Presented at the Pre-Forum Basin Focal Project meeting, 7-8 November, 2008, Addis Ababa, Ethiopia

1. Assessing the Effects of Alternative
Policies and Conditions in the São
Francisco River Basin, Brazil:
A Multi-Scale Approach
Marco Maneta
Stephen A. Vosti
Center for Natural
Resources Policy
&
Analysis -- CNRPA SFRB Team
ovember 2008 UCD/Embrapa

2. Presentation Overview
• Objectives of Modeling Exercises
• Basic Components of Predictive Models
– Hydrologic Models
– Economic Models of Agriculture
• Examples of Model Uses
– Plot Level
– Sub-catchment Spatial Extent
– Basin Spatial Extent
• Conclusions and Policy Implications
UCD/Embrapa

3. Key Objectives of Hydro-
Economic Models
• Understand Farmer Behavior and Outcomes
– Cropping patterns, input mix, employment, water use
– Income and poverty
– Surface water and groundwater availability
• Predict the Effects of Proposed Policy and other
Changes on Farmer Behavior/Outcomes
• Inform Policy
• Modeling at Three Spatial Extents
– Plot-Level LUS Models
– Buriti Vermelho Models
– Basin-Wide Models
UCD/Embrapa

4. Basic Components of
Predictive Models
• Hydrology Models
– Plot level
– Sub-catchment spatial extent
– Basin spatial extent
• Economic Models of Agriculture
– Plot level
– Sub-catchment spatial extent
– Basin spatial extent
UCD/Embrapa

5. Core of the Economic Model of
Agriculture: Farmer Objective Function
max ∑ pit qit (x nirrt , ewit (xirrt )) − ∑ w jt xijt − ∑ cewit (pirrt , xirrt ; z)
i i i
Agricultural Production Function Effective Water
•Vector of on-Irrigation Inputs (xnirr): Cost
Crop •Fertilizers, seeds, land, pesticides, on-Irrigation • Irrigation Input
Prices machinery etc Input Cost Prices – pirr
•Effective Water – ew • Price - wsj • Irrigation Input
•Function of Irrigation Inputs (xirr): • Quantity - xsij Quantities - xirr
•Applied water • z – Vector of
•Irrigation Capital factors that may
•Irrigation Labor affect irrigation costs
•Irrigation Energy (e.g. distance to
river)
UCD/Embrapa

6. Hydrologic & Economic Model Links
• Crop-specific Algorithm to translate HYDROLOGIC
• poduction cropping decisions into MODEL
• water use water demand
• irrigation efficiency
Cropping Decisions Hydrologic Consequences
ECO OMIC • Water available for ag
Algorithm to translate
MODEL hydrologic consequences • rainfall
into water availability •surface water
UCD/Embrapa

7. Land Use System (LUS) Analysis
• Space
– Single parcel of land
• Time
– Multi-year duration, specific end date, seasonal time steps
• Economic Model of Agriculture
– Specific series of cropping activities, specific production and
water use technologies
• Hydrology Model
– Farmer’s assessments of water availability
• All Data Collected at Farm Level
Field #1
Year 1
Field #1
Year 2 Field #1
Year 3 Field #1
Year 4 Field #1
Year 10 Field #1
Year 15
UCD/Embrapa

8. LUS Results for Alternative
Production Systems in Petrolina
Labor Employ
LUS Economic Performance Requirements Water for Irrigation ment
Establish
Excess ment
Total Establish Water
Returns Cost -- Opera- Operatio
PV per Returns Establish Family ment Productivi
PV to Plot tional Water Use nal
hectare to Land ment Labor Cost -- ty ( PV/
Family Costs Phase
Used Property 1000m³)
Labor (per
hectare)
$R/ Person- person-
person- $R/ha Person- days/ ha/ $R/ha/ 1000M3/ $R/ days/ha/
$R $R/ha day /year days /ha year $R $R/ ha year ha/year 1000m³ year
Goats and Sheep -12 0 0 0 1.5 6.3 0 0 6 4 0.00 0
Melon -Onion 43,963 21,981 11 1,099 28 102 50 25 2,466 21 53.26 229
Manga -- flood
irrigation 3,087 772 1 39 35 45 553 138 1,177 12 3.12 93
Mango -- micro
sprinkler 11,057 2,764 4 138 44 32 4,212 1,053 973 10 14 69
Table grapes
with seeds 778,074 129,679 31.14 6,484 151 208 96,600 16,100 3,157 18 368 524
Table grapes
seedless 1,369,349 228,225 54.81 11,411 151 208 96,600 16,100 3,157 18 648 438
UCD/Embrapa

