Construction of the Itaparica dam and reservoir induced changes in the agricultural production systems of the Itaparica micro-region, at the lower-middle São Francisco river basin. Extensive traditional systems were replaced by e.g. irrigated fruit production. However, over twenty years after the dam construction, many farmers are still facing income insecurity. A survey, consisting of expert interviews and structured on-farm interviews, has been conducted to analyze current production systems. A Linear Programming farm optimization model was applied to determine optimal land allocation considering changing production conditions. Income depended strongly on low wages for day laborers, free irrigation water, and stable prices of the main crop, coconut. Diversification of production and improved market access can help to improve farmers’ income situation. Moderate water pricing can raise the awareness of water scarcity and lead to implementation of water saving production methods.


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