalfa Hay Barley-.. Idle Water Supply Sources Total Yeara Skip-Row 4x4 b and PastureC Ae Sorghum3 Land B 1 Projecttm Project Pump' Private Pump° Water Use Table 20. 12,576 12,576 12,576 4,782 3,303 2,562 1,904 1,321 803 7,112 7,112 7,112 7,112 7,112 7,112 6,601 5,861 5,204 4,620 4,102 3,642 Yeara 1967 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,250 4,250 (Acres) Ae See footnotes on Page 85. 343 7,598 10,776 Alfalfa Hay and Pasturec 0 1,767 2,000 2,000 0 3,790 5,628 Barley 450 450 450 450 450 450 450 450 450 2,217 6,240 8,078 Land B1 Idle 38,244 43,074 48,513 54,642 61,544 69,317 78,071 87,927 99,029 111,534 125,615 132,048 3,892 4,887 6,005 7,263 8,684 10,287 14,449 23,348 33,371 38,195 34,288 32,450 (Acre-Feet) 42,136 47,961 54,518 61,905 70,228 79,604 92,520 111,275 132,400 149,729 159,903 164,498 Water Supply Sources Project Private Total Pumpn Pump° Water Use Projecttm Projected Adjustments on Farms in Size Group III to Changing Land and Water Availability, SRP. Cotton Skip-Row 4x4b Table 21. 3,171 2,540 5,086 5,086 5,086 5,086 5,086 5,086 5,086 5,086 4,541 4,032 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 (Acres) See footnotes on Page 85. 2,031 5,109 7,291 9,750 12,518 13,728 13,728 13,728 13,728 5,086 1970 13,728 5,086 1967 Yeara 0 1,907 5,418 9,372 10,296 10,296 0 3,530 4,988 0 1,907 5,418 9,372 10,296 10,296 42,332 47,677 53,700 60,483 68,120 76,727 86,451 97,321 109,613 123,462 139,041 144,144 5,386 6,485 7,935 14,059 20,954 28,724 37,471 39,388 35,876 31,922 38,058 39,790 (Acre-Feet) 47,718 54,168 61,635 74,542 89,074 105,451 123,886 136,709 145,489 155,384 177,099 183,934 Projected Adjustments on Farms in Size Group IV to Changing Land and Water Availability, SRP. Cotton Water Supply Sources Total Skipjow Alfalfa Hay Sugarf Barley-. Idle Project Private Water h 4x4 and PastureC Beets Barley Sorghum Land B Projecttm Pump'1 Pump° Use Table 22. 2,457 2,457 2,457 2,457 2,457 2,457 2,457 2,457 2,457 2,457 2,457 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 0 2,500 2,500 2,500 2,500 2,500 See footnotes on Page 85. 2,457 a 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300 (Acres) . 0 286 286 2,786 2,786 2,786 2,786 2,786 2,786 2,786 286 286 286 4,086 4,086 4,086 4,086 4,086 4,086 4,086 1,586 1,586 1,586 1,586 1,586 15,218 15,218 15,218 15,218 15,218 15,218 2,874 2,874 2,874 2,874 2,874 2,874 2,874 8,699 21,043 15,218 8,699 21,043 8,699 11,485 21,615 21,043 11,485 21,615 (Acre-Feet) Projected Adjustments on Farms in Size Group I to Increasing Water Costs, RWCD. Cotton Wheat Skip-Row Alfalfa Hay Idle Idle Water Supply and Early 1 k 4x4b Land B Land A and Pasture Barley Sorghum PrivateP NonprivateP 1967 Year Table 23. 18,092 18,092 18,092 18,092 18,092 18,092 18,092 29,742 29,742 29,742 33,100 33,100 Use Total Water 2,390 2,390 4,905 4,905 4,905 4,905 4,905 4,905 4,905 4,905 1985 1990 1995 2000 2005 2010 2015 2020 See footnotes on Page 85. 0 4,190 4,190 4,905 1980 4,190 0 4,905 1975 2,390 2,390 2,390 2,390 2,390 2,390 2,390 2,390 2,390 5,000 4,905 2,390 1970 5,000 4,905 1967 (Acres) 0 2,200 2,200 2,200 2,200 2,200 2,200 1,390 1,390 6,390 6,390 6,390 6,390 4,190 4,190 4,190 6,550 6,550 6,550 6,550 6,550 6,550 6,550 2,360 2,360 2,360 1,550 1,550 30,352 30,352 30,352 30,352 33,652 33,652 33,652 43,414 43,414 43,414 44,086 44,086 8,938 8,938 8,938 8,938 11,139 11,139 11,139 25,091 25,091 25,091 26,978 26,978 (Acre-Feet) Table 24. Projected Adjustments on Farms in Size Group II to Increasing Water Costs, RWCD. Cotton Skip-Row Alfalfa Hay Alfalfa Idle Idle,1 Water Supply a h 1 Ae Hayd and PastureC Year Barley Land A Land B ProrateP NonprorateP 39,290 39,290 39,290 39,290 44,791 44,791 44,791 68,505 68,505 68,505 71,064 71,064 Total Water Use Water price charges Barley uses first half land A and sorghum uses 1. Cotton, alfalfa hay and pasture, alfalfa hay, sugar beets, barley-sorghum and dry onions use land A and B. Barley, early sorghum, wheat, spring lettuce and carrots use only land A. Late sorghum, fall lettuce and potatoes use only land B. Early sorghum uses first half land A. Barley and sorghum are double-cropped. second half land B. Includes 1,100 acres of wheat and 200 acres of barley. Barley is produced on Size Groups I, III, IV in the SRP and Size Group II in the RWCD. Wheat is produced on Size Group III and those listed in footnote i below. Sugar beets are produced on Size Group IV and those listed in footnote e above. Includes 1,500 acres of wheat; 1,000 acres (Tables 20 and 21) and 850 acres (Table 24) of sugar beets; 350 acres (Table 20), 400 acres (Table 21) and 750 acres (Table 24) of spring lettuce; 550 acres (Tables 20 and 21) and 390 acres (Table 24) of fall lettuce; 250 acres (Table 20), 400 acres (Table 21), and 200 acres (Table 24) of potatoes; 600 acres (Table 20), 900 acres (Table 21), and 200 acres (Table 24) of dry onions; and 600 acres (Table 21) of carrots. Alfalfa hay produces 4.5 tons of hay in the RWCD. Alfalfa hay produces 6.5 tons of hay and 25 days of pasture in the SRP and 4.5 tons of hay and 25 days of pasture in the RWCD. Cotton, skip-row, 4x4, occupies two acres of land for each acre of cotton listed. Land availability in total and by size group by years is in Table 18. by years are in Table 17. Footnotes for Projection Tables 19 through 24. period. Water supplied by the RWCD is divided into two delivery periods; the prorate period is in effect from March through September. The nonprorate period refers to the remainder of the production Size Groups II, III and IV have two, three and six private wells, respectively. SRP lands have an average of two acre-feet of project pump water available per acre. The SRP supplies two acre-feet of assessment water per acre and 1.0 acre-foot of stored and developed water per acre and an average of .5 acre-feet of normal flow water per acre. Footnotes for Projection Tables 19 through 24, (Continued). 87 alfalfa hay and pasture enterprises. Double-cropped barley-sorghum is excluded from the farms represented by this model in the fourth iteration representing the twentieth year hence; whereas, the alfalfa hay and pasture combination continues through the fiftieth year, though at decreasing acreage levels. Adjustment in SRP farm model Size Group III occurs in the barley enterprise, which disappears in the third iteration (the fifteenth year hence), wheat which is excluded in the fourth iteration (the twentieth year), and alfalfa hay and pasture, which remains in the model but in continually decreasing acreage amounts. SRP Farm Size Group IV enterprise adjustments take place in barley-sorghum acreage, which drops out of these farms in the third iteration (the fifteenth year); barley, which disappears in the sixth iteration (the thirtieth year); and alfalfa hay and pasture, which steadily declines through the 53-year projection. RWCD farm model Size Group I farms adjust their acreages in early planted sorghum and alfalfa hay and pasture. Sorghum drops out of the optimum mix in iteration three (the fifteenth year) and alfalfa hay and pasture in iteration six (the thirtieth year). Adjustments in model Group II farms occur in acreages of alfalfa hay, alfalfa hay and pasture, and barley. Alfalfa hay and pasture remains on these farms for two iterations (10 years). In the third iteration (at 15 years hence) alfalfa hay enters and barley acreage increases. Alfalfa hay remains through the fifth iteration (25 years), while barley acreage continues constant through the eighth iteration (40 years hence), at which time it falls to zero. 88 Aggregate farm model adjustments to changing land and water availability in the SRP and increasing water costs in the RWCD, as generated by the linear programming projection, are presented in Tables 25 and 26. These tables are, with the exception of preliminary 1968 reported acreages, the summation of progralLuuing projections of the individual farm model groups from each irrigation district for each time period from year 1967 to 2020. Reported 1968 crop acreages are taken directly from irrigation district preliminary crop reports (SRP, 19621968 and RWCD, 1963-1968a). The 1968 reported acreages differ from those generated by the linear programming model for the 1967 crop year for several reasons discussed below. The 1968 reported cotton acreage varies from the 1967 projected acreage due to ASCS cotton program changes between 1967 and 1968. (The program has changed again for 1969 as a result of which it is expected that planted cotton acreage will further increase.) A further source of variance between actual cotton acreage reported in 1968 and cotton acreage "predicted" by the model for 1967 is that in the model prediction cotton is grown entirely in a 4x4 skip-row pattern. ASCS reporting procedure does not distinguish between solid and skip-row planted acreage for the study area. However, it is known that not all acreage was actually planted in 1968 in a 4x4 skip-row pattern. Possible reasons for the difference between 1968 reported and 1967 model predicted