Assessing Investment Risk of Irrigation in Humid Climates

Abstract

Michigan has an estimated 475 000 acres of irrigated land. The irrigation is used to supplement seasonal rainfall during short periods of drought. Many row crops such as corn (Zea mays L.), soybeans (Glycine max (L.) Merr.], potatoes (Solanum tuberosum L.), and dry beans (bilcia faba L.) are under sprinkler irrigation systems. Much of the tree fruit acreage is also irrigated, using mainly drip/trickle systems. Though irrigation usually results in higher yields and income, it is possible that the expense of owning and operating an irrigation system outweighs income benefits if calculated over several years. The Irrigation Cost Analysis Program (ICAP) has been designed as a tool for assessing the risk associated with investing in an irrigation system for corn production. Using inputs such as purchase price, annual finance rate, production costs for irrigated and nonirrigated crops (e.g., fertilizer, seed, fuel, etc.), yield related costs, and irrigation costs, a user gains insight into the factors affecting the profitability and risk of such an investment. Using the validated CERES-Maize growth simulation and water balance model in conjunction with weather, management, and economic data, ICAP provides estimates on 30 yr net profit for irrigated and nonirrigated corn crops, and the increase in yield necessary to pay the increased costs.