Short run irrigation water demand : an empirical evaluation of the role of price, crop and technology choice

Master Thesis


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University of Cape Town

Considerable interest has arisen regarding irrigation water use in, especially, arid areas where competition for this scarce but crucial commodity is likely to intensify. The immediate implication is that user sectors, of which irrigated agriculture is the largest, must ensure efficient and conservative use of scarce water resources, using it sparingly and in high value I return economic activities. Central to the desire for efficient use, in a free market, is the role that proper pricing of water (so that its scarcity value is accurately reflected) could play in limiting farmers' derived short-run irrigation water demand, crop choices, and their choice of technology for irrigation. Using a multi- product firm framework, we have here constructed and modelled four central farm decision functions: the short-run demand function for irrigation water demand; the farmer's crop choice decision; the choice of irrigation technology; and lastly, a crop output equation. We conclude that irrigation water price does not influence short-run irrigation water demand, neither does it affect the farmer's choice of crops or technology. Our fourth equation, the crop output equation, however, demonstrates the important role water plays in irrigation agriculture. Using farm budget data from Orange Free State and Transvaal, which are collected by the Directorate of Agricultural Economics for short - term planning purposes, we conclude that the apparent inefficacy of water costs as a tool for ensuring the efficient and conservative utilisation of irrigation water is due to the relatively negligible weight water inputs have relative to the farmers' capital and operating costs. Water prices alone cannot , therefore, be relied upon as an effective tool for efficient water utilisation in irrigated agriculture in the study area.

Bibliography: leaves 84-90.