acreage cotton planting patterns are (1) that farm operators have a noneconomic preference for using land rather than allowing it to lie idle in skipped rows, (2) that farm operators are not aware of the profitability of 4x4 skip-row planted cotton over solid planted cotton or, (3) that farm 4,000 4,000 26,047 25,017 22,876 21,058 19,268 17,744 15,713 13,958 1985 1990 1995 2000 2005 2010 2015 2020 Source: 4,000 26,171 1980 4,000 4,000 4,000 4,000 4,000 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 (1,948) 5,600 3,488 5,215 6,981 10,161 13,928 19,371 23,977 30,081 37,641 43,871 46,039 (45,392) 47,149 Land B refers to land used from June to December. Tables 19 through 22. a. 4,000 26,171 1975 4,000 4,000 26,171 1970 4,000 (3,428) 26,171 (Acres) 0 28 8,119 (9,619) 11,660 1,500 9,198 1,118 1,271 1,302 1,598 1,801 2,885 2,299 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 3,267 14,785 4,479 3,500 (3,626) 3,500 27,785 (27,895) 33,164 Projected Adjustments in Agriculture to Changing Land and Water Availability, SRP. Cotton Sugar Vege-. Alfalfa Hay Skip-Row 4x4 Beets tables Barley and Pasture Sorghum Wheat (28,912) 1968 (Reported) 1967 Year Table 25. Idle 3,218 3,371 3,402 3,698 3,901 4,985 4,399 6,579 13,065 18,661 23,694 25,604 Land Ba 850 850 7,362 7,362 7,362 7,362 7,362 7,362 7,362 7,362 7,362 1980 1985 1990 1995 2000 2005 2010 2015 2020 December. 850 7,362 1975 1,540 1,540 1,540 1,540 1,540 1,540 1,540 1,540 1,540 1,540 1,540 (886) 1,540 1,100 1,100 1,100 1,100 3,300 3,300 3,300 3,300 200 200 200 200 200 200 200 200 200 200 200 (257) 200 0 286 (2,002) 286 0 4,190 4,190 4,190 286 286 286 9,176 9,176 9,176 9,176 6,976 6,976 10,636 10,636 10,636 10,636 10,636 10,636 10,636 3,946 3,946 3,946 3,136 3,136 Bb Idle Land 6,976 A Land A refers to land used from December to June and land B to land used from June to 0 2,500 3,300 3,300 2,500 2,500 2,490 (3,249) 2,490 7,500 (7,958) 7,500 Taken from Tables 23 through 24. 850 850 850 850 850 850 850 850 7,362 1970 850 (849) 7,362 (Acres) Projected Adjustments in Agriculture to Increasing Water Costs, RWCD.a Cotton Sugar VegeAlfalfa Hay Alfalfa Wheat Sorghum Hay Skip-Row 4x4 Beets tables and Pasture Barley (8,754) 1968 (Reported) 1967 Year Table 26. 91 operators would rather plant a small grain crop, such as barley or sorghum, on the acres that would be skipped if skip-row cotton were planted due to expectations of exceptionally high yields and/or prices for that crop. The optimum cropping solution, however, indicates that net revenue is increased if 4x4 skip-row rather than solid planted cotton is grown. It is presumed, therefore, that 4x4 skip-row planting will increase with increasing experience, knowledge, and economic pressures. Although available evidence indicates that the present (1968-1969) relaxation on cotton planting restraints within allotted acres will cause further increase in cotton planted acres compared to that predicted by the model for 1967 and illuLlediately succeeding years, this is expected to be a temporary phenomenon that will, in the long run, be again restrained due to cotton surpluses expected to result from the increases in planted acreage in 1968 and 1969. Thus, projections for the long pull are made in this study at the 1967 restrained level of acreage. Sugar beet acreage in 1968 and that predicted by the model for 1967 are comparable in the RWCD. For the SRP, sugar beet acreage reported in 1968 and 1967 model predicted acreages differ. The reason for this difference may be the extremely low yields experienced by some SRP growers in 1967 and the resultant discontinuation of sugar beet acreages by them. Current indications are, however, that sugar beet acreage in the SRP is increasing, probably as a result of increasing experience with the crop and more favorable producing conditions, and will approach that predicted for the longer run by the model. Thus, we expect the current discrepancy in acreages to be a temporary phenomenon and accept the model acreage predictions for the long run. 92 Vegetable acreage reported in 1968 for both districts does not include fall planted acreage (data were not available) and, hence, is lower than 1967 acreage predicted by the model. Acreages of alfalfa hay and pasture and other field crops reported in 1968 correspond quite well with acreages of these crops predicted by the model for the 1967 crop year. A composite of model acreages of all crops in both the SRP and RWCD is presented in Table 27. Cropland and Water Use Lands A and B, the two types specified to coincide with growing periods of short season crops, are used to various degrees in each of the six farm models. Land A refers to first-half land use (roughly December to June) and land B to second-half land use (roughly June to December). Some crops use land during either the first or second half of the growing season while others use land during both periods. SRP land A is fully utilized at all times on all farms over the projected time period. Land B, however, as indicated in Tables 19 through 22, is idle in varying acreages in all SRP farm models. SRP Group I model farms permit land B to lie idle because there is no paying alternative enterprise available to them to follow barley which occupies land A. Late sorghum is the only alternative; however, its net return per unit of water is such that project pump water, at $7.50 per acre-foot, cannot be used to produce it profitably. Idle land B in Group II model farms results from the use of land A for wheat and vegetable production, while no economically feasible alternative using $7.50 per acre-foot project pump water is available for the profitable use of the land in the second time period. 4,850 4,850 33,533 33,409 32,379 30,238 28,420 26,630 25,106 23,075 21,320 1980 1985 1990 1995 2000 2005 2010 2015 2020 December. a. 4,850 33,533 1975 7,140 7,140 7,140 7,140 7,140 7,140 7,140 7,140 7,140 7,140 7,140 7,140 3,488 5,215 6,981 10,161 13,928 19,371 23,977 36,771 44,331 50,561 53,539 54,649 2,228 2,371 2,402 2,698 5,101 6,185 5,599 7,779 12,498 18,057 22,156 23,994 (Acres) 0 28 8,119 11,660 0 286 286 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 3,467 3,700 3,700 9,176 9,176 9,176 9,176 6,976 6,976 6,976 286 286 286 13,859 14,007 14,038 14,334 14,537 15,621 15,035 10,525 17,011 22,607 26,830 28,740 Land A refers to land used from December to June and land B to land used from June to 4,850 4,850 4,850 4,850 4,850 4,850 4,850 4,850 33,533 1970 4,850 33,533 1967 Year Projected Adjustments in Agriculture toChanging Land and Water Availability and Increasing Water Costs, SRP and RWCD. Cotton Sugar VegeAlfalfa Hay BarleyEarly Idle Land Aa Ba Beets Skip-Row 4x4 tables Sorghum and Pasture Barley Sorghum Wheat Table 27. 94 Nonuse of land B by Group III model farms results initially from using land A for vegetables, wheat and barley production, with no following profitable use for land B. As barley and wheat drop from the optimum solutions and as total cropland availability declines, both remaining land A which was being used and remaining idle land B are brought into use to offset the decline in total cropland acreage. Group IV model farms let land B be idle because land A is used for barley production and there is no alternative crop that can use land B profitably due to the cost of using private pump or project pump water. Lands A and B in the RWCD are both idle, as shown in Tables 23 and 24, at various times throughout the projection period. In Group I farms, land B remains idle because of alternatives unable to profitably use $8.50 per acre-foot project water. of $9.69 per acre-foot in 1975. Land A becomes idle at water costs Idle lands A and B increase over the projection period as water costs per acre-foot increase. Idle land B in RWCD Group II farms occurs at water costs of $8.50 per acre-foot in 1967. This results from barley and vegetable use of land A, with no profitable alternatives available for land B. At per acre-foot water costs of $11.51 in 1990, idle land A appears because alfalfa drops out of the optimum solution. Total projected acreages of idle land by project and by study area are presented in Tables 25, 26 and 27. Total water use by agriculture in the SRP is composed of that supplied by the project and that which is pumped by farm operators. Project supplied water is made up of surface runoff and water pumped by the project. Water use by agriculture in the RWCD combines surface 95 flow from the SRP system (Chapter II, Roosevelt Water Conservation District) and groundwater pumped by the project. Although private wells are located on farms in Size Group II in this project, they are typically not needed since project supplied water is sufficient to meet all demands. Projected use of water in agriculture in the SRP is a function of its cost and the amount of available land on which to use it. As total land availability declines, so also does the total quantity of low cost, project supplied surface water. However, the quantity of this low