A Dynamic Risk Optimization Model for Evaluating Profitable and Feasible Water Management Plans

Bennie Grove, L.K. Oosthuizen and G.R. Backeberg

No 25554, 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia from International Association of Agricultural Economists

Abstract: Currently the South African government is advocating the cultivation of high valued crops and more efficient use of available water resources through the adoption o f more efficient irrigation technology and irrigation scheduling. A requirement of the National Water Act (Act 36 of 1998) is the compilation of water management plans. The main objective of this paper is to develop a multiperiod mathematical risk programming model able of assisting water user associations with the compilation of water management plans that are both profitable and feasible. Special care was taken to represent canal capacities and irrigation system application rates in the model. Risk simulation procedures are used to generate an appropriately correlated inter- and intra-temporal risk matrix for the programming model. A combination of subjectively elicited distributions of crop yield and objective data on crop prices were used to characterize risk. The model was applied to a representative flood irrigation farm in the Vaalharts irrigation scheme South Africa to demonstrate the capability of the model to optimize water use over a 15 year planning horizon. Model results clearly indicated the potential of high value crops and more efficient irrigation technology to soften the impact of water shortages. Furthermore infrastructure, the financial position of the farmer and the level of risk averseness have significantly impacted on the results. Policy makers and government authorities should take cognizance of these factors when evaluating water use efficiency and water management plans of different water user associations. Improvements in the adopted modeling procedure are also made.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 16
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae06:25554

DOI: 10.22004/ag.econ.25554

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