FARM PROFITABILITY AND BUREC WATER SUBSIDIES: AN LP LOOK AT A REGION

Most studies of irrigation water subsidies focus on farmers' "ability-to-pay" for irrigation-related construction costs without questioning the methods used to subsidize these costs. This article shows how BUREC water subsidies could be eliminated by increasing federal water and power rates on long-term irrigation contracts. The welfare effects of this "desubsidization" are examined for California's San Joaquin Valley, which uses federal power for groundwater pumping and the conveyance of surface water. A linear programming model provides estimates of the change in farm profitability from imposing full-cost federal water and power rates. The desubsidization has a disproportionate impact on growers of water intensive crops while benefiting non-agricultural power users and the U.S. Treasury. This points to the conclusion that charging full-cost rates would redistribute $4.58 million of profit-income per year without significant regional impacts on growers. Copyright 1998 Western Economic Association International.