damage from drought on the basis of the change in 

 frequency and duration of inadequate soil moisture 

 during the growing season. Estimate reduced 

 damage from erosion on the basis of the change in 

 land voiding from gully and streambank erosion and 

 on the basis of the change in productivity losses 

 from floodplain scour, sheet erosion, overbank dep- 

 osition, and swamping. 



(ii) Estimate reduced costs associated with using 

 water and land resources for the production of 

 crops on the basis of the changes in the costs of 

 equipment ownership and operation; production 

 materials; labor and management; and system op- 

 eration, maintenance, and replacement. 



(ill) Use farm budget analysis to measure 

 changes in net income from reduced damage to 

 crops and reduced costs of production. 



(c) Step 3. Select evaluation method for estimat- 

 ing intensification benefits. For land on which the 

 cropping pattern would change, select either farm 

 budget analysis or land value analysis as the 

 method for measuring intensification benefits. If 

 land value analysis is selected, go to Step 9. If farm 

 budget analysis is selected, proceed with Step 4. 



(d) Step 4. Determine wtiether other crops are to 

 be treated as basic crops, if the change in cropping 

 pattern increases the acreage in production of 

 other crops and if it is believed that the production 

 of other crops is constrained by the availability of 

 suitable land, the following test may be applied to 

 determine whether these crops should be treated 

 as basic crops in the benefit analysis. If the test is 

 not applied, go to Step 8. 



(1) Select a representative sample of farm oper- 

 ations on lands comparable to lands benefiting 

 from the project under with-project conditions. 



(!) For each farm operation determine the respec- 

 tive acreages of basic and other crops. 



(ii) Use these data to compute the proportion of 

 other crop acreage to total crop acreage for each 

 farm. 



(iii) Use farm budget analysis to identify the top 

 25 percent of farms in the representative sample in 

 terms of expected net income per acre. 



(iv) The average of the proportions of other crop 

 acreage to total crop acreage for the top 25 per- 

 cent of farm operations is defined as the "optimal 

 proportion." The optimal proportion for these farm 

 operations will reflect risk and uncertainty, returns 

 to management, and prevailing market conditions. 



(2) If it can be demonstrated through standard 

 statistical tests that the optimal proportion is not 

 statistically different from the proportion computed 

 as the average of individual farm operation propor- 

 tions for the complete sample, then the production 



of other crops can be considered to be constrained 

 by the availability of suitable land in the ASA and, 

 therefore, treated as basic crops. Otherwise it can 

 be inferred that production of other crops is not 

 land constrained in the ASA. When the crops are 

 not land constrained, go to Step 8; othenA^ise, pro- 

 ceed with Step 5. 



(e) Step 5. Determine limit on acreage of other 

 crops that may be treated as basic crop acreage. If 

 the production of the other crops is found to be 

 constrained by availability of suitable land in the 

 ASA, then multiply the acreage of comparable land 

 in the project area by the optimal proportion found 

 in Step 4(1). This is the maximum acreage of other 

 crops that may be analyzed using the steps that 

 apply to basic crops (Steps 6 and 7). To analyze 

 benefits for any acreage of other crops in excess of 

 this maximum acreage, go to Step 8. 



(f) Step 6. Project net value of agricultural pro- 

 duction with and without the plan. Use information 

 from farm budget analysis to estimate the net value 

 of agricultural production under without-plan condi- 

 tions. Estimate the net value of agricultural produc- 

 tion associated with each of the alternative plans. 

 Account for variable costs related to production. In- 

 clude non-project OM&R costs and associated 

 costs for each alternative plan. 



(g) Step 7. Compute intensification benefits for 

 acreages of basic crops and other crops to be 

 treated as basic crops. Compute intensification 

 benefits as the change in net income between the 

 without-project condition and conditions with an al- 

 ternative plan. Express these intensification bene- 

 fits in average annual equivalent terms. This com- 

 pletes the analysis of benefits for lands with in- 

 creased acreage of basic crops and other crops 

 that are to be treated as basic crops. 



(h) Step 8. Determine efficiency benefits. Com- 

 pute efficiency benefits for acreage producing other 

 crops not treated as basic crops as the sum of: 



(1) the difference between the cost of producing 

 the crops in the project area and the cost of pro- 

 ducing them on other lands in the ASA; and 



(2) the net income that would accrue from pro- 

 duction of an appropriate mix of basic crops on 

 those other lands. Express this efficiency benefit in 

 average annual equivalent terms. 



(i) Step 9. Land value analysis. When estimating 

 intensification benefits on the basis of land value 

 analysis, base appraisals on market values, not on 

 capitalized income values. 



i 



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