THE ECONOMIC IMPACT OF CHANGING WATER QUALITY ON IRRIGATED AGRICULTURE IN THE LOWER VAAL AND RIET RIVERS

THE ECONOMIC IMPACT OF CHANGING WATER QUALITY ON IRRIGATED AGRICULTURE IN THE LOWER VAAL AND RIET RIVERS
Report No: 947/1/02
November 2002

EXECUTIVE SUMMARY

INTRODUCTION

In the course of economic growth and development, there is an increasing use of water and also water return flows, which contributes to the gradual deterioration of water quality. This applies in particular also to the Vaal River system, where water quality (salinity) worsens as river flow reduces, but improves again with floods and good rains. These observations are pronounced below the confluence of the Riet and the Harts Rivers, indicating that irrigation itself, contributes to declining water quality. Although water quality does not worsen consistently over time, but fluctuates inter-seasonally and between wet and dry years, the irrigability of soils are affected as a result of accumulation of salts, which in turn impacts on the sustainability of crop production.

Seasonal or cyclical decline in water quality contributes to both private and external costs. Private costs involve e.g. artificial drainage, amelioration and application of additional water to leach salts while external costs refer to e.g. increasing salt loads in down stream river reaches. The causes and consequences of deteriorating water quality can be managed by adapting on-farm production practices and by introducing policy instruments such as pollution charges or limits.

PROBLEM STATEMENT

In the Lower Vaal and Riet Rivers, rapidly fluctuating and generally poor irrigation water salinity has raised concern about the long-term financial sustainability of irrigation farming due to reduced yields in certain crops and the withdrawal of other more profitable crops. The financial feasibility of irrigation farming is further under pressure due to the current economic conditions and mounting pressure to use water more efficiently.

In previous salinity research irrigation water quality was relatively constant and methodologies used to calculate the impact of water quality on crop yield assumed constant water quality throughout the growing season. This research therefore had to develop a methodology for determining the effect of fluctuating irrigation water quality.

The Orange-Vaal Irrigation Board (OVIB) which serves farmers irrigating from the Lower Vaal and Riet Rivers, has 178 irrigation farmer members communally holding 8097 ha of irrigation rights of which nearly one quarter (1861 ha) are either slightly or severely affected by waterlogging or salinisation. 49% of the land irrigated is either medium or low potential irrigation land, 28% of the area is flood irrigated and 70% sprinkler irrigated with the trend being conversion to centre pivot irrigation (Van Heerden et aI, 2000). Centre pivot irrigation allows far more efficient irrigation scheduling than flood irrigation, but this reduces the amount of unintentional leaching that has kept soil salinisation at bay in the past.

Salinity management options such as intentional leaching have to be weighed against other salinity management options such as accepting a lower yield or changing the composition of the crops planted. If intentional leaching were found to be the optimal management option, the resulting irrigation returnflows would also have to be dealt with. Furthermore, to apply intentional leaching, costly artificial drainage is required, especially in soils prone to waterlogging.

STUDY AREA

A schematic representation of the hydrological system impacting upon the study area is shown in Figure 1. It can be deducted that the area is highly controlled and has a multitude of factors that interact to determine the water quality in the study area. The high level of control does however have the advantage of insuring an almost certain annual water quantity.

Figure 1. A schematic representation of the positioning of the OVIB within the regional hydrology

The OVIB has subdivided its service area into five sub-regions, each receiving a different average water quality as a result of being differently influenced by alternative regional level water management options. The soil types in the five sub-regions also differ markedly. The first sub-region, known as the Olierivier sub-region, includes all farmers irrigating from the Riet River; from the Vaal/Riet confluence to Soutpansdrift, the eastern boundary of the study area. The Second sub-region includes all farmers irrigating from the Vaal River between De Bad, the northern boundary of the study area, and the Douglas Weir. These are predominantly the Vaallus irrigation farmers, but also include farmers below the Vaal/Riet confluence, down to the Douglas Weir. The area below the Vaal/Riet confluence is not only influenced by the addition of very poor quality Riet River water, but also by 'pure' Orange River water pumped in via the Orange-Vaal (Louis Bosman) Canal. This results in two distinctly different water bodies that do not readily mix. The third and fourth sub-regions include the predominantly smallholding farms irrigating from the Bucklands and Atherton Canals that receive 'mixed' Orange River water. The fifth sub-region comprises newly established farms irrigating with Orange River water out of the Louis Bosman Canal. As these farms are producing on relatively virgin soils (only in their 5th production season) and irrigating with "pure" Orange River water, they provide a good control for this water quality study.