9. Policy Experiments Using LUS
UCD/Embrapa

10. Effects of Uncertainty
Effects of Goat Mortality
Uncertainty on NPV per Year
Effect of Uncertainty in Mango Prices
on PV per year
UCD/Embrapa

11. A Spatially Distributed Hydrologic
Model for Buriti Vermelho
UCD/Embrapa

12. Modeling the Buriti Vermelho
Sub-Catchment
Brazil San Francisco
River Basin
UCD/Embrapa

13. Water
Availability
and Use
UCD/Embrapa

14. Changes in Applied Water
Changes in Land Allocation
Economic Effects of Drought
Changes in Profits Changes in Hired Labor Use
UCD/Embrapa

15. Setting the Policy
Experiment Stage
• Variable Weather Conditions
– Wet year and drought
– Rainfall and evapotranspiration
• Water Policy Setting
– Application of the A A guidelines
• Price Shock
– Large increase in sugarcane prices
• Use Hydro-Econ Models to Predict:
– Cropping patterns, water use, employment, income
– Water availability in river system
UCD/Embrapa

16. A Basin-Wide Hydrology Model
Petrolina
Barreiras
Paracatu
Rio Paranaiba
UCD/Embrapa

17. Water Available at the Entrance to Sobradinho Dam
Water
Available for
Agriculture
Water Available at the Entrance to Sobradinho Dam
Wet-Year Water Drought-Year Water
Availability (m3s-1) Availability (m3s-1)
January 5477.3 2991.8 “Available” for Ag =
February 5471.1 2955.0
March 5718.0 2364.9 River Flow Entering
April 3130.6 1578.3 Sobradinho Dam Minus
May 1724.2 681.8
June 1573.5 274.0
2000 m3s-1 for
July 1391.7 66.9 Environmental Flows
August 919.1 10.0 (following Braga and Lotufo
September 380.7 10.0 2008)
October 621.2 10.0
ovember 1740.4 627.7
December 3863.4 2153.5
UCD/Embrapa

18. Upstream Water Demand
Upstream Water Demand for Boqueirão
(sample município)
Blue = baseline
Green = Sugarcane Price Increase
Total Demand of all Simulated
Upstream Responses to
Sugarcane Price Increases (m3s-1)
January 39.5
February 33.4
March 40.1
April 22.3
May 27.1
June 37.8
July 54.4
August 89.5
September 99.4
October 92.5
November 74.6
December 43.1
UCD/Embrapa

19. Available Water Downstream after
3 -1
Sugarcane Price Increase (m s )
Downstream Water January
Wet Year
5442
Drought
2973
February 5388 2927
Availability after March
April
5723
3175
2154
1585
Price Shock May
June
1743
1483
650
222
July 1366 10
August 827 10
September 296 10
Water Available at the Entrance to Sobradinho Dam October 543 10
November 1718 574
December 3794 2016
UCD/Embrapa

20. Agricultural
Land Use
UCD/Embrapa

21. Area in Sugarcane
UCD/Embrapa

22. Rural
Employment
UCD/Embrapa

23. Agricultural
Profits
UCD/Embrapa

24. Conclusions and Policy
Implications
• Application of A A Guidelines Will Affect Agriculture
– Effects will depend on product mix, irrigation technology, location and
upstream effects, weather conditions, and product prices
• Hydro-Econ Model Can Help Predict:
– The location and extent of effects on (say) profits
– Provide estimates of willingness to pay for more water
• Hence, help develop water markets
• Effects of Sugarcane Price Increase on Ag
– Shift in product mix
– Increased irrigated area
– Profits increase
– Upstream farmers not affected by drought; not so for downstream farmers
• Effects of Sugar Price Increase on Poverty
– Bad news: little employment growth, small-scale sugarcane not likely to
participate in boom
– Good news: increased water use in sugarcane does not ‘crowd out’ crops
with higher labor demand patterns UCD/Embrapa

25. Muito Obrigado!
UCD/Embrapa