crops in the project area would be offset by a de- 

 crease in production elsewhere. In some parts of 

 the Nation analysis of local conditions may indicate 

 that the production of other crops is limited by the 

 availability of suitable land. (Suitable land is land on 

 which crops can be grown profitably under prevail- 

 ing market conditions.) In this case, crops other 

 than basic crops listed above may also be treated 

 as basic crops when measuring intensification 

 benefits by farm budget analysis. (See Section 

 2.3.5(d) to determine when other crops may be 

 treated as basic crops.) 



(c) Benefit categories. Agricultural benefits are di- 

 vided into two mutually exclusive categories, de- 

 pending on whether there is a change in cropping 

 pattern: 



(1) damage reduction benefits, that is, benefits 

 that accrue on lands where there is no change in 

 cropping pattern between the with- and without-pro- 

 ject conditions; and 



(2) intensification benefits, that is, benefits that 

 accrue on lands where there is a change in crop- 

 ping pattern. There is also a subcategory of intensi- 

 fication benefits called efficiency benefits, which 

 accrue from reduced costs of production. 



(d) Measurement of NED benefits. (1) Damage 

 reduction benefits. Damage reduction benefits are 

 the increases in net income due to the plan, as 

 measured by farm budget analysis. These income 

 increases may result from increased crop yields 

 and decreased production costs. 



(2) Intensification benefits. Intensification benefits 

 are measured either by farm budget analysis or by 

 land value analysis. Intensification benefits from in- 

 creased acreage of basic crops and other crops 

 that are constrained by the availability of suitable 

 land in the WRC assessment subarea (ASA) are 

 measured as the net value of the increased produc- 

 tion. Intensification benefits from increased acreage 

 of other crops (except for acreage of crops to be 

 treated as basic crops because they are land con- 

 strained) result when there are production cost sav- 

 ings. These production cost savings are called effi- 

 ciency benefits and are measured as the difference 

 between production costs in the project area and 

 production costs on land elsewhere in the ASA. 



(i) Farm budget analysis. On land where the in- 

 tensification benefit is solely from increased acre- 

 age of basic crops (and crops to be treated as 

 basic crops), benefits are measured as the change 

 in net income (see Section 2.3.5(d) through (g)). On 

 land where the intensification benefit is from in- 

 creased acreage of other crops, use the efficiency 

 procedure found in Section 2.3.5(h). 



(ii) Land value analysis. Intensification benefits al- 

 ternatively may be measured as the difference in 



the value of benefiting lands with and without the 

 plan. The market value of a parcel of land reflects 

 the capitalized value of the expected net income 

 that can be derived from the land. Therefore, the 

 difference in market value of two parcels of land 

 that are identical except for the provision of im- 

 proved water conditions reflects the present value 

 of the additional net income (i.e., the intensification 

 benefit) that can be attributed to improved water 

 management or supply. (See Section 2.3.5(i).) 



2.3.3 Evaluation Components. 



Evaluation of the impact of water management 

 practices or control measures should consider the 

 following components: 



(a) Cropping patterns. Project the most probable 

 cropping patterns expected to exist with and with- 

 out the project. If project measures are designed to 

 reduce damage or associated cost problems with- 

 out changing cropping patterns, project the current 

 cropping pattern into the future for both with- and 

 without-project conditions. 



(b) Prices. Use normalized crop prices issued by 

 the Department of Agriculture to evaluate NED agri- 

 cultural benefits; adjustments may be made to re- 

 flect quality changes caused by floods or drought. 

 For crops not covered above, statewide average 

 prices over the three previous years may be used. 



(c) Production costs, (i) Analyze production costs 

 that can be expected to vary between the with- and 

 without-project conditions. These may include the 

 costs of equipment ownership and operation; pro- 

 duction materials; labor and management; system 

 operation, maintenance, and replacement (OM&R); 

 and interest payments. If costs associated with pro- 

 ject measures (e.g., on-farm drainage or water dis- 

 tribution costs) are included in the project cost 

 analysis, exclude them from production costs. 



(ii) Value purchased inputs at current market 

 prices. Compute interest at the project discount 

 rate. Value all labor, whether operator, family, or 

 hired, at prevailing farm labor rates. Estimate man- 

 agement cost on the basis of the type of farming 

 operation. The estimate normally is expected to be 

 at least six percent of the variable production cost 

 (the cost of equipment ownership and operation, 

 production materials and labor, but excluding the 

 cost of land and added capital improvements). 



(d) Crop yields. Project current yields with aver- 

 age management in the project area to selected 

 time periods. Adjust future yields to reflect relevant 

 physical changes (e.g., erosion, drainage, water 

 supply, and floodwater runoff) in soil and water 

 management conditions. Increases in yields due to 

 future improvements in technology may be included 



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