RESEARCH AIMS

The main aim of this research project was to develop and apply models to determine the financial and economic viability of irrigation farming in the Lower Vaal and Riet Rivers, with specific aims to:

evaluate the relationship between changing water quality (salinity level), soil conditions and crop production;
determine the impact on yield, crop choice, agronomic and water management practices, expected income and costs;
develop models for typical farms in different river reaches, and apply these models to test the outcome of alternative scenarios regarding internal salinity management practices and external policy measures.

METHODOLOGY

This research proceeded as follows to achieve the aims:

The term water quality was first defined and the key problematic constituents in the Lower Vaal and Riet rivers were identified as irrigation water salinity and the resulting irrigated soil salinisation.
The study area was delineated as the OVIB service area.
A pilot survey was conducted to determine the magnitude and distribution of the problem and to identify case study farmers.

Based on the results of the pilot survey conducted in the study area, five case study farmers were selected, one from each of the different sub-areas of the OVIB. The case study farmers were representative of their sub-areas with regard to the hectares of irrigation water rights held, and jointly, also sufficiently representative of the OVIB region.

With the contradicting aims of improved water use efficiency and increased leaching for salinity management, the importance of a financial optimisation mode! was evident to solve the apparent paradox between saving water due to it's scarcity value and "wasting" water to leach out salts that build up in soils through the process of irrigation.

SALMOD (Salinity And Leaching Model for Optimal irrigation Development) was developed in GAMS (General Algebraic Modelling System). Using a linear programming model various management options and possible crops are weighed up against each other to find the profit maximising combination of crops and management options under different water quality (salinity) and external policy scenarios. Though not written in a user-friendly format, SALMOD is a generic model but requires a certain amount of initial setting up before being applied elsewhere. SALMOD is static, optimising only over one year; January to December (i.e. two production seasons) and relies on various assumptions, previously developed methodologies (e.g. Maas & Hoffmann (1977) salinity threshold and gradient values) and is more mechanistic than empirical.

The management options built into SALMOD are the appropriate leaching fraction to implement, and crop yield to accept for the optimal crop / resource combination calculated. The fixed capital management options included in SALMOD are the installation of artificial drainage, the change of irrigation system and the building of on-farm storage / evaporation dams for return-flow management.

To leach effectively, soils should have a good infiltration rate till beyond the root zone of the crop planted. In heavy soils and where waterlogging occurs artificial drainage is required -the heavier the soils, the greater the costs of artificial drainage installation. Thus the benefits and costs of leaching need to be quantified to be able to justify the capital expenses involved in relation to the soil and water quality degradation caused. At farm level SALMOD tests four management options:

whether to accept a lower yield, or
use extra water to leach salts out of the root zone,
the ability to pay to receive water of a better quality, and
the selection of the optimal cropping combination to match resource and salinity conditions.

The model consists of a simulation section in which, from a basic crop budget for each of the main crops grown in the study area, crop enterprise budgets are simulated for a range of soil types, irrigation technologies, water salinity levels, soil drainage abilities, leaching fractions and expected yields. The resulting net returns from the various cropping combinations are then incorporated into the linear programming optimisation section where the optimal crop enterprise combination is chosen, subject to various constraints such as land size, soil permeability, water price and availability and best management practice crop rotational constraints. The model also makes provision for a farmer to exceed his water quota by charging for increasing water volume application increments at an increasing block rate tariff structure as is done in practise. Also where the annualised costs of artificial drainage installation and alternative irrigation systems are offset by the increased returns they could generate, this option is automatically implemented in the model if activated.

