Farmers’ Water Usage Can’t Be Discussed in Terms of Citizens’ Water Usage, Unless You Change the Score: It’s More Like 16%!!! (Aguanomics)

Jan.28, 2009 in Water Conservation, Water Crisis, Water Industry, Water Management, Water Technology

(Jan. 28, 2009, Aguanomics)

This post is important and perhaps paradigm shifting. Let’s see if you agree…

It’s conventional wisdom that farmers “use” 70-80 percent of all developed* water supplies. But farmers do not use water in the same way as municipal and industrial (M&I) users do. When I use water to flush the toilet, that water only benefits me and is unavailable to others.**

Farmers, on the other hand, use water to grow products that benefit others. Put differently, we also use that water when we consume agricultural products.

So the right way to calculate “use” is not by looking at how much water one person (or sector) diverts but by looking at each participant’s share in the total benefit from that initial diversion.

For instance, say that a farmer diverts water to grow carrots. If he sells those carrots for $0.25/pound to the wholesaler, who sells them for $0.50/pound to the retailer, who sells them for $1.00/pound to consumers who value carrots at $2.00/pound, then we can say that the farmer and wholesaler each get 12.5% of the total value, the retailer gets 25% of the total value, and consumers get 50% of the total value.

So consumers are using 50 percent of “agricultural” water.

So that’s the theory. How much water do farmers use in reality?

To find that number, we need to know two things (for each product): What is its value to the final consumer, and who gets paid what along the way?

Although the second part is easier (the USDA tracks this information crop by crop), the first part is much harder. Basically we need to know how much a consumer values an agricultural product. Although we know that they value it at more than the price (because they buy it :), it is hard for us to know how much value they assign above the price. Measuring that “consumer surplus” is more of an art than a science, and it relies on estimations using demand elasticities and/or stated preference surveys. I am now looking for such data. Please email me or comment on where I can find it.

To get back to the second part, consider this USDA statistic: Farmers only keep 19 percent of the retail price of food.*** The average share to each actor in the food supply chain is distributed as follows:

From these statistics, we can see that farmers are using a maximum of (rounding up) 20 percent of 80 percent — or 16 percent of developed water.

Compare this to M&I’s 20 percent share. Are you seeing paradigm shift now?

If consumers enjoy any surplus from agricultural products (i.e., if those products are worth more than they pay for them), then farmers’ share of the total is even lower!

Bottom Line: Farmers are not using 80 percent of the water because they are not receiving all the benefits from that water. Use should be attributed in proportion to benefit. Those who receive more benefits are “using” more water — and that’s us, the consumers of agricultural products.

* Developed as in “controlled.” If one counts all uses of fresh water, then farmers use about the same amount as the environment (about 40 percent each), and cities use the rest.

** Conventional water accounting defines water as used when it cannot be used by others without processing. Thus, power generators use water by discharging it at temperatures that are too hot for the environment, plants use water when they discharge it through evapotranspiration, and I use water when I flush black water into the sewer system. These discharges can be recovered by cooling, precipitation and cleaning, respectively. Also see next post.

*** The USDA is biased in favor of farmers, but let’s use their numbers.

A BIG hattip to JR for bringing this idea to my attention.

(Original Article Here)