cost water used per land acre remains constant and, in no case, is production restricted by a physical lack of water. The variable that affects water use in the SRP is the price of pumped water, both private and project. All farm size models, except Model I, have access to privately pumped water; however, its use is discontinued when it becomes more costly to pump water from these private veils than to obtain water from project pump sources at $7.50 per acrefoot. As shown in Tables 20 through 22, this occurs between the second and third iteration (10 to 15 years hence). Succeeding iterations throughout the entire 53-year projection period employ only water supplied by the project under the assessment, from normal flow and from stored and developed rights, plus varying quantities of project pump water, the prices for which as explained earlier herein, are assumed to remain constant over time. Water use by farm size model by source for each future time period is presented in Tables 19 through 22. Water use on farm models in the RWCD is shown in Tables 23 and 24. Since land acreage is unchanging over the projection period, the changes in water use over time are strictly a function of its increasing 96 price due to the steadily increasing pumping lift. All water is assumed to be supplied from project sources, even though private wells are located on some Model II farms. As explained above, due to private pumping costs being assumed herein to be higher than project pumping costs from the same depths, no water is produced from these private wells. Total projected water use by district, per acre, and for the total study area is presented in Table 28. Water use on projected acreage decreases substantially over time. SRP total agricultural water use decreases 76 percent and RWCD use decreases 45 percent over the projection period. During this same time period, cropped acreage will decline by 71 percent in the SRP and by 50 percent in the RWCD. Water use per acre of available cropland declines by 15 percent in the SRP and by 46 percent in the RWCD over the projection period due to increase in areas of idle cropland. Net Revenue Changes Projected net revenue changes by farm model size group by project, and in total for the study area are presented in Table 29. Changes over time in SRP net revenue are due to increasing water costs and decreasing land availability. Increasing water costs affect net revenue only until privately pumped water reaches $7.50 per acre-foot in 1971, at which time project supplied pump water will be used in place of private pump water, as shown in Tables 19 through 22. The effect of decreasing cropland availability accounts for all net revenue declines in the SRP after 1971. Net revenue changes over time in the RWCD are in response to the increasing cost of obtaining water throughout the projection period. 610,434 476,735 416,430 136,988 121,630 107,995 95,888 85,139 75,593 67,116 59,590 52,907 46,974 41,707 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 156,621 178,361 203,036 235,338 3.8 3.8 3.8 3.9 4.0 4.1 312,678 271,706 4.2 4.3 4.4 4.5 4.5 4.5 361,173 543,403 640,575 144,000 27,000 27,000 27,000 27,000 27,000, 27,000 27,000 27,000 27,000 27,000 27,000 27,000 (Acre-Feet) 57,382 57,382 57,382 57,382 62,883 62,883 62,883 98,247 98,247 98,247 104,164 104,164 2.1 2.1 2.1 2.1 2.3 2.3 2.3 3.6 3.6 3.6 3.9 3.9 Projected Water Use by District, per Acre by District and by Study Area. SRP RWCD Total Water Use Total Water Use Acreage Water Use per Acre Acreage Water Use per Acre 1967 Year Table 28. 214,003 235,743 260,418 292,720 334,589 375,561 424,056 514,677 574,982 641,650 714,598 745,893 Total I 1,813 1,774 1,688 1,610 1,517 1,345 1,143 1,062 943 850 742 660 1967 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 3,326 3,125 2,946. 2,812 2,622 3,553 3,266 3,026 3,809 1,720 1,929 2,160 2,297 2,451 2,625 4,096 3,537 3,842 2,820 2,984 3,129 3,292 3,467 3,556 4,355 4,530 4,422 4,185 4,728 4,938 4,711 4,558 5,102 5,201 4,886 5,012 437 447 456 465 476 487 497 512 530 540 569 558 1,511 1,534 1,558 1,582 1,607 1,635 1,662 1,694 1,733 1,755 1,816 1,858 7,948 8,608 9,362 10,059 10,858 11,706 12,706 13,454 14,025 14,628 15,228 15,592 (Dollars in Thousands) 1,940 1,981 2,014 2,047 2,082 2,121 2,159 2,206 2,263 2,295 2,384 2,446 9,888 10,589 11,376 12,106 12,940 13,828 14,865 15,660 16,288 16,923 17,612 18,038 Projected Aggregate Net Revenue over Variable Production Costs by Farm Size Gro,ip, Irrigation District and Study Area. Aggregate Net Revenue by Farm Size Group Net Revenue by SRP Total Study Area RWCD Irrigation District II RWCD III IV I SRP Net Revenue II Year Table 29. 99 Total revenue over variable production costs in both districts is derived primarily from cotton, sugar beets, and vegetables. half of all net revenue was derived from these crops in 1967. Over Throughout the projection period, as alfalfa and small grain crops drop out of optimum farm operations, cotton, sugar beets and vegetables provide a steadily increasing percentage of the total net revenue. As the total acres of crops decreases from year to year, total gross revenue and production costs will decrease in lesser proportion than acreage because crops that produce low net values per acre and that incur low production costs per acre will be progressively eliminated. A loss of revenue to agricultural factor suppliers and product handlers will result. This loss, however, will not be in proportion to acreage changes, but will be in proportion to changes in factor needs and product output represented by deleted crops. Net revenue per year over variable production costs in the SRP and RWCD will decline by approximately 50 and 21 percent, respectively, between 1967 and 2020. However, cropped acreage will decline by 71 per- cent in the SRP and by 50 percent in the RWCD during the same period. Over this projection period, SRP and RWCD water use will change by 76 and 45 percent, respectively. In tabular form, the above percentages over the 53-year projection period are as follows: Net Revenue Decrease Cropped Acreage Decrease Water Use Decrease (Percent). SRP 50 71 76 RWCD 21 50 45 100 Figures 3 and 4 show in graphic form net revenue and water use projections for the SRP and RWCD. These figures both contain dual hori- zontal axes which in each figure relates an important independent variable to time over the projection period. In the SRP, variations in land availability over time are determined by competition for its use by the urban-industrial sector; in the RWCD, variation in water cost per acrefoot is determined by the increasing depth of the groundwater table. Net revenues are scaled on the left-hand axis and acre-feet of water on the right-hand axis of these figures. They portray the projected relative changes in net revenue and water use over time for each district. Both net revenue and agricultural water use in the SRP decline primarily as a result of declining land availability. cost is of minor consequence. rapidly than water use. Increasing water Net revenue, however, decreases less This is a reflection of the increasing propor- tion of crops in the enterprise mix on the declining land area that produces a high value per acre-foot of water used. In the RWCD, revenue and water use decline wholly as a result of increasing water costs since available acreage is constant. As in the SRP, water use changes more rapidly than net revenue due to the increasing proportion of high net return crops in the enterprise mix that makes use of the increasingly costly water. Firm Numbers Since this analysis assumes no transfer of land among farm size groups (Chapter IV, Land Availability) and since land acreage in agriculture is projected to decrease continuously in all size groups in the SRP, total numbers of farm units will decrease from those presented in 101 $16 14 12 U) Net Revenue 10 C 0 550 C U) C C 450 0 U) 0 I- Water Use C 350 44 a, U 250 ISO Acres 0 144,000 137,000 1970 1967 122,000 1975 108,000 1980 96,000 1985 85,000 76,000 67,000 60,000 53000 47,000 42,000 1990 1995 2000 2005 2010 2015 2020 Time in Years FIgure 3. Projected Water Use and Net Revenues over Variable Production Costs1 SRP. 102 2.5 110 2.3 Net Revenue U) C .9 2.1 90 C 1.9 Water Use C 0) > 0) 70 4- z0) 50 Dollars per Acre-Foot 8.50 9.09 9.69 10.30 10.91 1967 1970 '975 1980 1985 11.51 1211 12.72 13.33 1990 '995 2000 2005 Time Figure 4. Projected in Years Water Use and Net Revenues over Variable Production Costs, RWCD. 13.93 4.54 15.14 2010 2015 2020 103 Table 4 of Chapter III. Projected decreases in farm numbers in the SRP are presented in Table 30. Table 30. Projected Change in Farm Numbers by Farm Size Group, SRP, 1967 and 2020. Farm Size Group Year I II III (100 Acres) (400 Acres) (900 Acres) 223 106 42 23 394 65 31 12 7 115 IV Total (1,800 Acres) From Table 4. Year 2020 land acres divided by farm model size. Agricultural acreage in the RWCD is not expected to change over the projection period although cropped acreage will