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Substitution between Groundwater and other Inputs in Irrigated Agriculture in the Mississippi Alluvial Plain: An Economic Analysis
Proceedings of the 2019 Mississippi Water Resources Conference
Year: 2019 Authors: Alhassan M., Lawrence C., Pindilli E.
The Mississippi Alluvial Plain (MAP) region consists of parts of Mississippi, Arkansas, Illinois, Kentucky, Louisiana, Missouri, and Tennessee and relies on the Mississippi River Valley Alluvial Aquifer (MRVAA) for approximately 90 percent of its irrigation water. Irrigated agriculture is the main source of economic activity in this region, with regional economic impact of more than $11 billion from production of major commodities in 2017. However, groundwater levels in the underlying aquifers have declined due to long-term excess pumpage over inflows. These declining groundwater levels result in decreases in well yields, and reduction of water in storage in the aquifers to meet future demands and sustainable use. To support decision making regarding groundwater availability and use in the region, this study examines relationships between groundwater, labor, fertilizer use, and irrigation systems (furrow and center pivot) as the main inputs in the production of the major crops (corn, cotton, rice, and soybeans) in the region. In general, understanding relationships between groundwater and other inputs in agricultural production helps decision makers in sustainable management of groundwater. Our study also investigates how changes in water budget components impact input groundwater use in the region. This study employs a translog cost function, a type of econometric model, to analyze the production relationships between the inputs. The model relies on a large dataset of input prices, outputs of corn, soybeans, cotton, and rice, and the hydrologic characteristics of the underlying aquifer. We use 2017 county-level data from USDA-NASS, Crop Enterprise Budgets and Planning Budgets from the University of Arkansas and Mississippi State University, and a combination of observation and model-based hydrologic data. Our preliminary results using state-level data show an inelastic price elasticity of demand for groundwater and inelastic cross-price elasticities of demand between groundwater and the other inputs.