Farhad Farnam, RPSIII, RA Economics Analysis Section Economic Models Farhad Farnam, RPSIII, RA Economics Analysis Section

California Agriculture More than 400 crops $37.5 Billion industry Water use: Municipal and Industrial: 8.9 Million AF Environment: 39.4 Million AF Agriculture: 37.5 Million AF 11/9/2018

Economic Models What is a model? Why models? Any representation of an actual phenomenon, such as an actual system or a process. Why models? Reality versus manageability 11/9/2018

Types of Models Verbal/logical models Physical models Geometric models Algebraic models 11/9/2018

Agricultural Economic Models Used by DWR Central Valley Agriculture Model (CVAG) California Agricultural Resources Model (CARM) San Joaquin Optimal Control Model California Market Outlook (CMO) Central Valley Production Model I (CVPM) Central Valley Production Model II (CVPM) Statewide Agricultural Production Model (SWAP) 11/9/2018

Statewide Agricultural Production Model Land Water Irrigation Technology Production Practices Availability Availability Water Use Technology Cost Cost Yield Cost Crop prices Optimization Routine Implicit costs Quantity produced Population Crop production Income level Land use Quantity produced Net income Exchange rates Water use 11/9/2018

Applications of SWAP Sisk Dam Restrictions Impact analysis Drought Update 11/9/2018

Example Application 1: Economic Costs of a Restriction on Sisk Dam 11/9/2018

Example Application 1: Economic Costs of a Restriction on Sisk Dam 11/9/2018

Example Application 2: Potential benefits of BDCP and/or new storage The DWR CALSIM II system simulation modeling tool was used to generate SWP and CVP project deliveries at the 2030 level of demand and assuming climate change for four future scenarios:   Baseline Scenario- The Delta continues to be operated under the current biological opinions and no additional SWP storage is built (Scenario F2). Future Scenario 3- The BDCP plan is implemented without building any additional SWP storage. Future Scenario 4- The BDCP plan is implemented and NODOS is operational. Future Scenario 5- The BDCP plan is implemented and both NODOS and an SWP San Joaquin groundwater storage facility are operational. 11/9/2018

Example Application 2: Potential benefits of BDCP and/or new storage 11/9/2018

Example Application 3: Impact analysis of a severe drought This Scenario is based on the 90-percent exceedence forecast: Zero CVP agricultural water service contract supply for south of Delta export regions and 5% for Tehama-Colusa (Region 3B) contract delivery, 75% for Settlement and Exchange South of Delta and 77% for North of Delta regions, 65% Friant Class 1 (Regions 13,16,17,18,20,21), 0% Friant Class 2 and 5% SWP. Region Subregions Revenue Loss ($) Income Loss ($) Employment Loss SAC 1-9 77,774,089 105,075,136 2,403 SJV 10-21 1,286,722,117 1,738,400,325 39,760 Total 1-21 1,364,496,206 1,843,475,461 42,163 11/9/2018

Example Application 3: Impact analysis of a severe drought Increases in Groundwater Pumping Costs Region Subregions Increased Groundwater Cost ($) SAC 1-9 34,293,000 SJV 10-21 180,945,000 Total 1-21 215,238,000 11/9/2018

Example Application 3: Impact analysis of a severe drought ALFALFA -16,941 ALMD/PIST -4,977 CORN -36,464 COTTON -95,870 CUCURBIT -5,332 DRYBEAN -5,023 FRTOMATO -37 GRAIN -39,543 ONION/GARLIC -4,125 OTHERDECID -8,343 OTHERFIELD -8,842 OTHERTRUCK -467 PASTURE -2,701 POTATO -128 PROCTOMATO -3,332 RICE -268 SAFFLOWER -1,525 SUGARBEET -2,002 SUBTROPICAL -346 VINE -2,167 Change in Cropping Acreage 11/9/2018

Example Application 3: Impact analysis of a severe drought Shadow Prices of Water ($/AF) in Drought Year Compared to Base Subregion Base Drought V03A – Sac Valley Settlement Contractors $32.0 $32.1 V14A- Westlands Water District $76.4 $426.2 V18- Example eastside SJ Valley $38.8 $40.9 V19A- Example westside Kern County $57.8 $337.8 11/9/2018

Questions & Comments 11/9/2018