decline. Farm numbers, as shown in Table 5. will not change over time, only decreases in cropped acreage per farm. Land transfers between size groups are not projected to take place since a large number of small units exist at the present time; their primary source of revenue presently is cotton, and over the projection period their cotton acreage remains constant. Presumably, the operators of these small farms consider their returns adequate in the present as there is no clear indication that larger farm units are presently absorb4ng them. Thus, there is no reason within the postulated assumptions of this study to assume land or entire farm transfers from small to larger units will take place in the future. Adjustments will take place only in terms of cropped acres within the existing number of farm units. As described in Chapter IV (Land Availability and Water Supply Functions) it is assumed when making these projections that the proportion of farms falling in the several size groups in each district will remain 104 constant throughout the projection period. Because of conditions within the SRP (primarily the relatively low and stable cost of available water), this seems a reasonably safe assumption for that district. However, in the RWCD, because water cost is presently higher than in the SRP and is expected to increase in cost throughout the projection period due to a progressively falling water table, the assumption of a constant proportion of farms by size is questionable. Earnings by small size farms in the RWCD (Model Size I of 100 acres) were decidedly low in 1967 and throughout the projection period will become progressively lower, even negative, (see Table 31). It is probable, therefore, that Model I farms in the RWCD are now and will come under increasing economic pressure to disappear and be incorporated into larger size farms. It is even possible that significant numbers of 900-acre (Model III) and 1,800-acre (Model IV) farms will appear in this district though the analysis reported herein does not provide for the presence of farms of such sizes throughout the 53-year projection period. Thus, the assumption concerning farm size distributions in the RWCD is probably overly restrictive on the ability of agriculture in that district to make economically meaningful adjustments to increasing water scarcity. Thus, projections reported herein of declining aggregate net revenue, changing enterprise combinations, declining water use, and output are somewhat exaggerated in comparison to what will, in reality, occur. However, at most, these discrepancies will be modest. For example, net revenue in the district (see Page 98) is projected to decline approximately $500,000, or by 21 percent over the 53-year Farm Model Acres Farm Size Group 400 900 1,800 II III IV 400 II (4) 116,729 25,010 5,211 78,278 319,614 19,691 47,473 24,221 107,954 225,046 4,866 Costs Fixedb Annual 19,710 Gross a Returns (3) (6) Net Return to Land an Management 41,276 6,531 155,043 123,831 47,286 8,128 16,266 1,320 76,765 76,358 23,065 3,262 (Dollars per Farm) Net Revenuec (5) (7) 5,836 981 15,980 11,252 5,397 985 Managemente for Allocation Return to land or to water and land as the ultimate fixed factor. Calculated as five percent of gross returns in column 3. Column 5 minus column 4. Revenue in each size group of Table 29 divided by number of farms in each group. From Table 12. (8) 10,430 340 60,785 65,106 17,668 2,277 Residual Calculated from acres of crops in Tables 19 through 24 multiplied by gross returns per acre of Table 11. 100 I Roosevelt Water Conservation District 100 I Salt River Project (2) Gross Returns, Fixed Costs and Net Revenue per Farm and Its Allocation, 1967. (1) Table 31. 0 Ui f 106 projection period. Even if all the Model I size farms were to disappear and farms in the larger Size groups were to absorb all the Model I size cropland, aggregate net revenues, water use, and output would still decrease, though more slowly due to the somewhat greater efficiency with which these larger farms would be able to use the acreage absorbed from the smaller farms. Though the decreases in the rates of decline thus obtained might appear significant from the standpoint of the RWCD, as these projections are aggregated with those developed for other irrigated areas to assess statewide impacts of water scarcity, the discrepancies in the RWCD projection rapidly become insignificant. In the absence, therefore, of any objectively valid basis for incorporating in the analysis a prograiuuied rate of transfer of smaller into larger sized farms and because of the minor importance of the modified declines thus derived when they are aggregated into the larger objectives of the total study of which this is but one part, the restrictive assumption on farm size transfer in the RWCD is allowed to stand. It is important to remember, however, that in reference to the RWCD specifically, appropriate adjustments made by farm managers will soften the economic impact of increasing water scarcity and the declines in net revenue, water use, and output will not be as large as projected herein. Allotments Based on the need for a rotation for agronomic purposes, limited acreageS of cotton, alfalfa, barley and sorghum as percentages of total cropland acres were placed on the basic models.4 4. See Chapter IV, Restrictions. Sugar beets, wheat and 107 vegetable acreage limits were assumed to remain at originally specified levels throughout the projection period. Cotton acreage in the SRP is projected to decrease from 26,171 acres at the outset of the projection period to 13,958 acres at the end of the period 53 years later. In all farm size models, the percentage of cropland employed in Cotton production is allowed to increase until it reaches one-third of the model's acreage. At and beyond this point, cotton acreage in excess of one-third of the model's total acreage must be disposed of under the assumptions of this study in order to maintain a rotational balance among crops for agronomic reasons. Cotton acreage not planted in the SRP is assumed to be transferred to other agricultural areas. These allotments may be used in other areas of the state by their original owners on an operation outside the SRP or they may be sold to other operations outside the SRP, but within the county. It is assumed herein that ample opportunity for such cotton allotment transfers will exist throughout the projection period. RWCD cotton allotment acreage is assumed to remain constant at 1967 levels throughout the projection period. Since in 1967, cotton acreage is less than one-third of available croplarid and no change in cropland acres is assumed, the total cotton acreage remains constant. Cotton acreage does, however, occupy an ever increasing proportion of the land cropped as alternative crops drop from optimum solutions as water costs increase over the projection period. Total Costs and Net Returns per Farm A summary of costs and returns for each farm size model in each district for 1967 is presented in Table 31. Gross returns to each farm 108 are shown in Column 3. Table 4 of Chapter III. Annual fixed costs in Column 4 are taken from Net returns in Column 5 are obtained from Table 29. Net return to land and management is the difference between gross returns and all costs, both fixed and variable. Net revenue figures of Column 5 are exclusive of variable production costs. Net revenue, less fixed costs of Column 4, provide the residual return to land and management shown in Column 6. The control and guaranty functions are assumed separable although in many instances, especially on the smaller size farms, they are performed by the same individual. On large farms the control function is more typically performed by hired managers responsible to the farm owners who fulfill the guaranty function. Return to the control function, or management, is calculated as five percent of gross returns (Stults, 1968:50). This is shown in Column 7 of Table 31. Net return to land and/or rights to water is presented in Column 8 of Table 31 as a residual return. Since the right to use water is associated with the control of land, and since land has no intensive agricultural value without water, residual returns may more properly be allocated to water rather than land. Agricultural Demand for Irrigation Water Figures 5 and 6 present segmented demand functions for irrigation water for each of the farm size models as of 1967. The breaking points of these discontinuous functions represent quantities and prices at which water use will change among enterprise combinations. The horizontal 109 250 240 60 50 40 30 4.- U) 0 20 lO l00- Acre Model 1800- Acre Model 900-Acre Model L 400-Acre Model 1 0 1Q00 2000 3000 Quantity Figure 5. Individual 5000 4000 in 6000 Acre - Feet Model Form Demands for Irrigation Water, SRP, 1967. 7000 8000 9000 10000 110 50 40 30 4U, 00 20 ..-_-40Q- Acre Model l0 100 - Acre Model 1-i 0 200 400 1 600 800 Quontity Figure 6. Individual 1200 1000 in Acre- Feet Model Farm Demands for Irrigation Water, RWCD , 1967. 