Water shortages and agriculture in the Colorado River Basin: adaptations and economic impacts

This study uses a multi-region, multi-market model of the U.S. agricultural sector to examine effects of severe water shortages and large water price increases on Western agriculture. The USARM (U.S. Agricultural Resources Model) includes major commodity programs as well as markets for specialty crops. While agriculture in the region, as a whole, is resilient to water supply shocks, particular crops and regions are quite vulnerable. Crops grown in Central Arizona – the region with the most junior water rights – are most vulnerable. Results illustrate that major commodity programs do not protect producers from effects of water supply shocks. The model also illustrates the importance of output-price effects as consumer surplus losses are the dominant form of economic loss.