Agricultural Economics Department
Date of this Version
2010
Abstract
Nebraska’s water resources are cost-effective insurance for harnessing the productive potential of cropland. During the last 30 years, intensive irrigation development in Western Nebraska has led to regulations to prevent or reduce the over-use of Nebraska’s share of both surface and groundwater. Despite regulations affecting the amount of available water, farmers have been able to manage water in ways that lead to an acceptable net return, with little impact on land values. However, as stricter regulations are put in place to limit the amount of water that can be withdrawn each year per irrigated acre, it is quite possible that the market value of irrigated land will be significantly affected.
Determining the economic value of water is sometimes confused with calculating the cost of water. In Nebraska, the cost of water is usually the pumping cost associated with attaining the water for use. This is an acceptable pricing method for crop budget analysis and other financial calculations; however, it should not be misconstrued as the value of the water resource. The true value of irrigation water is determined by its worth in production, and often the value of the water and the cost of the water are very different values. This analysis is concerned with determining an estimate of the value or “worth” of the water.
Comments
Published by the Department of Agricultural Economics, University of Nebraska-Lincoln. Copyright 2010 Regents of the University of Nebraska.