1400 1600 1800 2000 111 portions of these functions over a range of quantities indicate an expansion of water inputs to a single enterprise. All values for water above $56.75 per acre-foot result from its use in vegetable activities. Vegetables are grown only on SRP farms in Size Groups II and III and RWCD farms in Size Group II. All values for water between $56.75 and $30.26 per acre-foot result from its use in cotton production. Sugar beet production demands water on SRP farm Size Groups II, III, and IV and RWCD farm Size Group II at water values between $30.26 and $21.90 per acre-foot. Alfalfa competes for water in all farm models at water costs between $15.42 and $9.38 per acre-foot. Barley can compete for water at water values between $14.66 and $11.18 per acre-foot. Wheat becomes a competitor for water at costs between $13.93 and $13.08 per acre-foot. Early planted grain sorghum can afford to use water at a range of water values between $11.23 and $1.36 per acrefoot. Late planted sorghum and barley-sorghum double-cropped become effective demanders for water at water costs between $7.38 and $1.36. Figures 7 and 8 show the aggregate quantity of water demanded for irrigation at water costs between zero and $247.99 per acre-foot in the SRP and RWCD, respectively. Accompanying Tables 32 and 33 show the water quantity and cost data from which the individual farm model and aggregate irrigation district water demand functions are constructed. In the SRP, at water costs of $15.42 per acre-foot and below, relatively large increases in water use occur, as shown in Figure 7. At this cost of water and below, crops requiring relatively large quantities of water per unit of net revenue produced enter the optimum solutions. At prices above $15.42 per acre-foot only vegetables, sugar 112 250 240 65 60 Aggregate Demands 50 II II II II I I I I I I I I I 4- 0 0 IL p I I I I 40 U, I 126,413 Acre-Feet of U I I I I I I 0I47 Acre- Feet of Project I I Pump Water at i1i 7. 50 per Acre- Foot I I I I I Private Pump Water a, at 644 per Acre - 30 I I I I 288,000 Acre-Feet of Avoilable Foot U, 0 i C-) I I L' I 288,000 Acre-Feet of Project l0 Water at 0 per Acre - Foot I I l Water at 200 per Acre- Foot 100,000 II I III 300,000 400,000 500,000 60D,000 Quantity in Acre - Feet Figure 7. Project Pump Water at 750 per Acre- Foot ii 216,000 Acre - Feet of Project I 200000 I II II II I 20 I' Aggregate Agricultural Demand for and Supply of Irrigation Water, All Farms, SRP, 1967 I Equilibrium L 700,000 Point 'Aggregate Supply 800,000 900,000 113 60 50 4- 0 a, 0 4 40 a, a. 4- Aggregate 0 Demand U, C-) 30 20 Equilibrium Point l0 Aggregate Supply 20,000 40,000 60,000 80,000 Quantity Figure 8 100,000 120,000 140,000 in AcreFeet Aggregate Agricultural Demand for and Supply of Irrigation Water, All Farms, RWCD, 1967. 114 Table .32. Price per Acre-Foot Demand for Irrigation Water at Various Prices by all Farms in Each Farm Size Group and by the Aggregate of all Farms, SRP, 1967. Farm Size Group I II III (Dollars) Total IV (Acre-Feet) 1.36 2.00 4.80 5.44 128,852 122,690 122,690 105,930 91,758 251,278 235,224 227,379 208,811 208,811 220,739 207,504 188,732 188,732 188,732 216,004 214,220 214,220 214,822 214,822 816,873 779,638 753,021 718,295 704,213 6.27 6.37 6.43 7.50 7.65 91,758 91,758 91,758 88,197 78,120 208,811 203,861 203,861 203,861 172,072 164,498 164,498 164,498 164,498 150,912 214,822 214,822 184,004 184,004 164,736 679,889 674,939 644,051 640,560 565,840 8.53 9.13 9.38 9.67 10.03 78,120 78,120 66,900 55,800 33,480 149,688 128,304 128,304 128,304 128,304 150,912 150,912 150,912 150,912 150,912 164,736 164,736 164,736 164,736 164,736 543,456 522,075 510,852 499,752 477,432 11.23 13.03 13.08 13.52 13.93 33,480 33,480 33,480 25,390 25,390 85,536 85,536 63,900 63,900 63,900 150,912 150,912 150,912 150,912 113,184 144,144 123,552 123,552 123,552 123,552 414,072 393,480 371,844 363,754 326,026 14.66 15.42 21.90 22.80 47.57 25,390 25,390 25,390 25,390 25,390 63,900 63,900 63,900 63,900 53,813 56,592 56,592 56,592 48,558 48,558 123,552 102,960 30,516 30,516 30,516 269,434 248,842 176,398 168,364 158,277 55.41 0 56.75 58.94 240.15 53,812 53,813 9,354 9,354 2,100 48,558 13,004 13,004 13,004 3,500 30,516 30,516 30,516 132,886 97,333 53,874 22,358 5,600 247.99 0 3,500 0 5575 0 3,500 115 Table 33. Price per Acre-Foot Demand for Irrigation Water at Various Prices by all Farms in Each Farm Size Group and by theAggregate of all Farms, RWCD, 1967. Farm Size Group I II (Dollars) Total (Acre-Feet) 1.64 2.00 4.80 40,778 40,050 38,678 37,115 89,560 79,359 79,359 75,234 130,338 119,409 118,037 112,349 6.43 8.50 10.03 11.18 33,818 33,100 32,242 29,741 75,234 71,064 68,005 68,005 109,052 104,164 100,247 97,746 11.20 13.08 22.80 30.26 29,741 18,925 14,742 14,742 39,290 39,290 39,290 30,135 69,031 58,215 54,032 44,877 47.57 55.75 63.16 113.35 12,285 30,135 30,135 5,610 1;000 42,420 30,135 5,610 1,000 0 0 116 beets and cotton return sufficient revenue to command water on any SRP farm size group. used. At this price for water, only 248,000 acre-feet are At water prices between $15.42 and zero per acre-foot, rapidly increasing quantities of water up to a total increase approximating 568,000 acre-feet of water are employed in growing alfalfa and small grain crops in the SRP. In the RWCD, as shown in Figure 8, relatively large increases in water use occur at water costs of $11.20 per acre-foot and below. At this water cost, alfalfa demands water. At water costs above $11.20 only vegetables, cotton, sugar beets, and barley command water. At costs of $11.20 and below alfalfa, sorghum, and double-cropped barley-sorghum use water. Aggregate water supply conditions based on conditions that existed in 1967 in the SRP and RWCD are also shown in Figures 7 and 8. Aggregate water supply in the SRP is a composite of quantities available at different prices. The first 288,000 acre-feet are received after a fixed assessment has been paid. The variable cost of this water is zero. A second aggregate quantity of 216,000 acre-feet can be obtained at a cost of $2.00 per acre-foot. The next most inexpensive source of water is private pump water at $6.44 per acre-foot. In 1967, 126,413 acre-feet of private pump water were used on SRP Farm Size Groups II, III, and IV. A final source of water is from project pumps. A total agricultural supply of 288,000 acre-feet of this water at $7.50 per acre-foot is available. Of the total amount available, only 10,147 acre-feet were used in the 1967 model projection. This was used exclusively on Farm Size Group I farms which have no private wells. 117 The intersection of 1967 demand and supply functions, as shown in Figure 7, predicts the use of 640,560 acre-feet of water at a marginal water cost of $7.50 per acre-foot in the SRP. The normal average cost concept does not apply in the instance since water is supplied on a marginal rather than an average cost basis. Water supply conditions in the RWCD, based on conditions of 1967, are shown in Figure 8. In this district, there is but one price for district water to all members. foot. In 1967, that price was $8.50 per acre- At that price, 104,164 acre-feet were predicted to be used as shown by the intersection of the supply and demand functions in Figure 8. All water predicted by the analytical model to be used on the model farms in 1967 was obtained from the district. Though private wells, in reality, exist on some farms in Farm Size Group II, they were not used in the model projection to supply water for reasons explained above under Cropland and Water Use. A comparison of actual water production in 1967 by the irrigation districts and water use predicted by the analytical models for 1967 in each district shows a high degree of comparability. District water pro- duction, losses, and deliveries to agricultural users are discussed below. Water use as projected by the 1967 analytical models is compared to actual district water deliveries to agricultural users in 1967. Water produced by the RWCD in 1967 totaled 126,144 acre-feet (RWCD, 1963-l968b). Of this amount, 90,215 acre-feet were pumped by the project and the remaining 35,929 acre-feet were from surface sources (see Chapter II, Roosevelt Water Conservation District). Project records show that 108,312 acre-feet were actually delivered to water users. Thus, 118 17,832 acre-feet, or 14 percent, was system loss. The model, in Table 28, predicts a 1967 RWCD water use by farmers of 104,164 acre-feet. The difference in these quantities (4,148 acre-feet) is remarkably small and can, in fact, be accounted for by crops not included in the models such as citrus and grapes, of which there are approximately 4,000 acres. (These crops are also a source of demand for water supplies from private pumps.) The SRP produced 1,108,000 acre-feet of water for irrigation use in 1967 (SRP, 1962-1967). Of this amount, 709,000 acre-feet were from surface sources and 395,000 acre-feet were