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The U.S. Geological Survey has determined that irrigation in Arkansas’ Delta is unsustainable. This study examines how irrigation restrictions would affect county net returns to crop production. It also considers the effect of planting less water-intensive bioenergy crops—switchgrass and forage sorghum—in the event biofuel markets become a reality. Results suggest that sustainable irrigation restrictions without bioenergy crops would decrease producer returns by 28% in the region. Introducing these alternative crops would both reduce groundwater use and may restore state producer returns, albeit with significant spatial income redistribution to crop production throughout the state.

The U.S. Geological Survey (USGS) has determined that agricultural irrigation in Arkansas’ Delta is unsustainable with significant negative economic repercussions on producers net returns affected by the Alluvial aquifer. This study examines how irrigation restrictions in that region would affect county net returns to crop production. It also considers the effect of planting less water-intensive bioenergy crops in the event biofuel markets become a reality. A constrained optimization model determines acreage allocations and net returns under three irrigation scenarios: i) no irrigation restrictions, ii) irrigation restrictions that lead to a sustainable Alluvial aquifer, and iii) irrigation restrictions that would lengthen the life of the Alluvial aquifer. Hypothetical switchgrass and forage sorghum crops were then added to model the effect of a biofuel market. If crop production were conducting using irrigation levels that are sustainable, as defined by the USGS, producer net returns would decrease by 28% in the Alluvial region. Estimates show that the introduction of dedicated bioenergy crops could alleviate this downturn. If the price of switchgrass reached $46.40 per dry ton at the farmgate, it is possible to restore net returns to crop production across the state to pre-irrigation restriction levels, while Alluvial region producers now would suffer only a 9.5% reduction. Significant income redistribution to crop production thus exists with depleting ground water irrigation resources even with the introduction of an alternative markets.

This study examines how the introduction of dedicated energy crops—switchgrass and forage sorghum—may affect Arkansas’ crop allocation decisions. The study captures crop production practices at the county or crop reporting district level. Results are in a static equilibrium framework and limited to a one-year ahead forecast. The model’s predictive success was evaluated by comparing 2007 model results with no energy crop production to actual acreages harvested. Switchgrass entered land use at approximately $25 and $35/dry ton in 2007 and 2008, respectively. Higher 2008 commodity prices for traditional crops caused lower switchgrass acreage peaks compared to 2007. Further, at higher biomass price levels—$45 to $55/dry ton depending on year and whether or not land charges were applied—the annual energy crop, forage sorghum, surpassed switchgrass acreage primarily as a result of its higher yield. Since acreage supply response is quite elastic, biorefineries will be exposed to significant price risk, especially at higher biomass prices, when the annual energy crop exceeds perennial switchgrass in acreage. Finally, the study examined impacts of biomass production on resource use. Regardless of ownership scenario, in 2007 and 2008, a 13 and 10 percent reduction, respectively, in irrigation water per acre occurred when the price of switchgrass increases from $25 to $65. Labor and fuel use showed no such trends. This is a significant finding, given diminishing water resources for a large portion of the Arkansas crop producing region.