In the past several years, there has been much public interest regarding agricultural practices and irrigation in the western United States. With pressures of climate change mounting in the mind of Americans, the allocation of scarce water resources has become an important political issue. When at first, farmlands in the western U.S. were ideally located to depend heavily on natural water resources or cheap irrigation methods, today these costs are greatly elevated. The marginal cost of irrigation in the West has changed greatly, as have other viable uses for this water. Public discourse has shown that this water currently being allocated toward oftentimes-inefficient farmland irrigation can also be used for municipal areas or even conserved altogether. As scarcity of this precious resource rises, the opportunity cost of electing a certain use for the water over another also expands. (Wichelns)
It is difficult to determine how much water a certain farmland production organization should be spending in normative terms because there are so many variables involved. This is because the cost of irrigation in the U.S. fluctuates dramatically based on so many components: supply and demand for the particular crop grown, geographic location, existing natural water sources, type of irrigation method used and even federal and state subsidies.
The problem is, famers still need to irrigate. Much of the western United States is quite arid, and agricultural operations cannot simply eliminate irrigation because of their environmental conscience. A viable policy objective in the agricultural industry must be able to incorporate sustainable irrigation processes, instead of suggesting that farmers eradicate their irrigation. West of the 100th meridian, much of the water used for agriculture is in the form of irrigation, while east of the 100th meridian, irrigation is only used to supplement rainfall and groundwater sources. Therefore, a federal policy is much more difficult to implement because these two divisions of the country have quite different needs where irrigation is concerned. (Wichelns)
Pricing for irrigation in the west greatly reflects historical pricing schemes, and not the true cost of water being used. Many agricultural operations in the western U.S. are based on long-standing agreements with the U.S. Bureau of Reclamation and state governments. For many, however, this water does not meet the needs of large irrigation operations. Many growers supplement their federal and state water with water from private irrigation companies that manage and provide transportation services. (Wichelns)
Federal and state subsidies distort the true costs of water through subsidization. “Subsidies and generous pricing policies were used to keep the price of water well below its real cost, thereby signaling that the resource was relatively abundant.” (Vaux) Logically, the average cost of water has a positive relationship with carrying capacity, that is, price rises as...