pumped. The relative surface and groundwater percentages fluctuate from year to year; however, 1967 was a historically typical year (SRP, 1962-1967). SRP irrigation deliveries for agricultural uses in 1967 totaled 541,167 acre-feet on 160,000 acres (SRP, 1968a). Other project deliveries, such as subdivision irrigation, domestic contracts, and other municipal and industrial uses totaled 179,228 acre-feet. Thus, total deliveries were 720,395 acre-feet. Compared to 1,108,000 acre-feet produced, this leaves 377,605 acre-feet unaccounted for (UAF) or system loss. Smith (1968:92) estimates that approximately 15 percent (56,640 acre-feet) of this UAF water is actually delivered to farm water users. Adding 56,640 acre-feet to the 541,167 acre-feet reported as delivered to farms gives an estimate of total water use as being 597,807 acre-feet on 160,000 project acres. Total water use in the SRP predicted for 1967 by the analytical model used herein was 640,575 acre-feet on 144,000, as shown in Table 28. Private pumps provided 126,368 acre-feet of this total amount. The project 119 supplied the remainder, or 514,207 acre-feet. Water in the amount of 597,807 acre-feet was estimated to have been actually delivered by the SRP to 160,000 acres in 1967; the analysis reported herein predicted that project supplied water in the amount of 514,207 acre-feet would be delivered in that year to 144,000 acres. The difference between the actual and predicted figures is 83,600 acre-feet of project water available for use on 16,000 acres not included in the representative model farms. These acres were used for nonmodel crops in 1967, such as sugar beet seed, fruits and nuts, garden crops, and pasture. Average water use per acre on these 16,000 cropped acres was approximately five acre-feet per acre; thus, accounting for essentially all the discrepancy between the actual and predicted water deliveries in the SRP. Water Parameter Variations This section explores sources of additional water supplies, the uses that would be made of additional supplies at various prices, and the net revenue these additional water supplies would generate if available for use in agriculture. Demand for water supplies additional to those now available, or foreseen as available at selected future times, are projected. This projected demand is for a supplemental or replacement supply of water since additional supplies would be used only if available at prices below those paid in 1967 or projected as being paid in selected future years. Additional Water Sources Presently there are a number of additional sources of water being developed. area. These are from sources within, as well as outside, the study 120 Surface water delivered to central Arizona via the Central Arizona Project is expected to provide approximately 1,450,000 acre-feet of water by 1975 (United States Congress, Senate 1967:29). Quantities available to the SRP and RWCD have not as yet been determined. A second possible source of additional surface water supplies is management of the watersheds of the Salt and Verde Rivers for increased runoff. Additional quantities of water from this source are known only on an experimental basis; however, work is currently progressing on treatment practices (Arizona Water Resources Committee, 1957-1968). A third source of additional surface water is stream bank and floodplain phreatophyte control. Estimates of water loss due to evapo- transpiration in the Salt River basin are approximately 55,000 acre-feet annually. The amount of water potentially available to water users asa result of phreatophyte control is not known. Water reclamation offers another source of increased supply. Nonconsumptive uses of water by the metropolitan area within the SRP produce large quantities of reclaimable water. The ownership of this water is not clear; however, regardless of its ownership status, its availability will have an influence on irrigation water availability and costs over time. This will occur either through its direct use by agriculture, by groundwater recharge, or indirectly by influencing the water demands of the urban-industrial sector relative to those of the agricultural sector. Changes in water use technology within the agricultural sector provides a further means whereby more water may effectively become available. Agricultural technicians are currently employed by the SRP 121 to act as advisors to water users (Smith, 1968:88) by providing information relative to optimum water need. Increased efficiency is constantly being attained in water delivery systems in both the SRP (Smith, 1968:123) and RWCD. A decrease in water system loss means an increase in availability. A continual canal, lateral and ditch-lining program is being carried on by both the SRP and RWCD and by agricultural water users. Substantial increases in water availability are attainable as delivery efficiencies are improved from the present approximately 70 percent in the SRP and 85 percent in the RWCD. Values and Quantities of Additional Water Water supplies in additionto those available in 1967 will be of value to agriculture in the SRP and RWCD only if they are available at costs such that they can be employed in growing crops of a relatively low value per acre-foot of water used and are cheaper than presently available supplies. Figure 5 shows that for additional water supplies to have been of value to agriculture in 1967 in the SRP they must have been available at prices below $7.50 per acre-foot on Farm Size Group I and below $6.44 per acre-foot on Farm Size Groups II, III and IV. A schedule of quantities of replacement and additional water projected by this analysis to be used at various marginal water prices at selected future years in the SRP is presented in Table 34. At constant marginal water prices, the quantity used will change over time because of the declining availability of land. As the cost of the marginal or highest priced water in the SRP is decreased from $7.50 per acre-foot, the present and projected cost of marginal water available from present sources, to a hypothetical $2.00 per acre-foot, which is the present cost of the 122 Table 34. Estimated Time-Related Demand fo Agriculture in the SRP and RWCD. Replacement Water for Selected Years 1967 1990 2020 Price Range (Dollars! Acre-Foot) District 15.14-Above RWCD 0 15.13-13.08 RWCD 54,032 54,032 13.07-11.51 RWCD 0 54,032 54,032 11.50-11.20 RWCD 58,251 58,251 58,251 58,251 11.19-18.18 RWCD 69,031 69,031 69,031 69,031 11.17-10.03 RWCD 97,746 97,746 97,746 97,746 10.03- 8.50 RWCD District Total District Total District Total (Acre-Feet) 0 SRP 100,247 100,247 0 0 100,247 8.49- 7.50 RWCD SRP 104,164 104,164 104,164 0 62,000 10,070 104,164 7.49- 6.44 RWCD 109,052 109,052 109,052 SRP 140,121 108,575 51,487 217,627 109,052 109,052 109,052 SRP 171,009 108,575 51,487 217,627 109,052 109,052 109,052 SRP 175,959 113,525 56,437 222,577 165,489 RWCD 109,052 109,052 109,052 SRP 200,193 130,525 64,714 239,577 309,245 5.43- 4.80 160,539 RWCD 285,011 6.26- 5.44 160,539 RWCD 280,061 6.36- 6.27 114,234 166,164 249,173 6.43- 6.37 100,247 173,766 RWCD 112,349 112,349 112,349 SRP 214,365 137,029 64,714 326,714 249,378 177,063 123 Table 34. (Continued). 1967 Price Range (Dollars! Acre-Foot) 4.79- 2.00 District District Total Selected Years 1990 District Total 2020 District Total (Acre-Feet) RWCD 118,037 118,037 118,037 SRP 249,215 165,895 83,744 367,248 283,932 201,781 Salt River Project quantities are in addition to three and a. one-half acre-feet per acre of project supplied assessment, normal flow and stored and developed water (see Chapter II, Salt River Project). Roosevelt Water Conservation District quantities are total quantities that would be used at each price. Although approximately 34,000 acre-feet of water are received by the RWCD from the SRP (see Chapter II, Roosevelt Water Conservation District) at a low variable cost, it is not known how this will affect future water prices to the farmer. It can be said, however, that the above estimated additional water quantities are on the high side since as the cost of pumping water increases, less will be used, thereby, causing the 34,000 acre-feet received from the SRP to become a larger percentage of the total water used. 124 next most inexpensive water, the quantity used will increase by 249,215 acre-feet under 1967 conditions, by 165,895 acre-feet in 1990, and by 83,744 acre-feet in 2020, in each case over the quantity of water that would then be used from presently available sources in the absence of additional and cheaper supplies. Net revenue produced in the SRP from the use of additional and cheaper water at selected prices over the projection period is presented in Table 35. Under 1967 conditions in the SRP, a decrease in the cost of marginally priced water from $7.50 to $2.00 per acre-foot would cause net revenue in agriculture to increase by slightly less than one million dollars ($16,537 million minus $15,592 million). The increase in agri- cultural