The meaning of field irrigation for the land lease market in northeast Lower Saxony

Abstract

The meaning of field irrigation for the land lease market in northeast Lower Saxony Against the background of the implementation of the EU water directive, this paper analyzes the impact of irrigation on agricultural land markets. The study focuses on Germany's largest irrigation area, i.e. the north-eastern heath region of Lower Saxony. First, we outline some theoretical considerations with regard to the calculation of land rents. Then, based on irrigation tests in north-eastern Lower Saxony and typical regional crop rotations, we calculate farmers' willingness to pay for irrigated leasehold compared to rain-fed cropping. We then present the results of a large-scale survey of farmers in north-eastern Lower Saxony and derive farmers' willingness to pay from empirical data. We find that willingness to pay for irrigated land as stated by the farmers surveyed is considerably higher than the additional benefit of irrigation derived from calculations based on marginal income effects. This discrepancy can be due to the fact that irrigation allows farmers to control weather, especially yield risks. We conclude that changes of water policies with regard to irrigation in northeastern Lower Saxony will probably have an effect on regional markets for leasehold.