Economic evaluation of on-farm irrigation in the Morden-Winkler area of southern Manitoba

Abstract

The feasibility of building a dam on the Pembina River (running across northern North Dakota and southern Manitoba) is being considered by the International (U.S.A.-Canada) Joint Commission. The general objective of this study is to investigate the economy feasibility of on-farm use of irrigation water which would become available for the Morden-Winkler Area of southern Manitoba with the completion of the dam. The methodology involves the use of mathematical programming models to evaluate various economic factors which may influence the feasibility of irrigation in this area. The study deals primarily with representative individual farm units. The regional dimensions such as the total demand for water are aggregated from the micro-unit analysis. The first phase of this study (Model I) involves an assessment of irrigation feasibility on the basis of long run average conditions and prices. In this aspect, "economic feasibility" of irrigation implies the possibility of increasing farm incomes, but does not explicitly take into account the income-stabilizing effect of irrigation... The second phase of this study (Model II) involves the recognition of different risk preferences on the part of potential irrigators and an assessment of the impact on the overall feasibility of irrigation. Risk programming techniques are incorplated into the economic models developed for the first phase to accomodate the refinement... Under both dryland and irrigation conditions, all risk averters can reach high level utility indifference curves by choosing optimal plans developed by stochastic programming, than by choosing those given by linear programming. Under these two conditions, the optimal stochastic programming plans differ significantly from the optimal linear programming plans, especially when these plans are developed for the medium to high levels of risk aversion... The alternative optimal cropping systems obtained for various levels of risk aversion parameters under dryland conditions are compared with the actual one. From this comparison, it is inferred that the farmers in the project area have, on the average, a high level of risk aversion.