Part of the analysis considers the impact of annual qroundwater withdrawal constraints on discounted net present value for a forty year planning horizon. The discounted net revenue was higher for lower discount rates, better commodity prices, and more advanced technology. However, alternative discount rates, prices, and technology did not change the optimum annual withdrawal limit. Lower initial groundwater resources reduced the revenue level and the optimal annual groundwater decline limit. The other part of the farm firm analysis covers expected costs, returns and cropping patterns for a single period.
Prices have a significant influence on production, but a far greater impact on net returns.
The amount of available groundwater was not as important as price in the determination of production levels, but it too had a significant impact on net returns. The second level of analysis, a regional analysis, addressed expected changes in cropland use, groundwater pumpage, production levels, input demand, and farm income over the next forty years, under select technology and price assumptions. Water availability and hence use, drops over time, reducing irrigated cropland, gross returns and net revenue. The demand for other inputs does not decline as quickly as water usage, indicating input substitution. Further, the decline in net revenue is greater than the reduction in gross returns or variable costs of production.