Orestimba Creek Feasibility Study - Stanislaus County

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Economics Appendix – Draft Report - Orestimba Creek Feasibility Study, Stanislaus County, California – September 2012 It is noted that short-term planning prices and yields should not be used for planning capital purchases that extend beyond the next production year. Review of land grant university’s agricultural economics new releases indicate that the use of short-term yields and prices is not recommended because current supply/demand conditions rarely continue for long periods of time and are poor indicators of future trends. Instead, intermediate to long term planning prices and yields are most appropriate for evaluating alternative plans. USDA Agricultural Projects to 2020, published in February, 2011 by the Office of the Chief Economist, World Agricultural Outlook Board, USDA substantiates this claim. It indicates that projections based on specific assumptions surrounding macroeconomic conditions, public policy, weather/climate, and international development, with no domestic or external shocks to global markets, suggest that the long-run development for global agriculture reflects a resumption of steady world economic growth following the global recession and continued demand for biofuels. This analysis combined with the aforementioned assumptions support increases in consumption, trade, and prices. Based on the USDA analysis it is believed that the most recent prices used in this analysis may conservatively estimate benefits of flood projects. It is, however, difficult to quantify the price and yield increases, especially while also estimating cost of production increases, to arrive at a long-term net income per acre value. Accordingly, the most recent prices, yields, and cost of production are used in this analysis and considered appropriate for this level of evaluation. Seasonality Within the computational framework used for the crop damage analysis, the season of the year that the flood occurs greatly impacts the amount of crop damages sustained. If flooding occurs early within the year, the producer may be able to re-prepare the seedbed and plant, and ultimately may realize a return on his efforts. Conversely, a flood of substantial proportion occurring at harvest time will most certainly result in complete loss for the entire year. The probability of a storm occurrence in any particular month was provided by the District hydrologist for the study area vicinity and describes the likelihood of a storm occurring for each month throughout the year. These monthly probabilities were used as input into the crop damage analysis. . The monthly probability of flood occurrence was derived from peak annual flow data secured from the Water Management Section, USACE, Sacramento District. Due to year-to-year variability flood occurrences may be as much as 4 weeks early or later than the flood occurrence midpoint. These flood occurrence probabilities for the Newman study area are displayed below showing the flood event probabilities with uncertainty associated with each month: 54
Economics Appendix – Draft Report - Orestimba Creek Feasibility Study, Stanislaus County, California – September 2012 Table 1 - Monthly Flood Occurrence Probabilities Probability Month Scenario Midpoint Scenario Beginning Scenario Ending January 0.216 0.144 0.333 February 0.333 0.216 0.135 March 0.135 0.333 0.039 April 0.039 0.135 0.055 May 0.055 0.039 0.031 June 0.031 0.055 0.002 July 0.002 0.031 0.000 August 0.000 0.002 0.009 September 0.009 0.000 0.009 October 0.009 0.009 0.027 November 0.027 0.009 0.144 December 0.144 0.027 0.216 Multiplying the direct production costs and the value of crop at risk for each month times the monthly probability provides the probable damages expected if a flood event occurred in any particular month. Uncertainty parameters were used in the overall computation of both direct production losses and the net incomes for each crop affected. Value of Perennial Crops Damage caused by long-term duration flooding may result in permanent loss of perennial crops. The damage to perennials susceptible to flooding is computed based upon the assumption that the crop stands are at various ages, ranging from year 1 throughout their economic useful life. Accordingly, damage caused by long-term duration flooding is computed based upon a stand that is at the mid-point of its economic useful life. For example, a crop such as Almonds has a productive economic life of approximately 25 years. It is assumed that the stand is 12-13 years of age when the flood occurs. Using this assumption, half of the costs to establish the tree has been depreciated with half of the establishment costs remaining at risk. Clean-up and Rehabilitation Erosion and deposition of debris and sediment may be caused by floods of any duration or time of year. Additionally, drainage and irrigation ditches may become clogged with silt and debris. Interviews with cooperative extension agents and local farmers have been conducted over the past several years. Clean-up and rehabilitation of farm acreage is a genuine flood loss and is accounted for in the computation of agricultural flood damages accordingly. Restoration of Field Cropland after Flooding The requirement to restore agricultural land after it has been inundated by a flood will necessitate the removal of accumulated trash and debris, the addressing of sediment deposition, and the reworking of the fields to incorporate the sediment and to re-level the irrigated cropland. The 55
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Orestimba Creek Feasibility Study - Stanislaus County

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