Water use efficiencies, economic tradeoffs, and portfolio optimizations of diversification farm systems in a desert oasis of Northwest China

Agroforestry system has been considered as an efficient solution to reconcile land use conflicts by tree-crop interaction and supplement. However, the water productivity, tradeoffs, and water-use portfolios of farm diversification in agroforestry combination with tree and/or crop monocultures are still missing, especially in arid water shortage regions. Based on portfolio theory and farmer perception, this study integrates experimental data, meteorological parameters, farmers questionnaire, and yields and prices to assess water use efficiencies, economic return-risk tradeoffs, and portfolio optimizations of diversification farm systems in Moyu oasis of Northwest China. Results show that all the planting layouts of agroforestry systems provide a better economic income than the combination in mixing agroforestry and monocultures in water-use tradeoffs using Sharp ratio. Moreover, allocating part farm area to the nut/fruit trees can increase economic water-use return compared to more crop cultivations, providing a good complement to farm income. The Sharpe ratios of the walnut/wheat, walnut/maize, and walnut/alfalfa intercropping for 23.70%, 15.71%, and 60.60% give the highest economic water-use return compared to the other planting layouts. Nevertheless, according to the minimum risk portfolio and risk-averse farmers’ preference, the combination of the walnut/wheat, walnut/maize, and walnut/alfalfa intercropping and monocultures of jujube and apricot (the ratios of 32.01%, 27.63%, 8.11%, 9.81 and 22.45%) is recommended to use for planting layout in the study area. It is concluded that the combination with nut/fruit-crop agroforestry and sole nut/fruit tree is a financially efficient diversification strategy to improve the water use efficiency and economic tradeoffs in arid water shortage regions.