EFFECT OF VARIABLE WATER SUPPLY AND QUALITY ON DESIRABLE CROP PRODUCTION PATTERNS

J. A. Groenewald and J. van Zyl

Agrekon, 1986, vol. 25, issue 3

Abstract: Availability of resources, including water, is a major consideration in the choice of irrigated crops. This problem is compounded by variations in water supplies. For maximum profit, the marginal revenue to water applications must at the last usable unit be the same for all crops or uses. With abundant water, profit is maximized with expansion of high water requirement crops relative to water-economising crops. Empirical evidence shows that profit maximization is achieved if returns to the scarcest, most limiting resources available are at a maximum. Thus, in certain situations, land or water resources may have to be left idle to maximize profit. Imperfect knowledge arising from unpredictable variability leads to risk in agricultural production. Rational decision-making under risk is choice consistent with the decision maker's beliefs about the uncertainty he faces and with his preferences for possible consequences. With uncertain water supplies, the manager could adopt more conservative estimates. An optimal risky decision is one that maximizes the decision-maker's subjective expected utility. This can be determined by using stochastic efficiency analysis, mean variance analysis or simulation.

Keywords: Crop Production/Industries; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:ags:agreko:267129

DOI: 10.22004/ag.econ.267129

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