On-Farm Water Storage as a Tool to Reduce Risk

Transcription

1 On-Farm Water Storage as a Tool to Reduce Risk Domena Agyeman Graduate Student, Mississippi State University Brian Williams Assistant Professor, Mississippi State University Mary Love Tagert Assistant Professor, Mississippi State University Bryon Parman Assistant Professor, Mississippi State University Mississippi Water Resource Conference

2 250 Introduction On-Farm Water Storage (OFWS) is a best management practice which involves capturing runoff on-site and making it available for irrigation Design of OFWS Advantages Reduce stress on ground water (e.g Ouyang et al. 2016) Prevent nutrient loads into water bodies (e.g,tagert et al.2015:paz et al. 2012) 2

3 Introduction cont d With 1.7 million acres of irrigated land, Mississippi ranked 9 th in top irrigation states (USDA-NASS, 2012) Only 30% of annual rainfall occur during growing periods in Mississippi (Kebede et al. 2014) Poor access to irrigation water in East Mississippi Southeastern Coastal Plain Aquifer System Over 1000 feet of well depth High cost of drilling Motivation Uncertain rainfall pattern High cost of drilling Nutrient and Sediment loads to water bodies ( NRCS, 2010) 3

4 Previous studies Falconer, Lewis, and Krutz (2015): Economic feasibility of Tailwater Recovery (TWR) systems in MS Delta Loss of production land High investment cost 4

5 FOCUS Determine net present values (NPV) of OFWS over the investment period Perform sensitivity analysis on different pond sizes and irrigated acres Risk assessment 5

6 Site Field size is about 408 acres with about 339 irrigated acre Pond size: 17 acres, 25 feet deep Crop prices and yields USDA Weather PRISM Budgets From MSU Planning Budgets, 2016 Study site and Data Noxubee A map showing Mississippi counties and the study area 6

7 Approach 1. log ( y ) PP T T tc 2 2 nt 1 nt 2 nt 3 nt 4 nt 5 n nt P T c nt nt nt monthly mean precipitation, county n monthly mean temperature, county n county fixed effects t time nt stochastic error term Richardson, (2006): 2. p Mean price 1 Emp s, f x,cusd jt j d where: j crop s d = sorted deviates f( x) commulative probability of sorted deviates cusd correlated uniform standard matrix 7

8 3. E( ) E R F ti ti ti Approach cont d ( ) ( ) ER ( ) E0.5 ( p y ) z ( p y ) z ti A ct w cti cti st w sti sti i EF ( ) E0.5 ( ) ( ) A ti cti cti sti sti i 4. ENPV ( ) inv t1 ECF ( ) 1 inv initial investment cost ECF ( ) expected annual cash flows it L useful life span discount rate L it t E( ) expected annual returns ti ER ( ) expected annual revenue ti EF ( ) expected annual cost ti t time = dummy variable premium payment z indemnity i = either irrigation or rain-fed A land size i 8

9 Stochastic Efficiency with Respect to a Function (SERF) CE U ( NPV, RAC) F( N) is prefered to G( N) if CE CE F( N) is indifferent to G( N) if CE CE Fk Fk Gk Gk Where, RAC Risk Aversion Coefficient F( N) and G( N) are cummulative NPV distributions CE and CE are Certainty Equivalence at RAC Fk Gk k Hardaker et al. (2004) 9

10 Simulated Net Present Value for Rain-fed and Irrigation productions for a 408 acre farm in Noxubee county No Insurance 7% 8% 9% 10% Irrigation Rain-fed Irrigation Rain-fed Irrigation Rain-fed Irrigation Rain-fed Mean($/acre) SD($/acre) Min($/acre) (533) (557) (777) (366) (685) (540) (794) (502) Max($/acre) 2,113 1,844 1,698 1,576 1,407 1,489 1,342 1,417 70% CL 75% CL 80% CL 85% CL Mean($/acre) SD($/acre) Min($/acre) (226) (268) (381) (272) (531) (90) (613) (204) Max($/acre) 2,116 1,883 1,997 1,854 1,789 1,546 1,433 1,478 Mean($/acre) SD($/acre) Min($/acre) (496) (186) (469) (59) (425) (155) (511) (141) Max($/acre) 1,913 1,894 1,668 1,644 1,720 1,864 1,483 1,474 Mean($/acre) SD($/acre) Min($/acre) (429) (101) (800) (177) (514) (162) (692) (77) Max($/acre) 2,083 1,861 1,931 1,572 1,576 1,745 1,366 1,557 Mean($/acre) SD($/acre) Min($/acre) (524) (289) (418) (214) (501) (253) (619) (228) Max($/acre) 1,830 1, ,328 1,483 1,408 1,675 10

11 Certainty Equivalent SERF Analysis with Relative Risk Aversion Coefficients RRAC i ni i 70% i 75% i 80% i 85% Certainty Equivalent SERF Analysis with Relative Risk Aversion Coefficients RRAC i ni i 70% i 75% i 80% i 85% Irrigation production at 7% Irrigation production at 10% Anderson and Dijon, (1992): RRAC,

12 SERF Analysis with Relative Risk Aversion Coefficients 800 SERF Analysis with Relative Risk Aversion Coefficients Certainty Equivalent RRAC Certainty Equivalent i-ni r-ni i-70% r-70% i-75% r-75% i-80% r-80% i-85% r-85% 600 RRAC i-ni r-ni i-70% r-70% i-75% r-75% i-80% r-80% i-85% r-85% SERF chat for both irrigation and rain-fed at 7% SERF chat for both irrigation and rain-fed at 10% 12

13 Conclusion Including government incentives will make irrigation more attractive Society may also benefit from protection of water quality (not accounted for in this study) 13

14 Thank You Suggestions and Comments Name: Domena Agyeman Phone: