| Abstract: | ABSTRACT: The on-farm economic effectiveness of government capital grants, subsidized interest rates, and the Canadian Wheat Board (CWB) delivery quota levels in terms of adoption and/or expansion of irrigation in Saskatchewan is tested. The annualized net income at 5 and 20 years of three representative farm types - a dryland grain farm, an irrigated grain farm, and an irrigated mixed farm - are used in the analysis. Tradeoffs between income levels and the risks associated with adoption/expansion of irrigation are evaluated using mean-standard deviation tradeoff and stochastic dominance. Risk differences arise due to reduced business risk through higher yields and increased financial risk through higher borrowing when adopting or expanding irrigation. Capital grants and subsidized interest rates are effective policy measures for dryland grain farms adopting irrigation because the farms are left in a similar risk position. However, these grants and interest rates are not effective policy measures in the medium run (5 years) for irrigated grain farms expanding irrigation because they lower the farm's risk efficiency. In the long run (20 years), the capital grants and subsidized interest rates need to be combined with open CWB delivery quotas before the risk position can be improved for irrigated grain farms expanding irrigation. Finally, the grants and interest rates need to be combined with increased irrigated hay production for risk efficiency to increase in both the medium and long run (5 and 20 years, respectively) on irrigated mixed farms expanding irrigation. |
