From Toadwater Guide
An irrigation ditch is needed to irrigate land. Heh, redundancy.
Irrigated land is required for jute crops, but you can still plant trees and other crops on it.
Planting a tree on irrigated land adds an invisible 10% skill boost (not odds) to forestry.
Planting crops on irrigated land takes your current odds and adds 10%. (10 => 11%, 20 => 22%, 30 => 33%, etc...)
To start digging a ditch use an Oar on an empty square. This will mark the ditch. (note: oar must be level 31+). The direction of the ditch depends on where you are standing when you mark the ditch. You can mark the ditch in one or both directions before you start digging. There seems to be a small chance that your oar will break during this process.
Once a ditch is marked, use a shovel to start digging. The ditch will be completed when it reaches a depth of 30.0 cm. The first dig goes a long way, but after that, progress is slow. Your depth will increase by 0.1 cm for every 20 levels on your shovel. So a level 40 shovel will dig 0.2 cm.
Using a shovel to dig a ditch uses 25 health.
Shovel power will decrease by 10 points after each use. So it is recommended that you do not use your highest level shovel
A ditch must be connected to either the ocean or another filled ditch.
A completed ditch will fill back up with time, so they do need to be occasionally dug out again.
Stepping on a freshly marked ditch that hasn't been dug at all (a faint line in the sand) will destroy it.
If for whatever reason you decide you want to fill up a ditch, you can use dried poo (or grandma's homemade poo) to fill it up at the rate of 1 centimeter per 300 dried poo. Each action takes 100 poo and 10 health. You must have over 100 poo in your inventory otherwise it doesn't work.