Sunday, June 28, 2015

King Cotton and Deadweight Loss (and the large water subsidies paid to cotton farmers)

By Alex Tabarrok of Marginal Revolution.
"In our textbook, Tyler and I write:
Farmers use the subsidized water to transform desert into prime agricultural land. But turning a California desert into cropland makes about as much sense as building greenhouses in Alaska! America already has plenty of land on which cotton can be grown cheaply.  Spending billions of dollars to dam rivers and transport water hundreds of miles to grow a crop which can be grown more cheaply in Georgia is a waste of resources, a deadweight loss. The water used to grow California cotton, for example, has much higher value producing silicon chips in San Jose or as drinking water in Los Angeles than it does as irrigation water.
In Holy Crop, part of Pro-Publica’s excellent, in-depth series on the water crisis the authors concur:
Getting plants to grow in the Sonoran Desert is made possible by importing billions of gallons of water each year. Cotton is one of the thirstiest crops in existence, and each acre cultivated here demands six times as much water as lettuce, 60 percent more than wheat. That precious liquid is pulled from a nearby federal reservoir, siphoned from beleaguered underground aquifers and pumped in from the Colorado River hundreds of miles away.
Over the last 20 years, Arizona’s farmers have collected more than $1.1 billion in cotton subsidies, nine times more than the amount paid out for the next highest subsidized crop. In California, where cotton also gets more support than most other crops, farmers received more than $3 billion in cotton aid.
If Arizona’s cotton farmers switched to wheat but didn’t fallow a single field, it would save some 207,000 acre-feet of water — enough to supply as many as 1.4 million people for a year.
…The government is willing to consider spending huge amounts to get new water supplies, including building billion-dollar desalinization plants to purify ocean water. It would cost a tiny fraction of that to pay farmers in Arizona and California more to grow wheat rather than cotton, and for the cost of converting their fields. The billions of dollars of existing subsidies already allocated by Congress could be redirected to support those goals, or spent, as the Congressional Budget Office suggested, on equipment and infrastructure that helps farmers use less water.
“There is enough water in the West. There isn’t any pressing need for more water, period,” Babbitt said. “There are all kinds of agriculture efficiencies that have not been put into place.”"

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