net revenue resulting from lower prices marginal water would decline over time, as would the use of marginal water, as shown in Table 34, due to the decrease in available cropland in the SRP. The increases in net revenues and marginal water uses within years at various lower marginal prices shown in the table reflects an increased use of water to produce crops of low economic productivity and an increase in net revenue due to a saving in water costs on crops that would be grown using the higher priced water, as well as additional net returns obtained from crops grown with the lower priced marginal water that would not be grown at the higher water prices. Assuming a continuing policy by the SRP to subsidize the cost of project produced pump water (see Chapter IV, Water Supply Functions) to its member water users at present levels, no additional or replacement water would be used by them at costs over $7.50 per acre-foot. The SRP, 125 Table 35. Year Projected Net Revenue at Selected Marginal Water Prices, SRP and RWCD. Irrigation Selected Marginal Water Prices District 8.50 7.50 4.80 2.00 (Net Revenue in Thousand Dollars) 1967 SRP RWCD 2,446 15,592 15,907 16,537 2,550 2,885 3,164 1970 SRP 15,228 15,645 16,243 1975 SRP 14,628 15,025 15,537 1980 SRP 14,025 14,387 14,890 1985 SRP 13,454 13,788 14,241 1990 SRP 12,706 13,007 13,420 1995 SRP 11,706 11,987 12,359 2000 SRP 10,858 11,096 11,432 2005 SRP 10,059 10,267 10,564 2010 SRP 9,362 9,542 9,806 2015 SRP 8,608 8,767 9,000 2020 SRP 7,948 8,087 8,294 126 operating as a users' cooperative, might find it preferable for a variety of reasons to subsidize additional and replacement water to users at constant prices from some surface source rather than continuing to subsidize the pumping costs of water obtained from the groundwater reservoir at ever increasing costs. An analysis of water source alternatives and their costs to the SRP as a cooperative would be necessary to ascertain the relative desirability to it of obtaining or developing alternative water sources at specific costs. The analysis reported herein reveals only the quantities of water agricultural users would find it profitable to acquire at a range of marginal prices below, but not above the present SRP price of $7.50 per acre-foot for project produced pump water. This analysis has nothing to say as to the quantities of water from other sources the SRP as a users' cooperative might find desirable to buy and subsidize to its members in replacement of the pumped water supplies it now produces. In the RWCD, water is supplied to agriculture at a constant average and marginal cost, as illustrated by the supply function in Figure 8. As shown, 104,164 acre-feet of water was demanded by agricul- tural users under 1967 conditions at an average price of $8.50 per acrefoot. Any increase or decrease in this average price will affect quantity used to the degree indicated in Figure 3 and Table 33. For selected water prices between $15.13 (which is the projected cost to the district of pumping water in 2020) and $2.00 per acre-foot, quantities of any available replacement supply that would be used in two selected future years (1900 and 2020) are presented in Table 34. Since land availability over time is assumed to remain constant at the 1967 level in the RWCD, water 127 use over time will remain Constant at any constant water price, as shown in Table 34. Net revenue produced in the RWCD at selected water prices under the conditions of 1967 is presented in Table 35. A change in the price of water from $8.50 to $2.00 per acre-foot would increase use by approximately 14,000 acre-feet, as shown in Table 34 (118,037) acre-feet minus 104,164 acre-feet). The use of this additional water, together with the saving in cost made possible on the 104,164 acre-feet formerly produced by the district and sold to its members at $8.50 per acre-foot, would cause agricultural net revenue to increase by $718,000, as shown in Table 35 ($3.l64 million minus $2.446 million). Since land availability over time is constant, net revenue over time at any single price is also variant. The RWCD, operating as a users' cooperative, obtains approximately two-thirds of its water supplies through its own pumps from underground sources. Over time, these supplies will become increasingly more expen- sive, as shown in Table 17. At any point in time, the project would be willing to buy water from any other source at any delivery price equal to or below its cost at that time of pumping groundwater, thereby, steuauing, or at least slowing down, the rate of increase in the cost of water to its members. It is assumed in this analysis that the cost to the district of pumping water in any given future year is the !lbreakevenU price below which the district would purchase all its water from the alternative source offering the lower price. In summary, additional and replacement supplies of water in the SRP would be of value to agricultural users only if the prices paid for 128 them were less than that now being paid for water from the most expensive source (project pumped at $7.50 and private pumped at $6.44 per acrefoot). The value of this water to farmers in future years at prices below those paid in 1967 for the replaceable marginal quantities are those presented in Table 35. It is assumed that the SRP will not acquire water at any price to replace the annual surface supply available to it because, having no use for such a displaced supply, its marginal value to the district is zero. In the RWCD, the project and the water user are in the same position relative to additional water supplies and their costs. Their position is identical to that of the SRP since increasing water costs will be experienced by both the RWCD as a cooperative and the individual water user. CHAPTER VI SUNMARY AND EVALUATION A linear programming analysis of the present structure of agriculture in the SRP and RWCD of central Arizona shows a considerable dependence upon Cotton, sugar beets and vegetables for the production of net revenue. These crops produce large amounts of net revenue per acre and per acre-foot of water. Acreage declines in cotton will occur in response to declining land availability and to the need for a rotational balance rather than due to its economic inability to command scarce resources other than cropland. Sugar beet and vegetable acreages remain nonvariant over the projection period. At the present time, alfalfa and small grain crops are netting relatively small returns per acre and per acre-foot of water used. As such, they are marginal users of the scarce resources and declines in the acreages of these crops can be expected as the land base decreases and/or the cost of irrigation water increases over the projection period. Projected adjustments in enterprise combination in the two irrigation districts and in the study area have been presented. The use of land and water and the projected net revenue stemming from their use over the 53_year projection period show for both the SRP and RWCD a decrease in water use per cropped acre and an increasing net revenue per acre-foot of water used (Table 36), though the latter increase is considerably more marked in the SRP than in the RWCD. 129 Net revenue per 130 Table 36. Year Projected Net Revenue per Acre, WaterUse per Acre, and Net Revenue per Acre-Foot of Water Used, SRP and RWCD. Net Revenue Water Use per Net Revenue per per Acre Cropland Acre Acre-Foot of Water SRP RWCD SRP RWCD SRP RWCD - (Dollars) - - (Acre-Feet) - (Dollars) - 1967 108.28 90.59 4.5 3.9 24.29 23.48 1970 111.16 88.30 4.5 3.9 24.94 22.89 1975 120.27 85.00 4.5 3.6 26.92 23.36 1980 129.86 83.81 4.4 3.6 29.42 23.03 1985 140.30 81.70 4.3 3.6 32.31 22.45 1990 149.23 79.96 4.2 2.3 35.18 34.33 1995 154.86 78.56 4.1 2.3 37.44 33.73 2000 161.80 77.11 4.0 2.3 39.96 33.11 2005 168.80 75.81 3.9 2.1 42.74 35.67 2010 176.95 74.59 3.8 2.1 46.11 35.10 2015 179.43 73.37 3.8 2.1 48.26 34.52 2020 190.57 71.85 3.8 2.1 50.75 33.81 131 acre of land cropped will also increase over time in the SRP, although it will decrease in the RWCD, as shown in Table 36. The decline in aggregate net revenue in the SRP over the projection period stems primarily from a decline in the availability of agricultural land. This decrease is a result of the encroachment of the urban-industrial sector onto land currently being used by agriculture. Declines in net returns to agriculture in the RWCD over the projection period are the result solely of increasing irrigation water costs. An analysis of water use by farmers over time at various hypoth- esized water prices below those currently paid indicates relatively minor effects upon net revenue and aggregate water quantity used, but a sizable shift in the source of supply of water used. The effects of lower water costs to agricultural users in the SRP are of much less significance than to the RWCD users because the present average cost of water in the SRP is relatively low compared to its average cost in the RWCD, which