Assessing Agriculture-Water Links at B i S l A H d E i M d l fBasin Scale: A Hydro-Economic Model of

the São Francisco River Basin, Brazil

Marco ManetaMarcelo TorresStephen VostiStephen Vosti

Wesley WallenderSFRB Team

Center for Natural Resources Policy A l i CNRPA

UCD/Embrapa

SFRB TeamSeptember 2008

Analysis -- CNRPA

Presentation Overview

• Objectives of Modeling Exercises• Overview of the Hydro modelOverview of the Hydro model • Overview of the Economic Model of Agriculture• Interaction between Hydro and Econ Modelsy• Geographic Focus of Today’s Presentation• Setting the Stage for a Two-Part Policy Experiment

– Application of ANA water use guidelines and a sugarcane price shock

• Simulation Results• Simulation Results– Hydrology– Agriculture

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g• Conclusions and Policy Implications

Key Objectives of Hydro-E i M d lEconomic 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/OutcomesChanges on Farmer Behavior/Outcomes

• Inform Policy• Modeling at Three Spatial ExtentsModeling at Three Spatial Extents

– Plot-Level LUS Model– Buriti Vermelho Model

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– Basin-Wide Model

A Basin-Wide Hydrology ModelA Basin-Wide Hydrology Model

Petrolina

Barreiras

Paracatu

Rio Paranaiba

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Rio Paranaiba

Core of the Economic Model ofCore of the Economic Model of Agriculture: Farmer Objective Function

)z;,())(,(max irrtirrti i i

ewijtjtirrtitnirrtitit itcxwewqp xpxx∑ ∑ ∑−−

Agricultural Production Function•Vector of Non-Irrigation Inputs (xnirr):

Effective Water CostCrop

Prices

Vector of Non Irrigation Inputs (xnirr):•Fertilizers, seeds, land, pesticides,

machinery etc•Effective Water – ew

F ti f I i ti I t ( )

Non-Irrigation Input Cost• Price - wsjQ tit

Cost• Irrigation Input

Prices – pirr• Irrigation Input

Q titi•Function of Irrigation Inputs (xirr):•Applied water•Irrigation Capital •Irrigation Labor

• Quantity - xsij Quantities - xirr• z – Vector of

factors that may affect irrigation costs

( di t t

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g•Irrigation Energy (e.g. distance to

river)

E i Si l ti M d lEconomic Simulation Model

)z;,())(,(ˆmaxx irrtirrt

i i iewijtjtirrtitnirrtitit it

cxwewqp xpxx∑ ∑ ∑−−

∑ ≤i

tit BlandlandLand :

Subject to:

i

: it ti

Labor labor Blabor≤∑ : m mSurface Water sw Bsw≤

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B i Wid M d l ’ T l dBasin-Wide Models’ Temporal and Spatial Resolutions and ExtentsSpatial Resolution

Hydro model 14 large polygons

Temporal ResolutionHydro model month

Econ model Município

Hydro model monthEcon model agricultural season

Spatial ExtentSpatial ExtentSFRB, both models

Temporal Extent

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Decades, both models

Hydrologic & Economic Model Linksy g

HYDROLOGIC• Crop-specific Algorithm to translate MODEL• poduction

• water use• irrigation efficiency

gcropping decisions into

water demand

Cropping Decisions Hydrologic Consequences

ECONOMICMODEL

• Water available for ag• rainfall

Algorithm to translatehydrologic consequences

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O • rainfall•surface water

hydrologic consequencesinto water availability

P i it tiPrecipitation in the SFRB and Today’s

FocusFocus

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Setting the Policy Experiment Stage

• Variable Weather Conditions

Experiment Stage

– Wet year and drought– Rainfall and evapotranspiration

• Water Policy Setting– Application of the ANA guidelines

• Price Shock– Large increase in sugarcane prices

• Use Hydro-Econ Models to Predict:– Cropping patterns, water use, employment, income

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pp g p , , p y ,– Water availability in river system

Water Available at the Entrance to Sobradinho Dam

Water Available forAvailable for Agriculture

Water Available at the Entrance to Sobradinho DamWet-Year Water

Availability (m3s-1)Drought-Year Water Availability (m3s-1)Availability (m3s-1) Availability (m3s-1)

