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### Abstract

Agriculture production in the Texas High Plains is highly dependent on climate especially with the decline in water levels in the Ogallala Aquifer. There is increasing pressure on the Ogallala Aquifer as a result of an increase in population and expansion of agricultural production. The decline in water levels in the Ogallala Aquifer along with precipitation variability are affecting agricultural production, thus increasing the risk faced by farmers. The primary goal of the study is to determine the effect of rainfall variability on yield and income from crops grown in the Texas High Pains. The specific objectives are to estimate the effect of precipitation variability on dryland and irrigated crops; to conduct risk analysis for dryland and irrigated crops and estimate revenue loss/gain due to variability in precipitation; and, to perform sensitivity analysis to analyze the effect of precipitation changes on profitability for a farm enterprise. The information about the dryland county-level yield data was collected from the National Agricultural Statistics Service (NASS) for the period of 1972 to 2012 for dryland cotton and dryland sorghum while dryland wheat data was for the period of 1973 to 2012. The county-level climatic information was collected from the National Oceanic and Atmospheric Administration (NOAA). The information about irrigated corn was collected from AgriPartners Program from 1998 to 2007. The relationship between growing season precipitation variability and dryland yield was examined for dryland sorghum, dryland wheat, and dryland cotton using ordinary least square regression. The effect of precipitation fluctuation on irrigated corn profitability, and irrigation water demand was also estimated. The coefficients of variation for price, yield, precipitation, and revenue were considered for different sub periods. The average season county precipitation levels are 13.65 inches, 13.16 inches, and 15.01 inches for dryland sorghum (Deaf Smith County), dryland wheat (Hansford County), and dryland cotton (Lynn County) respectively. The R2 values from the restricted models are 90%, 93% and 87% for dryland sorghum, dryland wheat, and dryland cotton respectively. The R2 value of the restricted irrigated corn model was 96%. The higher the coefficient of variation for precipitation, the greater the risk faced by farmers. A decline in the coefficient of variation for precipitation by 9.59% favored dryland sorghum yield increase by 5.14 cwt/ac from 1972-1981 to 1982-1991. In Deaf Smith County, 570,813 ac-ft. of irrigation water will be needed for irrigated sorghum if there is a 25% decrease in the average seasonal precipitation received for the next 50 years. At a natural gas price of $4.5/Mcf and corn sales price of$7/bu, variation in the Hansford County seasonal precipitation by ±2.69 inches will change the optimal profit by ±\$27.26/ac. More irrigation water will be needed in the future if any less amount of precipitation is received.