is approximately four times that in the SRP, and because of the growing ability of the SRP to subsidize pumped water costs to its members through net electrical power revenues. This insulates them from the increasing cost of pumping over time an increase which will affect RWCD users. The projections advanced herein in enterprise combinations, water use and net revenue over the 53-year projection period are premised on a continuation of many present conditions. Primary among these assumptions are an unchanging production technology, a constant cost-price structure or one in which relative prices remain constant, a continuation of present cropping patterns, continued growth in the urban-industrial sector at the expense of the agricultural sector, an unchanging water quality, and a 132 maintenance of current institutions such as water supply organizations and governmental administration of acreage and price controls on certain crops. A deviation in any of these assumed constants will affect the rate or magnitude of the projections; however, the direction of change could be affected only by relatively large changes in the factors assumed to be nonvariant. These would have to be of such magnitude as a drastic reorganization of water supply organizations, changes in cropping patterns equivalent to a discontinuation of cotton production, or a markedly increased specialization in vegetable production. Changes of these magnitudes do not appear justifiably predictable at this time. They do, however, suggest areas for future research into the degree to which agriculture in the area is dependent on presently available technological and institutional conditions. LIST OF REFERENCES ARIZONA INTERSTATE STREAM COMMISSION Arizona, Phoenix, Arizona. ARIZONA WATER RESOURCES COMMITTEE Water Resources, State of 1967 1957-1968 Proceedings 1-12, State of Arizona. Arizona Watershed Symposium BAIN, JOE S., RICHARD E. CAVES and JULIUS MARGOLIS 1966 Northern California's Water Industry, Resources for the Future, Inc., The Johns Hopkins Press, Baltimore. 1964 "Variable Resource Programming for Appraising Farm Adjustment Opportunities," Agricultural Economics Research, Vol. XVI, No. 1. BOLTON, BILL CITY OF PHOENIX AND MARICOPA COUNTY l959a Population Growth of the l959b Land Use of the Phoenix Phoenix Urban Area, Phoenix, Arizona. CITY OF PHOENIX AND MARICOPA COUNTY Urban Area, Phoenix, Arizona. COOPERATIVE EXTENSION SERVICE AND AGRICULTURAL EXPERIMENT STATION 1967 Arizona Agriculture, 1967, The University of Arizona, Bulletin A50, Tucson, Arizona. 1968 Annual Report on Groundwater in Arizona Spring 1966 to Spring 1967, Arizona State Land Department, Water Resources Report No. 36, Phoenix. COX, C. J. DORFMAN, ROBERT, PAUL A. SAMUELSON and ROBERT M. SOLOW 1958 Prograiiuuing and Economic Analysis, McGraw-Hill, New York. Linear 1954 A Suiiuiiary of Groundwater Legislation in Arizona, Arizona State Land Department, Bulletin No. 301, Phoenix. ERNST, ROBERT n.d. "Couiuiercial Vegetable Production Guide for Maricopa County," Agricultural Extension Service, College of Agriculture, The University of Arizona, Tucson. FOERNAN, BOYCE R. 1968 "Legal and Administrative Controls on the Transfer of Water in Arizona," Unpublished Master's Thesis, The University of GOSS, JAMES W. Arizona. HEADY, EARL 0. and WILFRED CANDLER 1958 Linear Programming Methods, Iowa State University Press, Ames, Iowa. 133 134 HEDGES, TRIMBLE R. and CHARLES V. MOORE 1962-1965 Economics of On-Farm Irrigation Water Availability and Cost, and Related Farm Adjustments, 1-4, Giannini Foundation Research Reports No. 257, 261, 263 and 286, California Agricultural Experiment Station. n.d. HOCK, KENNETH J. "Agricultural Adjustments to a Falling Groundwater Table in Central Arizona," Dissertation in Progress, The University of Arizona, Tucson. HURLEY VS. ABBOTT, et al. March 1, 1910 No. 4564 Decree. In Federal District Court of 3rd Judicial District, Territory of Arizona in and for the County of Maricopa. JONES, DOUGLAS M. 1968 "Economic Aspects of Agricultural Use of Colorado River Water in Yuma County, Arizona," Unpublished Dissertation, The University of Arizona, Tucson. "An Analysis of Pump Water Costs in Central LANOREAUX, ROBERT D. 1966 Arizona," Unpublished Master's Thesis, The University of Arizona, Tucson. "Agricultural Value of Additional Surface Water MACK, LAWRENCE E. 1965 in the Salt River Valley of Arizona," Unpublished Master's Thesis, The University of Arizona, Tucson. MACK, LAWRENCE E. 1968 Supplemental Report Entitled "Supplementary Material in Support of Dissertation Entitled 'Economic Implications of a Dynamic Land and Water Base for Agriculture in Central Arizona'," File Report 68-2, Department of Agricultural Economics, The University of Arizona, Tucson. 1963 The Politics of Water in Arizona, The University of MANN, DEAN E. Arizona Press, Tucson. 1962 "Economics of Water Dertand in Couuuercialized MOORE, CHARLES V. Agriculture," Journal American Water Works Association, Vol. 54, No. 8. MOORE, CHARLES V. and TRIMBLE R. HEDGES 1963 "A Method for Estimating the Demand for Irrigation Water," Agricultural Economics Research, Vol. XV, No. 4. Costs and Returns for Major Field Crops in 1965 NELSON, AARON G. Central Arizona, Technical Bulletin 174, Agricultural Experiment Station, The University of Arizona, Tucson. NELSON, AARON G. and CHARLES D. BUSCH 1967 Cost of Pumping Irrigation Water in Central Arizona, Technical Bulletin 182, Agricultural Experiment Station, The University of Arizona, Tucson. 135 PAWSON, WALTER W. and AARON G. NELSON 1966 Economics of Skip-Row Cotton Production, Report 231, Agricultural Experiment Station, The University of Arizona, Tucson. ROOSEVELT WATER CONSERVATION DISTRICT Higley, Arizona. l963-1968a "Crop Report Summary," ROOSEVELT WATER CONSERVATION DISTRICT Records," Higley, Arizona. 1963-l968b "Water Production SALT RIVER PROJECT 1962-1967 Annual Reports, Phoenix, Arizona. SALT RIVER PROJECT 1962-1968 "Crop Reports," Phoenix, Arizona. SALT RIVER PROJECT 1964 SALT RIVER PROJECT 1968a Phoenix, Arizona. Major Facts in Brief, Phoenix, Arizona. "Irrigation Department Statistical Report," SALT RIVER PROJECT 1968b Planning and Project Development Division, Unpublished Data, Phoenix, Arizona. SALT RIVER VALLEY WATER USERS' ASSOCIATION Irrigation Department. 1962 "Statistical Report," Its "The Salt River Project of Arizona: SMITH, COURTLAND L. 1968 Unpublished Organization and Integration with the Community," Dissertation, The University of Arizona, Tucson. 1968 "Predicting Farmer Response to a Falling Water STULTS, HAROLD M. An Arizona Case Study," Unpublished Dissertation, The Table: University of Arizona, Tucson. 1965 Present and Future Water Use and Its Effects THIELE, HEINRICH J. on Planning in Maricopa County, Arizona, Maricopa County Department of Planning and Zoning, Phoenix. TIJORIWALA, ANILKIJMAR G., WILLIAM E. MARTIN and LEONARD C. BOWER 1968 The Structure of the Arizona Economy: Output Interrelationships and Their Effects on Water and Labor Requirements, Part I, The InputOutput Model and Its Interpretation, Arizona Agricultural Experiment Supplement," Station Technical Bulletin 180; and"Part II, Statistical Agricultural Economics File Report 68-1, The University Department of of Arizona, Tucson. United States Census of AgriculUNITED STATES BUREAU OF THE CENSUS 1961 United States Government Printing 1, Part 43, Arizona, ture 1959, Vol. Office, Washington, D. C. 136 UNITED STATES CONGRESS, SENATE May 2-5, 1967 Central Arizona Project, Hearings Before the Subcommittee on Water and Power of the Committee on Interior and Insular Affairs, United States Senate, Nineteenth Congress, First Session on S.1004, S.1013, S.861, 5.1242 and S.1409. Bills to Authorize the Construction, Operation and Maintenance of the Central Arizona Project and Colorado River Project, and for Other Purposes. UNITED STATES DEPARTMENT OF AGRICULTURE 1967 The 1967 Upland Cotton Program, Agriculture Stabilization and Conservation Service, Publication No. PA-789. 1965 "Data Book on Power UNITED STATES DEPARTMENT OF THE INTERIOR Districts, Irrigation Districts and Cooperatives," Bureau of Reclamation, Boulder City, Nevada. 1959 Economic Analysis and Projection WESTERN BUSINESS CONSULTANTS, INC. for Phoenix and Maricopa County, Phoenix, Arizona 1965 The Economy of Maricopa WESTERN MANAGEMENT CONSULTANTS, INC. County, 1965 to 1980, Phoenix, Arizona. WHITE, NATALIE D., R. S. STULEK and CLARA L. RAUH 1964 Effects of Groundwater Withdrawal in Part of Central Arizona Projected to 1969, Arizona State Land Department, Water Resources Report No. 16, Phoenix, Arizona. WYATT, RICK 1968 "SRP Land Use Projection," Planning and Project Development Division, Salt River Project. Data for YOUNG, ROBERT A., WILLIAM E. MARTIN and DALE L. SHAW 1968 University of College of Agriculture, The Arizona Crop Farm Planning, Arizona, Tucson.
* Your assessment is very important for improving the work of artificial intelligence, which forms the content of this project