Water managers, policy makers, and farmers need tools to estimate the impact of water management on agricultural yields, economic benefits, and environmental effects to be able to make strategic and operational decisions. Historically, relationships between groundwater level and crop yields were used to calculate the reductions in crop yield due to suboptimal water status of fields. Nowadays, state-of-the-art deterministic models for water flow and crop production can be coupled to simulate the effects of changing water management. For dairy farms, an integral management model has been developed and applied to simulate decisions on grazing and cutting, and calculate farm economics. Soil physical conditions, crop yields, and farm management are simulated for a number of years, based on daily weather data. For a dairy farm in a peat district in the central part of The Netherlands, a rise of the ditch water level from 60 till 40 cm below the soil surface resulted in wetter conditions in the topsoil and a lower bearing capacity; a reduction of 0.8 tonnes/ha grass production and ¿222 ha¿1 lower economic benefit. Higher ditch water levels increase also the variation in farm economic results between years, and thus lead to higher economic risks for the farmers. Increased phosphorous leaching to surface waters is another risk when ditch water levels are raised.