Research Articles (Agricultural Economics)

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Crop water productivity, applied water productivity and economic decision making
(MDPI, 2022) Letseku, Violet; Grove, Bennie
Increasing productive water use in agriculture is seen as paramount to meet future food demand with limited water supplies. The main objective of this paper is to gain a better understanding of the interrelated linkages between crop water productivity (CWP) and applied water productivity (AWP) as affected by irrigation management decisions in order to assess the impact of economic decision making on CWP and AWP under area-limiting and water-limiting conditions. A daily soil water balance mathematical programming model that explicitly models the impact of technology choice and stochastic weather on water use efficiency was used to study the interactions. The assumption is made that a rational decision maker will allocate water to maximize expected profits. The results showed that CWP is, to a large extent, unresponsive to increasing irrigation water applications, especially when water applications are approaching maximum potential crop yields. The difference between optimal crop yields for the area-limiting and water-limiting scenarios is small, which shows that the portion of water production function that is relevant for economic decision making is small and falls within the unresponsive range of CWP changes. Profit maximizing decision makers will not try to maximize CWP or AWP since these objectives will result in profit losses.