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Water Management Study: Upper Rio Grande Basin actual conditions, there is no equilibrium between the forces of demand and supply for the river's resources. We illustrate the disequilibrium by describing some of the values associated with alternative water-related activities in the Middle Rio Grande area. We use the term "value" to refer to both the goods and services associated with the water and related resources of the Middle Rio Grande area that are measured in monetary terms, and to those that are not monetized. Agricultural Values. Without water, very little agricultural production would occur in the Middle Rio Grande area. It would be a mistake, however, to attribute the entire value ofthe crops produced in the area solely to the water, because many other factors of production, such as labor and capital, are employed to produce these crops. A conventional way to allocate a crop's value among the various factors of production entails taking the total revenues from the crop, subtracting the readily quantifiable production costs, such as the cost of tractors, fuel, and labor, and attributing the residual to a set offactors that reflect farm earnings, namely, the return to the farm business' management, land, and assumption of risk. ";~ ~::.~ ,;,; t', b f:' ,\,-, .'. [~ -i,; The data in Table 2.5 show the results of such a calculation for major crops in the Middle Rio Grande area.7 Specifically, the data show the amount of water applied to each crop, the yield, and the farm earnings for a typical farm in 1995, under two scenarios: one assumes full-water conditions when the Middle Rio Grande Conservancy District (MRGCD) does not have to restrict the availability of water because of short supplies, and the other assumes the amount of water applied per acre is reduced by one acre-foot (at). The final column in Table 2.5 shows the incremental change per afin yield and farm earnings associated with the reduction of 1 af of water applied to the field. The data show that alfalfa is being produced on 30,837 acres in 1995, 4 af of water are diverted and applied to each acre, on average, and each acre can be expected to produce 4.4 tons and net earnings of $195 per aflac. With a reduction of one aflac, yield can be expected to drop to 3.3 tons and farm earnings to $70 per aflac. Hence, the net earnings attributable to a reduction of 1 aflac in the supply of water available for irrigation is ($195-$70=) $125 per aflac. ,. '-.0: , ~~. l~~ ;~@ \'..$. ;.- .;X j._~~ ;','" i-,. Similar calculations indicate that the net earnings attributable to a reduction of 1 aflac in the supply of water available for irrigation is $19 per 7 Data for agricultural estimates come from the New Mexico Cooperative Extension Service (1995) and the U.S. Department ofInterior, Bureau of Reclamation (1980-1994). ;-;.:; r::",. 56 1".1.:2937