This is basically why the word "rationing" exists in the first place.
What good is being "productive" (whatever your definition of it) if poor people die from lack of access to water because chips need to exist.
That works out to 0.032¢ per liter. A quarter (25¢) will buy you 760 liters of water, enough to survive for three months. That's about 1000× lower than a price at which even Phoenix's homeless might start dying of thirst due to the cost of water. (Homeless people don't pay the water utility, but they get water from people who do.)
Poor people in the country get their water from wells, which cost money to drill but basically nothing to pump more water from.
Rationing might be a reasonable thing to do to keep the aquifer from being depleted, but it would be likely to hit poor people much harder than rich people, because poor people don't have the political influence to prevent the enactment of regulations that would hurt them badly, such as a requirement for an environmental review before drilling a new drinking-water well.
Rationing could cause poor people to die from lack of access to water. Markets won't, unless you're talking about something like a Mars colony.
Add in some market mechanics and that problem disappears. The only entities left without water are the ones unwilling to pay a small fraction of a cent.
I'm not particularly concerned with the viability of people farming their own food but that seems plenty cheap.
Even desalinated water would be under a thousand dollars, and we could 10x the water supply at that point.
> and again we would predict that rationing measures would favor politically powerful agribusinesses and perhaps the Indian reservations over most small farmers
If the system allocates free water which can then be easily resold, the end result is basically the same as everyone paying but some entities get free money. Anyone expecting to buy their water should be no worse off.
"[The Saudis] used sprinklers to grow alfalfa in La Paz County and exports it to feed dairy cattle in Saudi Arabia. The company did not pay for the water it used under the old agreement."
https://www.cbsnews.com/news/saudi-arabia-water-access-arizo...
Just because people don't like what the water is used for doesn't mean the water isn't priced appropriately. You'll still get farmers growing thirsty / pricey crops in the desert if it covers the cost of irrigation.