Farm production is surrounded by uncertainty. Between planting and harvesting manyrandom events such as plagues, droughts and sudden changes in commodity prices, may affectfarmers’ revenues. Agriculture in arid and semi-arid zones is highly dependent on rainfall, whichintroduces an additional risk during droughts. This research posits the hypothesis that watermanagement in agriculture during droughts strongly depends on the risks farmers face and ontheir expectations, based on past drought experiences.

Federal and state governments are searching for programs and/or policies to deal with the risks linked with uncertainty in water supplies and demands. Within the United States, competition among agricultural, urban, and environmental concerns for water is increasing. Drought conditions and water use restrictions have, at times, limited water supplies for these varied uses. The federal government stands in a unique position as both a major supplier and demander of water. As such, the federal government has put forward several programs for water conservation, information, and usage.