Farm economic impacts of water supply deficits for two irrigation expansion scenarios in Alberta

Abstract

A study was conducted to assess the farm financial impact and risk of two irrigation expansion scenarios based on the potential for water supply deficits in the irrigation districts of southern Alberta. The Irrigation Demand Model (IDM) was used to determine irrigation water demand based on annual crop water requirements, crop mix, irrigation system types and application efficiencies, irrigation district infrastructure, and the level of irrigation management within each irrigation block defined in the Water Resources Management Model (WRMM). Irrigation water supply values each year were then established for each irrigation block using the WRMM. The Farm Financial Impact and Risk Model (FFIRM), a farm financial simulation model that tracks farm finances (assets and liabilities) with time, subject to variability in crop water demand and crop prices, was used to determine the optimum allocation of water among fields within each farm operation during years of water supply deficits. Three scenarios were examined with the FFIRM – a baseline scenario and two irrigation expansion scenarios. Irrigation expansion was found to have negligible or very small adverse impacts on the financial well-being of typical farms in all six irrigation regions. Representative farms experienced essentially no change in net farm income (NFI) in the recent expansion (EXP1) scenario, and very small reductions in NFI in the future expansion (EXP2) scenario. Water conserved through irrigation efficiency gains in the next decade will likely offset the increased risk of negative impacts on NFI with irrigation expansion to the current limit.