during the middle of the season when the expenses associated with crop production have already
occurred. On a long-term basis, the value of water depends on long term profits net of all
operating and capital expenses. The level of profits (or return on assets) in agriculture is very low
and sometime even negative. This does not imply that a farmer should be willing to trade his
water rights for low value. He or she may have other values associated with farming.
There are four different agricultural water values depending on timeframe: (1) intra-
seasonal, (2) seasonal, (3) long run annual value, and (4) long run water right value. The intra-
seasonal value for water is the appropriate perspective once the major planting expenses have
occurred. Farming incurs a majority of costs upfront in the season. Once these expenses have
occurred, the value of water is approximately the gross value of the crop minus harvest costs.
This value would be the appropriate framework if the farmer were to lease his water after the
season had started – say for the month of July and August. These values are at their highest
levels because so much has already been invested in growing the crops.
The seasonal value of water nets out all operating costs except costs that still remain
(fixed costs) such as capital costs, labor, and management. If a farmer were to lease his seasonal
allotment of water and subsequently not use water, the seasonal value is the appropriate estimate
of water. These water values would represent the agricultural value of water in a seasonal water
Long-term annual value of the water is net profits after all costs that may be attributable
to water. This is the cost of not farming. In ceasing operations, the farmer would sell all
agricultural assets such as tractors and equipment and seek other employment (or retire). The
long term annual value is the net loss of income once all costs are accounted for. These values
are often low in agriculture.