Do crop price expectations matter? An analysis of groundwater pumping decisions in Western Kansas

Kunlapath Sukcharoen, Bill Golden, Mallory Vestal and Bridget Guerrero

Agricultural Water Management, 2020, vol. 231, issue C

Abstract: The Ogallala Aquifer is the main water resource for irrigated agricultural production in much of Western Kansas. It is hypothesized that as crop price expectations increase, producers will apply more water to increase yields in order to maximize profit. Using field-level panel data on groundwater pumped for irrigation in Western Kansas, this paper examines whether irrigated producers’ groundwater pumping decisions are consistent with the profit maximization framework by empirically testing if crop price expectations have a positive impact on the quantity of groundwater pumped. In general, the empirical results indicate that crop price expectations have no statistically significant impact on the quantity of groundwater pumped per acre. This suggests that groundwater pumping decisions are not consistent with the profit maximization framework and that irrigated producers consider groundwater as a fixed input possibly due to limited availability of groundwater in the area. Our econometric analysis also suggests that only a small portion of rainfall is effective.

Keywords: Agriculture; Ogallala aquifer; Price expectations; Pumping decisions; Irrigation; Profit maximization (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:agiwat:v:231:y:2020:i:c:s0378377419316294

DOI: 10.1016/j.agwat.2020.106021

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