MAIN RESULTS

Results show optimal enterprise composition under various water quality (salinity) situations. Artificial drainage installation and leaching are financially justified under certain water/soil quality scenarios. The results are also a strong motivation for a change in the current water pricing and quota allocation system used in the study area and elsewhere in South Africa. For a detailed discussion on the results see Chapter 5.

Useful data generated by SALMOD for use in environmental impact assessment are the estimated volumes of I salt loaded return flows that either leach into groundwater aquifers or are returned into the river system as a "diffuse pollution source". The model gives a good indication of a farmer's specific contribution to the diffuse or non-point source pollution problem. The economic effects of constraining return flows and the effects of water pricing policy on the volume of return flows are also determined.

The shadow prices (Marginal Value Product) produced by the linear programming model indicate the price that resources should be to be incorporated into the optimal enterprise combination -for instance, the price that a farmer can afford to pay for water of a certain quality. Results clearly indicate that irrigation waters of different qualities are different commodities for which different rates should be charged.

The % reduction in TGMASC from the long-term average ECiw (74 mS/m) to the worst expected Vaal River ECiw as predicted by Du Preez et aI, (2000) for 2020 (159 mS/m), is 84% and 58% for the small farmers from Bucklands and Atherton respectively, between 13% and 16% for the Olierivier farmer, depending on whether the Vaal River of the Riet River has the major impact, 1 % for the large and financially strong Vaallus farmer and 3% for the small yet resource strong New Bucklands farmer (see Figure 5.10). These results clearly show that the small and resource poor farmers will be the most affected by irrigation water salinity deterioration. Farming profitability of small farmers drops more rapidly than for larger farms, and by ECiw levels of 328 mS/m the smaller farms go out of production, while the larger farms are not as dramatically affected. One of the reasons for this is the limited crop choice that the smaller farmers currently plant due to management, labour and mechanisation constraints, and their generally poor resource endowment.

Scenario results from SALMOD further show that:

Leaching is financially viable for all case study farmers
Accepting lower yields on soils with insufficient leaching capacity is also financially viable
For farmers with a limited area of well drained soils it can be financially viable to install artificial drainage
The option of building on-farm storage dams when returnflows are constrained to 100 mm per hectare water rights held, is financially infeasible for all case-study farms and for all scenarios
It is not financially viable for farmers to replace their current irrigation systems with more efficient systems, but in some instances with systems that can apply a greater leaching fraction
At the worst-case scenario salinity conditions, farmers with below 60 ha water rights, and who don't grow cotton, will go out of production.

SALMOD has proved to be a valuable farm level salinity management tool. SALMOD is also potentially useful at regional and national level for determining the farm level financial impacts of various water quality and quantity scenarios where the farmers are affected by irrigation water salinity.

ACHIEVEMENT OF THE RESEARCH AIMS

The main aim of developing and applying models to determine the long-term financial and economic viability of irrigation farming in the Lower Vaal River area was achieved; results generated by SALMOD for water quality scenarios for 2020 calculated by Du Preez et al (2000) indicate that at the worst-case scenario of receiving Spitskop Dam irrigation water, the smaller part-time farmers go totally out of production, while the large farm studied at Vaallus was not as drastically affected, as was the relatively new, resource well endowed farm at New Bucklands. The Olierivier case study at even the predicted irrigation water salinity for the Riet River could still generate an income from production, but it did not cover the fixed expenses.

The specific aims of evaluating the relationship between changing water quality, soil conditions and crop production were thoroughly achieved and new methodologies developed to incorporate the biophysical relationships of irrigating with fluctuating saline irrigation water into an economic routine in SALMOD.

SALMOD was also applied to test the outcome of alternative scenarios regarding internal water quality management practices such as determining the profit maximising crop enterprise combination while optimising the allocation of cropping area according to, irrigation system leaching ability and soil drainage ability.

