Irrigation Adoption, Groundwater Demand and Policy in the U.S. Corn Belt, 2040-2070

Molly Van Dop, Benjamin Gramig and Juan Sesmero (jsesmero@purdue.edu)

No 235661, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: Climate change across the U.S. Corn Belt will significantly increase precipitation variability and temperatures by midcentury. Corn and soybean producers will seek to find strategies that may help to mitigate the potentially negative effects on yield. The adoption of irrigation technology has increased over the last several decades to improve yields in areas with insufficient rainfall, and is currently being adopted by producers who are choosing to minimize risk due to weather variability. To see if this trend in irrigation adoption has the potential to expand in the wake of climate change, this study uses weather data, crop yields, and water use from four General Circulation Models (GCMs) under Representative Concentration Pathway (RCP) 8.5 and crop models to evaluate the profitability of the irrigation investment. The data drives Net Present Value and internal rate of return calculations of investment in irrigation equipment for the present (1980-2005) and midcentury (2040-2070). The Net Present Value of irrigation investment for midcentury producers is largely driven by the yield response to irrigation by soybeans under future climate conditions. While the irrigation of corn is profitable in some locations, namely the western Corn Belt, the locations where irrigating corn in the future is largely the same as in the contemporary period. Under future weather conditions, the area where irrigating soybeans becomes profitable is greatly expanded, likely due to CO2 fertilization effects and higher temperatures in the northern Corn Belt. Projected irrigation water demand increases across the entire Corn Belt, both from a relative increase in applications from current irrigators, and an increase in the total number of irrigators across the central and eastern Corn Belt. The increase in profitability for irrigation, and the potential increases in water demanded has important policy implications for the future, in order to mitigate the potential impacts of climate change while ensuring water supplies are available and safe for the future.

Keywords: Agricultural and Food Policy; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 28
Date: 2016
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235661

DOI: 10.22004/ag.econ.235661

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