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

2. 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

3. 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

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

5. 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

6. 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

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

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

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

10. 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

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

12. 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

13. 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

14. 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

15. 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

16. Questions & Comments
11/9/2018