Page 17 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.70, # 1, 2013, pp. 4-22

The level of corn profit at each optimum level of TW to meet PET applying

alternative combination of natural gas and corn price is shown in table 8.

Benefit Analysis of PET

As introduced earlier, PET is the amount of water that a well-grown plant

exactly needs. If 100% of PET is satisfied, theoretically the water condition should

be optimum for the plants. As putting more water to meet 100% of PET, producers

are expecting more profit. In order to explore the trade-off between the extra

irrigation input and the extra profit, the results are analyzed in a further step.

Table 7 shows the marginal profit per acre-inch of irrigation at different PPET

levels under corn price of $5/bushel and natural gas price of $2.5/mcf. It shows a

decrease of marginal profit as the PPET level increases. For example, when the

total water could meet 10% more PET from 60% to 70%, the marginal profit,

which is the added profit realized by meeting this 10% more PET, is around $15.

While, when this figure increases to 80% from 70%, the same amount of irrigation

just makes $11 more per acre.

Even though a decreasing marginal profit will be realized, producers are still

willing to keep irrigating to meet 100% of PET since the total profit keeps

increasing. PPET information, however, could be used by policy makers in the

water allocation decision-making process regarding irrigation. For example, in

order to preserve the water resource, some kind of subsidy could be granted to

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