The impact of water price strategies on the allocation of irrigation water: the case of the Jordan Valley

This paper discusses the optimal water allocation and cropping patterns for the Jordan Valley, taking into consideration variations in expected incomes from agricultural production and rising water prices. The calculations were based on information available on water supplies, areas under irrigation and market conditions, and used linear programming models for determining solutions that maximize gross margins and minimize potential variations in these gross margins. The results indicated that optimizing cropping patterns and the allocation of irrigation water still has a substantial potential to increase the financial return from agriculture. Optimal solutions that consider risk from varying gross margins react quite elastically in terms of demand for irrigation water to rising water prices. This adds the element of a changing market supply to any discussion about managing water consumption between sectors of the society by using pricing mechanisms.