External policy measures modelled in SALMOD were the impact of increasing the water price, the effect of putting a constraint on irrigation returnflows and the determination of the farm level affordability of artificial drainage installation, and the building of on-farm storage dams to control irrigation return flows.

A qualitative assessment of the external policy measures revealed that by implementing policy constraining return flows, river and groundwater quality should be improved and prevented from deteriorating further. Under these improved water quality conditions the return flows from the resulting optimal crop compositions could be less than the maximum specified in the constraint, making the return flows constraint no longer necessary once farmers are using and managing their on-farm storage dams properly. This constraint is however initially required to get farmers to install drainage and build on-farm storage dams. Constraining irrigation returnflows must be coupled with the incentives of artificial drainage subsidisation and on-farm storage dam subsidisation.

FURTHER RESEARCH NEEDS/SHORTCOMINGS OF THIS RESEARCH PROJECT

The dynamics of water -use, -pollution and -control are so tightly interwoven by a multitude of external factors that the traditional style of mono-disciplinary research is no longer suited to achieve overall satisfactory results (McKinney et al. 2000). To proactively manage and implement policy to anticipate problems and sustainably introduce change, the correct research tools are necessary.

By understanding the full dynamics and interactions between irrigation water quality and the soil salinity status on crop yield over irrigated time, mistakes made in the past by choosing unsustainable irrigation sites can be prevented. Furthermore the impact of various natural or artificial (e.g. policy mechanism) scenarios on existing schemes could be more accurately modelled, leading to increased economic efficiency and sustainability of the irrigation industry as a whole. However "current USDA Salinity Laboratory evidence suggests these interactions are far more complex than originally thought. Rhoades, the doyen of soil/plant/salinity interactions, contends that no one has succeeded in combining all the refinements necessary to overcome the inherent problems of relatively simple salt balance models and geophysical sensors, to address the enormous field variability of infiltration and leaching rates" (Blackwell, et al. 2000).

Current literature and research on salinity management in irrigation agriculture also fails to capture the stochastic nature of inter-seasonal irrigation water quality as well as the cumulative economic and sustainability effects of irrigating with stochastic water quality levels. "Further limitations for setting criteria for salinity include: (i) the need to make assumptions about the relationship between soil saturation extract salinity (for which yield response data is available) and soil solution salinity. (ii) the deviation of the salinity of the soil saturation extract from the mean soil profile salinity, to which crops would respond. (iii) The criteria for crop salt tolerance do not consider differences in crop tolerance during different growth stages" (DWAF, 1996).

The water quality problem was initially perceived with the main variable being the water quality changes of in stream irrigation water. DWAF data recorded over many years was studied and incorporated into models, but the essence of the problem remained unresolved. This being the indirect and long-term accumulation effects of irrigation water carried constituents within irrigated soils and their underlying water tables, and the effects of the resulting returnflows from these soils and groundwater on downstream irrigation water quality.

POTENTIAL USERS OF THE RESEARCH RESULTS

Examples of the importance of the results of this research for irrigators, the OVIB and policy makers are:

For the irrigation farmer the results are important

to see how productivity gains can be made with existing resources through available management techniques,
to highlight the importance of leaching and evaluate the financial feasibility of installing artificial drainage, -to help in the decision of replacing or improving an old irrigation system, and
to highlight the importance of irrigation return flow management and options for on-farm storage.

Important decision making data for the OVIB are

what prices to charge farmers for water of different qualities,
to determine the water transfer costs and water quality benefits of the various water transfer schemes, and
to indicate to what extent a volumetric water rights allocation system would be better than the current system based on per hectare water rights held.

At a national level this research can be useful in providing an indication of

the value of the dilution effect of Orange River water,
the importance of leaching in irrigation and the need for subsidisation of artificial drainage, -the need for management options or controls of irrigation return flows, and
the right incentives for the promotion of leaching as a salinity management tool and at the same time the careful management of the resulting leachate.