January 5477.3 2991.8February 5471.1 2955.0

March 5718.0 2364.9April 3130.6 1578.3

“Available” for Ag = River Flow Entering

Sobradinho Dam MinusMay 1724.2 681.8June 1573.5 274.0July 1391.7 66.9

August 919.1 10.0September 380 7 10 0

2000 m3s-1 for Environmental Flows

(following Braga and Lotufo 2008)

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September 380.7 10.0October 621.2 10.0

November 1740.4 627.7December 3863.4 2153.5

2008)

Upstream Water DemandUpstream 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 39.5y 39.5February 33.4March 40.1April 22.3May 27.1yJune 37.8July 54.4

August 89.5September 99.4

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October 92.5November 74.6December 43.1

Available Water Downstream after

Downstream Water Available Water Downstream after Sugarcane Price Increase (m

3s‐1) 

Wet Year DroughtJanuary 5442 2973

Availability after Price Shock

February 5388 2927March 5723 2154April 3175 1585May 1743 650JPrice Shock

Water Available at the Entrance to Sobradinho Dam

June 1483 222July 1366 10

August 827 10September 296 10October 543 10Water Available at the Entrance to Sobradinho Dam October 543 10November 1718 574December 3794 2016

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Upstream Cultivated Areas(by scenario, irrigation)

Agricultural L d U300,000

400,000

500,000

Land Use0

100,000

200,000

300,000

Baseline Sugar Price --Drought

Sugar Price -- Wet Year

Rainfed Irrigated Total Cultivated AreaDownstream Cultivated Areas

(by scenario, irrigation)

500 000600,000700,000800,000900,000

0100,000200,000300,000400,000500,000

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Baseline Sugar Price --Drought

Sugar Price --Wet Year

Rainfed Irrigated Total Cultivated Area

Area in Sugarcane

30 000

Upstream Sugarcane Areas(by scenario, irrigation)

5 00010,00015,00020,00025,00030,000

Downstream Sugarcane Areas(by scenario, irrigation)

05,000

Baseline Sugar Price --Drought

Sugar Price --Wet Year

Total Sugarcane Total Irrigated Sugarcane

30,000

40,000

50,000

Total Sugarcane Total Irrigated Sugarcane

0

10,000

20,000

30,000

Baseline Sugar Price Sugar Price

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Baseline Sugar Price --Drought

Sugar Price --Wet Year

Total Sugarcane Total Irrigated Sugarcane

R lUpstream Agricultural Employment Rural Employment5,000

6,000

(by scenario, irrigation)

p y

1,0002,0003,0004,000,

0Baseline Sugar Price --

DroughtSugar Price --

Wet Year

Total Rural Employment Total Irrigated Ag EmploymentDownstream Agricultural Employment

(by scenario, irrigation)p y g g p y

40,000

50,000

( y , g )

0

10,000

20,000

30,000

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Baseline Sugar Price --Drought

Sugar Price --Wet Year

Total Rural Employment Total Irrigated Ag Employment

Upstream Sugarcane and Total Ag Profits(by scenario, irrigation)

Agricultural 40 000 00060,000,00080,000,000

100,000,000120,000,000

Profits020,000,00040,000,000

Baseline Sugar Price --Drought

Sugar Price --Wet Year

Downstream Sugarcane and Total Ag Profits(by scenario irrigation)

Total Ag Profits Irrigated Ag ProfitsTotal Sugarcane Profits Irrigated Sugarcane Profits

200,000,000250,000,000300,000,000

(by scenario, irrigation)

050,000,000

100,000,000150,000,000200,000,000

Baseline S gar Price S gar Price Wet

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Baseline Sugar Price --Drought

Sugar Price -- Wet Year

Total Ag Profits Irrigated Ag ProfitsTotal Sugarcane Profits Irrigated Sugarcane Profits

Conclusions and Policy I li ti

• Application of ANA Guidelines Will Affect Agriculture– Effects will depend on product mix, irrigation technology, location and

ImplicationsEffects 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– The location and extent of effects on (say) profits

– Provide estimates of willingness to pay for more water• Hence, help develop water markets

Eff t f S P i I A• 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 B d li l l h ll l lik l

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– 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

Muito Obrigado!Muito Obrigado!

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