Maximizing Net Profits

An increase in crop production per unit of land or per unit of water does not necessarily increase farm profit because of the nonlinearity of crop yield with production inputs. Determining rainfed and SI production functions is the basis for optimal economic analysis. SI production functions for wheat (Figure 14.3) may be developed for each rainfall zone by subtracting rainwater production function from total water production function. Because the rainfall amount cannot be controlled, the objective is to determine the optimal amount of SI that results in maximum net benefit to the farmers. Knowing the cost of irrigation water and the expected price per unit of the product, we can see that maximum profit occurs when the marginal product for water equals the price ratio of the water to the product. Figure 14.4 shows the amount of SI to be applied under different rainfall zones and various price ratios to maximize net profit of wheat production under SI in a Mediterranean climate.

FIGURE 14.3

SI production functions for wheat in different rainfall zones in Syria. (Adapted from Oweis, T. and Hachum, A. 2012. Supplemental irrigation, a highly efficient water-use practice. 2nd. edition. ICARDA, Aleppo, Syria. iv + 28 pp.)

FIGURE 14.4

Optimal economical annual SI amount (m3/ha) in different rainfall zones in Syria. (Adapted from Oweis, T. and Hachum, A. 2012. Supplemental irrigation, a highly efficient water-use practice. 2nd. edition. ICARDA, Aleppo, Syria. iv + 28 pp.)

 
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