We understand that the economics of agriculture depends on water supply as well as inter-related domestic and export market conditions. Our team develops calibrated economic optimization models as software solutions that link to robust data, engineering models (ground and surface water simulations), agronomic models, and broader market conditions. We apply our software to help clients evaluate the effect of changing water, costs, and market conditions on the agricultural economy, from the farm to broader regions.
Some of our analytic tools:
We draw on a broad analytical toolbox ranging from spreadsheet analyses to software solutions including econometric and optimization models of the agricultural economy. No matter how complicated the underlying economic analysis, our results are always explained in a simple, intuitive way.
SWAP-RTS is ERA’s economic computer model of California agriculture, and Arizona agricultural production along the Lower Colorado River. It is calibrated to current market conditions and is used to quantify changes in agricultural production costs, location, and water values, under changing resource and regulatory conditions. The SWAP-RTS model is linked to statewide surface water deliveries and groundwater data, enabling us to evaluate the effect of new storage projects or sustainable groundwater management requirements.
Econometric models are used to estimate market parameters, such as supply and demand elasticities, based on observed historical response by agricultural producers and consumers. In contrast to a trend analysis of crop prices, econometric models can quantify the effect of specific structural market changes, such as trade agreements or the value of the U.S. dollar, on expected crop returns.
Commodity market models
Our professionals have developed market models for most California crops, enabling us to evaluate the effect of shocks to the agricultural economy on the market clearing price and quantity, considering the effect of changes in domestic and export markets. For example, we can evaluate the effect of tariffs, growth in consumer demand in export countries, or the effect of competition from producers in other regions.
We develop farm financial models to quantify financial impacts, regulatory costs, and return on investment. For example, evaluating the cost of new laws and court decisions on farm profitability.
Economic multiplier models
We link our modeling framework to the broader economy through input-output models, such as IMPLAN or REMI, thus enabling us to clearly illustrate the relationship between agricultural production and measures of economic activity including employment, public welfare, and the regional tax base.