| Abstract: | The Texas High Plains has evolved into a highly productive agricultural region based largely on the development of irrigation from the Ogallala Aquifer. Due to limited recharge, continued mining of the aquifer can be expected to increase pumping cost and erode irrigated crop production profitability. The impact over time of a transition from irrigated to dryland production is the focus of this analysis. Economic impacts of the transition, as well as groundwater and soil depletion are assessed under alternative adjustment strategies. A multi-year/multi-crop growth model known as EPIC was used to estimate crop yield and wind erosion under 10 random 48 year weather patterns for various cropping systems. Variable costs of production and stochastic crop yield and price were used to generate net return distributions by system. This data was utilized in a whole farm multiple period recursive quadratic programming model (MPRQP) to assess the transition under different farm program and risk preference assumptions for two areas of the High Plains. The results of the whole farm analysis indicate that irrigation reduces yield and net return risk across all cropping systems. As groundwater levels decline, projected farm income and equity decline. The rate of decline is dependent on resource availability, risk preference, and farm program participation. Both areas rely heavily on farm program benefits to enhance income and reduce net return variability. Continuation of farm program benefits could reduce the shock in farm income as acreage reverts to dryland production. However, farm program participation and base acreage restrictions in this region encourage monoculture cotton production which accelerates groundwater depletion and wind erosion relative to nonparticipation. The imposition of a soil loss limit dramatically reduces farm income under farm program participation. If a flexible base provision were allowed, substantial reductions in wind erosion could occur with minimal impact on net returns. As acreage reverts to dryland crop production, the productive value of land declines. Many producers will find it difficult to expand dryland acres to maintain pretransition income levels. |
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